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Thrilling Thursday – Can We Be Saved?

Let’s review first, how we got into this mess

Not only is a bust cycle the inevitable result of a Capitalistic boom but the way we keep shoveling crises under the rug (to avoid pain and the ensuing political fallout) only exacerbates the problem once the rug becomes too small to mask the problem.  Then things begin unraveling at the fringes and then – horror of horrors – someone actually lifts up the rug and says: "OH MY GOD – IT’S TERRIBLE!"   Well DUH!  Of course it’s terrible.  Hayek (Freidrich, not Selma) told us this would happen 60 years ago and it’s happened dozens of times already and it will happen dozens of times again because it’s the nature of a system where there can be winners and losers – sometimes you win and sometimes you lose

It is no surprise then, that the Europeans are choosing to follow Hayek’s path to austerity, while the Americans cling to the Keynesian delusion that we, if we just buy a bigger rug, we can fit a lot more problems under it and maybe no one will notice until we move out.  David Leonhardt has a great article in The Times presenting the Keynsian side of the eqation.  Paul Krugman points out that the "bond vigilantes" are behind this massive attack on the markets as they work very hard to drive current rates down and keep them there BECAUSE THAT INCREASES THE VALUE OF THE BONDS THEY OWN. 

Come on people, grow up!  First Pimpco and company drove rates sky high telling you the World was going to default and there was a "ring of fire" in Europe and that sent swap rates and note rates flying so these evill jackasses were able to buy tens of Billions in sovereign debt at sky-high interest rates.  Now those same crooks push for a bailout, using other people’s money to insure their high-yield bonds and then they begin a PR campaign to crack the whip on austerity to make sure that making the bondholders whole is every country’s top priority, no matter what the cost to the population. 

How much is at stake here?  Pimpco alone has over $1Tn in bonds that get much, much more valuable if they can engineer a low-rate Japan-style deflationary environment.  I pointed out that this was happening on June 15th, when Mohamed El-Erian teamed up with Doctor Doom Roubini to tell us how dire things were (and Krugman had plenty to say about that as well).  Since then we have heard from El-Erian’s partner, Bill Gross but today we got the grand denouement as Pimpco released the Greenspan on CNBC this morning, right on Europe’s lunch hour in order to quell the stirrings of a rally as we got some pretty positive economic data early today

Greenspan’s nonsense is more effective in Europe these days as most Americans realize his policies did nothing more during his 20-year tenure (’87-2006) than debase the dollar and transfer the wealth of this nation from the middle class the the economic elite in one of the greatest cons in human history.  “This recent decline is more international than it is a domestic affair,” said Greenspan, adding that “there is an inherent instability in the euro system.” 

The current recovery has been different than others, Greenspan said, because it has been “dominated by large banks, higher income individuals and bigger business,” when in past recoveries small businesses do most of the hiring and pull the economy out of a recession.  One of the reasons that small business are not hiring, Greenspan said, is because smaller banks are loaded up with commercial loans and aren’t lending. “Small business is in real serious trouble.”  Interestingly, I totally agree with this statement but, like I said, all Greenspan is doing is pulling up the rug he laid out 20 years ago and shouting "Look, look - Icky stuff!

So on a day when the markets MUST be kept down (or Pimpco loses Billions), Alan Greenspan comes on CNBC with an hour’s worth of soundbites (in what Barry Rhithotz aptly calls his "Reputation Legacy Destrusction Tour") that they can chop up and play all day long to make sure that any retail buyer who is considering a purchase keeps his finger off the trigger or at least wavers long enough to miss an opportunity to get in while Pimpco covers up their bets and the hedge funds BUYBUYBUY ahead of the Jobs number that is terrifying the "home gamers" who have been chased out of their positions all week in a coordinated attack led by Cramer/CNBC and our friends at Goldman Sachs and Co, who are likely to continue their 2010 string of not losing money on a single trading day, no matter which way it goes.  Imagine how powerful that statement is when compared to the very poor end of quarter performance that was just forced on many funds in this week’s dive – just perfect marketing if perhaps FinReg makes them spin off their own fund operations. 

How ridiculously low have prices gotten?  C, for example, is as much as 20% of the trades in the market on some days and they have traded down to $3.75 yesterday, where we were BUYBUYBUYing it.  Today the Treasury announced they have sold $10.5Bn worth of C at an average of $4.03 per share and, that they are done selling for a while now after pocketing a $2Bn profit on 1/3 of their position (stock was granted at $3.25).  We’ll see how the financials perform today but let’s not expect much until we see tomorrow’s jobs numbers.

unemployment, depression, jobless men keep going, philstockworldUnemployment came in with 472,000 jobs lost last week, 12,000 worse than expected.  Construction Sprending, ISM and Pending Home Sales are at 10 and Auto Sales come throughout the day but nothing matters until tomorrow’s Non-Farm Payroll (8:30), which is now whispered to be -145K after being + 431K last month.  

Of course, at this point, even -100K would rally us and we now have the exact opposite situation from last time, when Obama said the Jobs Report would be good and that made 431,000 additions (mostly census) a disappointment.  Now we have expectations that are so low, that +1,000 will probably cause a crazy rally.  We are in technical hell but I maintain that we are overreacting, although it’s getting very lonely on my side of the fence.  Unfortunately, we’ll probably have to wait and see for tomorrow’s Jobs data.

If we are at all red today, we can layer our protection.  The TZA hedge is up 300% already and should be stopped out if we are not going lower and the other downside hedges are hugely in the money and may need to be stopped out.  A new cover (rolling 1/3 of the profits, which is 100% of the original insurance bet) is DXD July $31/32 bull call spread at .25 and you can stop right there as it has another 300% upside built in (DXD is already $30.95) or you can pair it with the sale of the Aug $26 puts at .40 for a .15 credit on the $1 spread. 

The logic to this is, if you put $5,000 into the TZA spread, it’s now $20,000 and it might make another $15,000 if we stay down but it also might get wiped out.  If you cash that and put $5,000 into the DXD play with a stop at $2,500, you are taking, effectively, $17,500 off the table (which you can use to roll and DD longs) and you still have another $15,000 of upside if we head lower from the new play.  If we DON’T head lower, then it’s good that you improved your longs!

As I said we had good news out of both Asia and Europe this morning (see early morning Member Alert) and even Greenspan and his pimp patrol couldn’t stop the EU from turning around from a 2% dip to down just half a point ahead of the US open.  We’re still in bargain-hunting mode until proven wrong – most likely one way or the other tomorrow morning!

 


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  1. Good morning everyone! Looks like we are going to have a VERY interesting day.


  2. For those who own ARNA, a bit of good news for today:
    Arena Pharmaceuticals in deal for obesity drug
    Arena Pharmaceuticals Inc. said Thursday it has an agreement with Japan’s Eisai Inc. in a deal worth potentially more than $1.3 billion to fund commercialization of an obesity drug that could become Arena’s first product
     


  3. Good story in Le Monde in France this morning about the English trader who bought 7 millions barrels of oil (30% of OPEP daily production) one night while drunk in his home, driving up the price of Brent by $1.50 on the London Exchange. No one noticed until the day after when his company had to dump the oil at a big loss dropping the price by $2. And they say prices are driven by supply and demand! Of what – booze… Amazing that this guy alone could pull a $500 millions transaction without supervision! For those who speak French - http://www.lemonde.fr/economie/article/2010/07/01/ivre-le-courtier-achete-30-de-la-production-de-l-opep_1381389_3234.html#xtor=RSS-3208. For the others, there is always Google Translate!


  4.  

    First Class Action Lawsuit Filed Against Apple Due to iPhone 4 (AAPL,T) http://bit.ly/aRrjx5
     
     


  5. YEAH ARNA……


  6. Hi Phil, 
    I am trying to figure out if I should to close out the 23/27 DXD and 29/36 SDS Oct/Sept hedges that are deep in the money as you pointed out in your alert this morning. I have 30 DXD’s and 30 SDS’s covering 30K in losses. Currently I have $150K in longs and puts sold that would require another $100K in new longs if put to me.
    What should I put in place instead, if you do recommend exiting them today?  


  7. Phil ,
    Also, yesterday I had a huge mishap with my trading platform at the end of the day, right when the market started tanking and I got stuck with 500 TNA shares I was day trading at 37.88, now 37.4 and dropping-- what could I do to stop the bleeding and recover from it?
    Thanks


  8. pharm – What do you think of arna’s deal?


  9.  Thanks for the reply posted in yesterday’s commentary.
    -On banks: I have a decent sized C and I just believe the gov’t can let them go that much lower as they still have 5Bn shares left.  Now when they’ve liquidated those shares, I can’s say for sure if they’d still care where the stock price goes--however, I think C is still TOO BIG TO FAIL.  But they’re commercial and retail banking in SEA is what I like.  Reason why I prefer not to go with JPM is that I might have too much exposure to the US retail financial having both C and JPM. And XLF kind of just follows that chain of thought…just spread out.  So you like NMR but how about BLK?  Are they too much like Pimco?
    -Velocity of money/Money Supply: Makes sense.  Only caveat on M&A.  With the cloud of what type of gov’t intervention (taxes, regulation, etc), when it will happen and to which industries, that should be enough to slow the M&A process to small ones (on a relative basis of course) in the near term.  If there is more certainty on that front rather than piece mealing it, I think companies will be able to more comfortably forecast factors which reduces at least one variable when considering M&A.  But yes, these things happen much faster before policy makers can adjust.  
    -I really like DNDN. Do I wait for a retest of 25 (I may have missed the boat on this idea) or do I go and buy later month in the money call spreads and if DNDN does go down much further, then sell P?
    Thanks!


  10. BP plus 5% @30.37 pre-mkt


  11. jro – good deal, a bit light on the upfront payment….but my wondering is what is behind the deal.  Is Eisai in the works for a buyout of ARNA after approval?  For a PIII compound that is in front of the FDA, the up fronts are usually a bit larger.  Look at SNY’s deal yesterday with a crap compound….$75M upfront.  Now this is marketing deal and ARNA is going to reap the rewards if it is a big winner, which is why my belief is that they are going to have a buyout clause in there somewhere.
     
    If OREX and VVUS are superior, why have they not inked a deal?


  12. Pharm / ARNA – I already own in my regular account.  Thanks for the great idea.  Was thinking of adding it to my IRAs.  Would you do it now or wait for pullback?  Is there any other news due to come out in near term that would act as catalyst?
    Thanks.


  13. Pharm, "light on the upfront payment" That was Adam Feuersteins comment as well, but I’ve for some time assumed him to be in the pocket of the shorts. I assume you agree then that the payment should have been larger?
     
    Gordo


  14. Interesting presentation.  We do have a mess brewing.  You have to believe that the nature of our political system will demand that a complete meltdown occurs before any realistic measure will be taken to fix the problem.  The hundred dollar question is…..when will the meltdown occur…..tomorrow or 10 years from tomorrow. 
     
    Frankly, I am sickened by what our political system has evolved to.  Including the media wing of our political system.   I had to laugh during the presentation when the politicians said vote for me and I’ll fix it.  How many times are the American people going to fall for the ol banana in the tailpipe act?  Answer…….over and over and over again because most are too consumed watching American Idol or Survivor to be informed about anything as uninteresting as the types of things that were outlined in this presentation.  They only time people truly become concerned is when it impacts them directly.  So when the day comes that they can’t buy dinner or their precious money market accounts are frozen, or their long awaited social security or pension checks vanish, or a nuke hits Washington, or their business goes broke, or a real war breaks out and there kids are forced to fight it……..then they’ll start to pay attention.
     
    Shit like this makes me want to go all in triple short!!!


  15. TASR down 10% pm


  16. Glad to be somewheat cognitive after the major surgery on my leg..
     
    Now the question.  I am getting murdered in this TASR position.  What do we do??
     
    AND I heard people say day trading TNA and TZA was dangerous.  LOL.


  17. Good morning,
     
    IWM 58.68, 60.70, 61.13, 61.97, 62.91, 63.31, 64.35, and 65.54


  18. Looks like a good day to take the kids to the fair…… :)


  19. Good morning!

    Bad jobs data (a trend continuing from yesterday’s ADP) means we’ll be once again happy not to go down. 

    Our goals for the day should be modest, looking to hit our June 8th "low spikes" we were watching on Tuesday and then we go for the June 7th low closes as our next beachead:

    • Low Spikes:  Dow 9,725, S&P 1,042, Nasdaq 2,145, NYSE 6,480, Russell 608, SOX 326 and Transports 1,921. 
    • Low Closes: Dow 9,815, S&P 1,050, Nasdaq 2,158, NYSE 6,512, Russell 617, SOX 332 and Transports 1,955). 

    Of course there will be people selling into any move up as there are plenty of people who wish they had gotten out yesterday before the big drop so it’s probably going to be slow going.  Construction Sprending, ISM and Pending Home Sales are at 10am and Auto Sales come throughout the day.  

    Our new DXD cover is the July $31/32 bull call spread at .25 and you can stop right there as it has another 300% upside built in (DXD is already $30.95) or you can pair it with the sale of the Aug $26 puts at .40 for a .15 credit on the $1 spread.  If you have the other hedges, that are already up 300%, you really should consider taking the profit off the table and reinvesting in this one as it will get stung a lot less on a bounce than the in-the-money TZA, SDS and SPX hedges, which have HUGE profits already.


  20. JRW,
    Was that your Sig a minute or so ago?


  21. IWM 60.80 61.70 62.44 62.92 63.28 64.30 65.17


  22. Good Morning Phil,
    I have Jan 2011 6/11 bullcall spread (10 contracts), with $5 puts sold (5 contracts)…….Are you suggesting these be liquidated??? Your morning post did not say which month hedge you want us out of.
    Thank you


  23. Pharma/
    What a great call on ARNA>
    You have been on top of this trade since its inception.
    Thank you so much for the trade idea but even more for your numerous pieces of advice on how to manage our positions in this stock.
    First class investment!


  24. exec,
    9:33


  25.  Phil DXD hasn’t been fillable at that price.  Any other ideas on hedges?


  26. JRW,  We’ve got California-style weather here today in the nation’s capital.  There are "golf days" when you enter a position in the morning and return to close it out at the end of the day, and "golf days" when you just ignore the market, sit on your 100% cash position and enjoy life.  Methinks today is the latter.


  27. In TNA at $35.60


  28. And out


  29. Phil / Ddip    Many thanks for the inspirational reply yesterday evening and brilliant perspective – reminds me again why I subscribe! I know you will continue to guide us into individual stock selections at appropriate moments, even if we head into negative GNP trends during the next two years as society pays for the earlier excesses.
    Timing is everything and I just think there’s no rush, as there’s lots of terrible news to come out during the coming 12 months which should create even better buying op/s (and shorting op/s). And, given human emotions, mkts usually over react upwards and downwards don’t they?  You analytically rationalized the logical bottom range, but logic may not prevail during the coming year, so we are going to deserately need your hand holding in order to not lose money.


  30. judah,
    Well, so far you are correct. I’m red for the day by 7 cents.


  31. Pharm
    Thanks for the advice on ARNA – are you still expecting another, perhaps much larger bounce when/if VVUS gets bounced? I am holding on selling anything awaiting the 7/15 news.


  32. ammata/TNA – I think if you are concerned about a 1.3% loss on a day trade, you probably shouldn’t be day trading or you should really reconsider your positon size. Not being able to make quick decisions when day trading will lose you money just as much as greed will.


  33. JRW, A wise man once said to me, I’d rather be rich than right.


  34. Le Monde/Stj – Amazing isn’t it?

    AAPL not liking the lawsuit news, hard for the Nas to get going without them. 

    Spreads/Amatta – Absolutely!  The more you make, the more you risk.  If we are going to continue lower, the new DXD spread will make nice money but if we fly higher, those old spreads will lose money fast.  That’s why I don’t like to take too many of the short time-frame hedges, they end up causing you to flip in and out of things a lot.  Of course, when it works, like now, and you are up 300%, then a little flipping is no big deal

    TNA/Amatta – That’s a pain because they are so volatile ut they also pay a hefty premium so you could sell Aug $35 calls for $6.20 which drops your entry to $31.68 with a not too bad call away.

    BLK/Jdub – I can’t figure out how they make money.  It’s pretty much a hedge fund so of course we know "how" they make money but I can’t unravel their holdings or tell when they are going to have good or bad results so it doesn’t appeal to me.   Berkshire is in the same vein but at least I have 20 years experience following them and I know all their holdings so I feel comfortable making entries and exits there.   On DNDN, I wouldn’t touch them now, was just a quick trade based on a very good possibility of a rebound off that panic but, on the whole, they don’t interest me anymore.

    Euro through $1.24!  Pound at $1.51 but Yen is SUPER STRONG at 87.33, dropping like a rock off the 3am pump to 88.5.  I should just retire and make that trade every day!

    Data is TERRIBLE!!! 

    June ISM Manufacturing Index: 56.2 vs. 59 consensus and 59.7 prior. Prices index 57 vs. 77.5 prior. Employment 57.8 vs. 59.8. Inventories 45.8 vs. 45.6. New orders 58.5 vs. 65.7.

    May Construction Spending: -0.2% to $841.9B/year vs. consensus -0.7% and +2.3% prior (revised); 8% below the year-ago estimate.

    May Pending Home Sales: -30% to 77.6 M/M, vs. -13% expected, +6% to 110.9 prior. Sales -15.9% Y/Y. “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” says NAR chief economist Lawrence Yun. 

    Why aren’t we going lower is the question to be asking?


  35. Another question to ask is why is the VIX down?


  36. VIX/daveo — that chart has got me confused!


  37. We’re probably not going lower simply because we are already deeply oversold. Once that works itself off we’ll likely keep going lower if the news stays persistently bad (as it likely will).


  38. There is a confluence at IWM 59.98 that I missed in this mornings post, so this could be a bottom


  39. I’m surprised the selling ended so quickly after the 10:00 data. Possible the data was out at 9:40?


  40. A lower VIX as the market moves down is not healthy. It’s a sign traders expect more of the same.
     
    Also, the VIX usually makes it’s largest run up on the market’s first entry to a given trading area. After that it’s a series of lower-lows for the VIX as the market keeps re-testing the range.
     
    There’s nothing bullish about the VIX action, in other words. There’s nothing bullish right now at all — just the fact that we are deeply oversold, which isn’t a bullish indicator, but just a caution to short sellers.


  41. TBT- My faith is getting rattled a bit. Let me pose a question – if, if, if, this keeps up, do you have a rational bottom number? What would your "worst case" number for say, Jan 11?


  42. pstas,
     
    Not that you asked me, but I’d look at the TLT highs (123) to try to extrapolate a TBT low.


  43. rainman/surprise  You may not want to look up…..


  44. We broke through a big longterm 50% fib retracement at 1016-1018 on S&P futures.  Next it 1011 and then I think 990. 


  45. PSTAS
    6485 on the Dow if not lower. I am totally convinced that is where we are going.


  46.  This is getting uglier and uglier every day… are we in denial here about the market heading south? It’s really hard to retain any optimism. At what point do we turn bearish like everyone else apparently is? 


  47. Fun upside play is QLD Aug $62 calls at .60.  They were $5 a week ago and if QLD moves up a bit, you can get the .80 off the table selling higher calls.

    TNA $40 calls at $1.25 also a nice buy.

    Triple Short/Exec – Hopefully it won’t come to that.  It is a broken system and it will take a crisis that wakes up the proletariat to change things.  What I find funny is the behavior of the rich, who are trying to grab what they can while Rome is burning by taking away what little cushion is left to the workers because this will on accelerate what I think is the inevitable day of judgment.  As you say, it’s all good as long as people can sit home and feel powerful by deciding who wil be the next American Idol (wasn’t there something mentioned about worshipping false idols once?). 

    TASR – Still a buy at $3.66.

    Fair/1020 – Just hook a simulator up to the index charts, that will give them a wild ride!

    TZA???/Jsur – Not the Jans, we’re talking about the Aug and July positions that are paying off already. 


  48. 1.      Phil–clarifying my understanding–on selling a put with stock price decending–if hold position, the value of put sale decreases, but if buyer of put exercises, then I must buy the stock at the put strike price, but my basis would be strike price less the premium I get.  The value of the put sale can lose more than 100%, which is reflected in the stock value once the put is exercised.  Or the put can expire in which case, I keep the premium money.  Is this correct?  Also, if "rolling" to another put sale position, (which in these case are put sales, I think means to actually buy-to-close, the put already sold, and then sell-to-open the next put to be sold. is this correct?) does this usually end up making a position cost more, kind of like DD a stock position?
    2.      FWIW–(JRW i’m using accronyms now!!) ARMS index went to 13 just days before the 9800 to 10200 ascent, went to 10 on 6/29 some type of rebound ahead??  let’s hope. 
     


  49. Hi Phil — GOOG please help — Aug470 short put and Sept 470 short put — how to adjust this one.  flip more to short call then put? THX


  50. kinki,
     
    I was thinking a break below 1000 might be needed too. I didn’t think it would happen in a single, straight-down move, but now it seems it may. That would clear a lot of sellers out of the market, and may give us a chance at a counter-trend rally.


  51. Bought some TNA at $34.34, waiting for confirmation for the rest


  52.  TBT is incredibly bad


  53. JRW/risk — nice post yesterday PM about risk. Thanks!


  54. ARNA – Congrats all, great play Pharm!

    Gold finally got smacked down to $1,230 on the good news out of the EU.  Oil way down at $73.20 despite the diving dollar and Nat gas still super-low at $4.64. 

    Volume coming into 10:30 is a bit above normal at 52M on the Dow but nothing to write home about

    Microsofts SmartPhone failed in just 43 days – a new record for Ballmer ineptitude!

    DXD/BG – It was an easy fill at .30 on the bull call – still 233% upside.  When you are having trouble, treat it like a momentum play and buy the calls first and then sell the higher calls.  If you do that in small rounds you can work your way into it.   Now it would be kind of chasing so I’d say skip it for the moment or you can reverse fill by selling calls first then buying yours to cover on a bounce but that’s a little more dangerous.  DXD ran up to $31.40 so if you want an easier fill it’s back to TZA, where we can sell the Aug $6 puts for .23 and buy the July $8/9 bull call spread for .43 and that’s net .20 on the $1 spread


  55. Phil/fair  I did not say I wanted to SCARE them….. ;)


  56. Out at $34.47, just doesn’t feel right !!


  57.  Phil,
    I have been hanging on to the July JOYG complex spread and I’m watching profits slip away as it lowers.  Is this a good time to be glad I made money on it or wait for the bounce to bring it up again?
    Second, I have two July short puts going underwater, XOM $60 and SNDK $44.  I have rolled all other short puts I have to August (TBT, WFR).  I’m considering rolling these down and out too, but also entertaining the idea of a stupid option trick like you showed me with the DIA mattress you showed me a couple weeks ago.  Any ideas on the best way to go here?


  58. JRW – watch TBT for confirmation.  Try it.  Doesn’t work every single time, but it has saved judah and I numerous times over the last several weeks.  Don’t fight the trend.
     
    Phil – the dollar up, market down correlation is broken today.


  59. Phil: we are now below all those levels that you sent in your "Morning alert"; if we close like this – or lower, then what?  straight down to hell?


  60. JRW – I second the "doesn’t feel right!"…


  61. Eric: yes, I think sub-1000 S&P is a fun place to play around in the blood. ;)


  62. Hi Phil — TBT July 40 short put, last time asked you recommend not to roll yet — should I roll out to lower strike now or wait ….TIA


  63. Europe crashing right back down on our data, down 2.5% on CAC, with FTSE and DAX down 1.5% with an hour left to trade. 

    In and out/JRW – ROFL!

    Logic/Tusca – Never count on logic to help you in the short run. 

    Wow, oil is in a panic – hitting $72.50 now.  If that breaks, we need more cover!  OIH hasn’t even reacted yet, they might make a good short if oil breaks.  Let’s say the July $84.1 puts at .92, stop if oil over $72.75 for a small loss. 


  64. Pharmboy -
    Any opinion on DNDN – and how usual is it for this type of review – of course Cramer and his boys at Street.com have a negative piece -
    Phil – you should like it just bc that POS The ST.com is negative or raising issues


  65. I didn’t even find it worth mentioning the failure of Microsoft’s Kin yesterday – they sold something like 500 units and the entire development team was moved to the windows mobile 7 dev team.
    Re: AAPL and the class action lawsuit – if people are that unhappy with the phone (because they don’t want to buy a bumper or whatever) why not just TAKE IT BACK? It’s almost comical – "I’m dissatisfied enough with the phone that I want to sue someone, but not dissatisfied enough that I want to take it back."


  66. Phil
    In one of your posts yesterday you said you have never seen so much negative sentiment on the PSW board, and esentially you were puzzeled by this. I will explain this ….. I have never seen so much malaise in the area of hope for positive growth since the meltdown 07/08. The economic reports day, after day are just awful. Our government is staffed with a consortium of nitwits, that continually make one horrific mistake after another. The business and banking community has totally given up on trying to move ahead with the continual disappointments that come out of Washington. They are in disbelief of the ineptitude on a daily basis. The markets are reflecting this, and we as investors and monitors of this mess are accordingly negative. I am going to cash to the best of my ability, and will become interested in re-entering the markets after November. The Democrat party is now becoming embarased by the policies that are pressed by this group of boobs that have taken up residency in our capital. 


  67. The sky is falling!


  68. Still playing sticks?  Wow I’ve played about 5 sticks on the last month and I’m 0-5.  I think we need to look at reality here.  The US and world economy IS NOT in any type of recovery.  Look at 1929-1933, this is where we are.  I was waiting for more of a rally before getting short but it’s not happening.  Matt on here and me are now in the same boat.  Bias DOWN I will not be playing anything to rally.  I’ve posted this before I would look at it again if I were you.
     
    http://greatdepression2006.blogspot.com/2007/08/famous-quotes-from-past-revisited.html


  69. Long term DOW chart is looking ugly.  Hanging off a cliff baby.


  70. Shorting BP here…


  71. GEL…thank you.  This upward bias has no intellectual basis.  period.  Everyone likes an optimist even when they are wrong, that’s why the upside bias, however this is not reality.


  72. Bought some TZA, the reverse split can’t come soon enough for me. It looks like we go all the way to IWM 58.68 (Russell 585)


  73. Phil,
    Got a TBT position adjustment to pass by you, as I was afraid you might not have had any TBT questions in the last few minutes and might be feeling itchy for one.
    I started a $44/$48 bull call spread back in April, and after a few rolls, (think small blister on my right index finger), I’m currently in the Jan.2011 $40 Calls (12 contracts) at a basis of about $5.25 if I were to close the covers I currently have, 4 July $41 callers nearing up 94% & 4 August $38 callers sold yesterday & up about 33% already.
    I’m looking at rolling down and out on the calls to the Jan.2012 $35 Calls for a debit of about $5.25 at last check, putting me in the $35′s for about $10.50 per.  It looks like I’ll need to cover about .47 per month, going forward, selling short term covers to offset time decay in the longs.  Thats been very doable selling 1/3 covers for the last two months & the 1/3 sizing should make rolls more manageable when necessary.
    My question is, would you make the roll or sit tight on the $40′s


  74. Phil – Did we get large volume on that last push down?


  75. I am happy, EUU 124/125 spread work well today, and  2 weeks old tza jul 7/9 spread too, thanks Phil.


  76. Phil,
    Tnx for DNDN thoughts.
     I think the OIH play is a good one as I think RIG and HAL holding up OIH here.  Once those low vol. rally fades, OIH will go down.  But, VIX is spiking.  Would we be better off buying put spreads with matching data even it’s just a day trade?


  77. 1020
    We have 45% of total average daily volume already !! (on IWM)


  78. Have DXD Oct 23 calls at 3.10 and July 27 callers at 1.05.
    get out?


  79. Wow.  FAS is now cheaper per share then FAZ.  It’s a paradigm shift! 


  80.  Phil,
    Re: The SDS $29 Long & $36 Short hedge that expires in September.
    Even though this spread is 100% ($7.00) in the money, closing the position now would only pay approximately $4.50 net because the $29 Calls are almost entirely intrinsic value and very little time value while on the other hand the $36 Calls are more than 1/2 time value that will decay to nothing over the next 11 weeks. Everything else being equal, the net $4.50 will become net $7.00 during that time. 
    Do you advocate closing this 100 contract position at this time and what do you then recommend for a replacement and at what market level?
    Thanks


  81. I guess it took 14 months (Mar ’09 to May ’10) for people to wake up to the fact that the emperor has no clothes !!


  82. Phil – whats the odds the govt manufactures a better jobs number Friday?


  83. JRW,
    You got that right.  Nor does anyone around him.  Did anyone hear Greenspan yesterday?


  84. matt / FAZ
    Welcome to the new normal; BTW, as the resident perma-bear, you would enjoy my AH post re: Risk.


  85. Who knew SRS was actually an inverse ETF?


  86. To the stock market.


  87. Phil / unheged longs           I still have some unhedged longs in oil integrateds and the 3 big banks.  Should I hold, sell or fully hedge?


  88. Ignore that last 2 posts, sorry…


  89. CNBC/Hiring - "Businesses don’t want to hire" is what I hear everyone state.  I believe businesses don’t NEED to hire…simply freeze raises, increase hours, remove 401k match, increase healthcare co-payments, get rid of the free coffee…this "was" your real earnings increases over the past few quarters on less revenue!  Corporate wage slaves are not going to break their chains anytime soon, especially once the state and federal govt starts increasing the taxes on the middle class very soon (VAT, SS/Med, Carbon Tax, exploding health care inflation, etc)…


  90. Phil: my TZA spread jan4/12 :
    calls 3.68 now 5$, callers 1.66 now 2.36$.  What’s your review of this ?


  91. Thanks JRW!


  92. VIX/Daveo – Not anymore,back to 36.81 but not too exciting considering we’re down 600 in less than 3 days but, sadly, the VIX is more of an anti-index, in other words it measures the "wrongness" of the move in the market so if the VIX goes down as we keep going down then that indicates that no one is surprised by anything that’s happening.  

    And what Eric said!

    TBT/Pstas - Well 2 year notes went negative in ’08 and TBT fell to $35.51 so they are lower now with less panic. If they stay down, this will be the first time they have spent 3 weeks below $40, ever and last time they hit $35, they were at $50 in 60 days and the two times they hit $42 after that, they were over $50 in 3 months and we’re just playing for them to get back to $40.  Looking at TLT’s insane run-up to 116, that’s another 15% from here so another 30% down for TBT is about $25, which would very much suck but that was ’09 and snapped back hard. 

    Denail/Stark – It’s looking that way.  Before we recovered off the flash crash, we determined that 8,500 on the Dow and 880 on the S&P should hold up as bottoms (down about 20%) so the next time we fell (June 7th) we went shopping with plays that cover us to those lows.  Today we have oil ($72.22), gold ($1,219) and copper ($2.865) crashing and that’s yanking a  whole sector down to hell while banks are dropping 3% today as well.  It’s an across the board panic and you just have to patiently wait to see where it ends.  If you slap an index put on your portfolio to stop the bleeding, you don’t have to panic out of your positions and, when we stop falling, you cash in the put and use that money to improve your longs.  You can try to make money to the downside but just be very careful as we could be up 200 at tomorrows open – crazy as that may seem right now….


  93. Opening wallet slowly…….


  94. $1.05 is plenty on OIH!


  95. JRW,
    You’re right.  The SS chart online is better.  Moves by the tick rather than the minute.  I was wondering what you were talking about when you said the SIG only took a few seconds.


  96. Out of TZA at $8.89 for 19 cents


  97.  Looks like we may want to consolidate at the 38.2 fib retracement from march ’09 lows.  I just rolled my VIX calls into Aug. call spreads to provide more protection.  
    If we can hold around these areas, I’d think about going long some leveraged etf.  TNA (as Phil mentioned), SSO or QLD might not be a bad idea here although small caps getting hit harder than the rest.


  98. JRW,
    Are you going for this bounce or playing the down trend?


  99. HEAD AND SHOULDERS
    SAM COLLINS
    First, let’s examine closely whether the breakdown of the S&P 500 is really a head-and-shoulders break. Although it is one of the most graphic signals, it is also one of the least understood.
    The classic pattern occurs only at market tops, and not in the midst of an already established decline. This pattern did occur at a market top following a broad advance from the bear market low of March 2009 to the peak, or head, on April 26 of this year. Chalk one up for the bears. 
    The left shoulder of the pattern is the culmination of a strong rally following an extensive advance and is always lower than the head but higher than the right shoulder. This recent break conforms to the ideal since the left shoulder’s high was at 1,150 and the right was at 1,122. 
    Next, volume on the advance up to the right shoulder should be lower than the advances up to both the left shoulder and the head. Again, this is accurate. Remember my continued complaint of the very low volume on advances versus the volume on declines in the month of June. 
    And, finally, there must be a break of a well-defined neckline by at least 3% of the total value of the stock (index) at the point of penetration of the neckline. Well, we do see a very well-defined neckline, and it has been violated. But in order to have a confirmed head-and-shoulders we must have at least a 3% penetration of the neckline.
    That means that this formation, as ugly as it looks, does not yet conform to the classic definition of this major reversal pattern. We must see a further decline to 1,009 before we are able to confirm that a new bear market exists.
    Now you may say, "Picky, picky. The charts of the major indices look lousy. Stop hedging yourself, Collins, and call it for what it is." 
    My answer to that is simple: Words have meaning and technical analysis has very specific, time-tested definitions for each term that we use. You may discard them if you wish, but if you do, then you are running on a hunch, and hunches don’t usually make money.
    Here is the way I read the current outlook: Following a further swift decline, new money from institutional investors may be put to use early in Q3, driving prices back up through the "neckline," and perhaps to the S&P’s 20-day moving average, or even the 200-day moving average. If that occurs, look for another downside reversal that could test yesterday’s break. It is that decline that will tell us if we have broken into a new bear market. But if the S&P and its companions fail to rally, drive immediately lower and establish losses of 3% below their respective necklines, then the bull will be dead and a new and ferocious bear will tear into the market
    THIS ARTICLE WAS WRITTEN BY SAM COLLINS AND I THOUGHT IT TO BE A CLEAR DEFINITION TO US NEWBIES. I HOPE SOMEBODY CAN PROFIT FROM IT


  100. Good Post Arbolito


  101.  Phil,
    In addition to my earlier post/question about my SDS hedge, this also applies even more so to the TZA  $4 – $12 January 2011 hedge I’ve got on.  Even though this hedge is nearly $5.00 in the money, because there is almost no time value to the $4 strike and only time value in the $12 strike, closing the position would bring slightly more than 1/2.  What do you think, let it ride or close it with a modest profit and replace it with?
    Thanks Again


  102.  Phil,
    On OIH, should we take some off here?  HAL went negative and RIG about to rollover which should take this down more no? 


  103. In TNA at $33.83


  104. exec,
    I used to use Street Smart on line back in ’07 and that was the best part of it


  105. YEEEEEEHAHHHHHH!!!!!!!!!!


  106. Out of TNA at $34.78


  107. Oh no, getting back in to TNA; first batch at $34.74


  108. JRW/YEEEEEEHAHHHHHH!!!!!!!!!!!  I guess the omlette turned out well……. :)


  109. OK now another theory. Remember we needed a correction and the BOTS control the market. There was no way to make Q2 look good so if they make it more bad at the very end Q3 has a chance to look great, the earnings upward suprises will be even better than the expected lowered projections based on the June bust. This is therefore the last flush to clear the rest out. Todays bust is to try to get us out and forever hate the market! Then the BOTS earn their keep and the criminals get their BIG CHECK AGAIN!


  110. APOL happy w/ employment numbers


  111. I just got pulled over by the comment police. I guess I’ll see you guys later……snif…..


  112. XOM – picked up some Aug calls


  113.  Volume today already surpassing volume on Monday.


  114. Out of TNA at $34.66 for an 8 cent loss, but only on 8000 shares.


  115. Comment police? Not Phil?


  116. VIX getting out of sync with RUT again


  117. Rut Pack – IWM 60.26 is 50% Fib for today for upside resistance.  Question is, will IWM 50sma hold…we will know in about 3 minutes…


  118. JRW -  I’m having amazing results using the Fib to predict the next low…got into TNA @ 33.32…unfortunately I sold about 30 seconds before you posted your entry.  At least I got some TZA when you sold your TNA…made $0.15 and now in cash.  If I can just merge your much longer holding method with my own…tough as I’m not use to holding so long!


  119.  Phil,
    I want to scale in to XOM here.  Jan ’12 45/55 call spread for 6.05 selling Jan ’12 45 P for 4.80.  So $10 in the money spread for $1.25.  OR do I start with almost delta neutral diagonal here--Sell July 57.5 C and buy Jan ’12 60 C for $5.39/spread and TOS tells me margin adjstment of $790.  I can trade around this month in and month out hopefully being able to sell $1.00 monthly calls (18 months) vs. $5.39 of total cost?


  120. Phil, are you playing for any kind of a bounce in oil? 72.5 (although it has already fallen past that mark)?


  121. Phil
    Because a long went below the strike on a putter 1 account got locked 0 margin? What can I do about it?


  122.  Forgot to mention reason behind my diagonal thinking on XOM.  Unlike other beaten down oil names, my risk of XOM being bought is low so those sold calls won’t worry me a bit.  ALTHOUGH, maybe AAPL buys them when they finally are #1 in market cap:P


  123. deano/police  Yeah, between my last two posts appeared -you are posting too frequently- or something to that effect. Maybe someone is watching…… ;)


  124. Gold,
    How are you setting up your Fib?


  125. Puts/Fizz – Sounds right but a lot of words…  You sell a put.  No matter what you keep the money.  You are obligated to buy the stock at the put strike and you can be forced to do so at any time, but it does not happen often there is a decent amount of premium remaining (more than 0.25% of stock price).  If the option expires and the stock is above the strike, the put is worthless and you don’t need to do anything but keep the money.  If the stock is one penny below and you do not buy back or roll the contract on expiration day – you will find the stock in your account the next Monday and the cash will be taken out of your account.  

    Rolling/Fizz - Rolling is just shorthand for selling (or buying back) the thing you don’t want and then buying (or selling again) the thing you do want to be in.  If you spend .10 to "roll" the posiiton, then your basis is up .10.  A problem is your broker account won’t show it so it’s up to you to keep track of how much you are really in a position for. 

    ARMS/Fizz – I think there are many technical indicators that show things are improving but right now you may as well be trying to talk my children out of chasing down an ice cream truck by running after them with charts and graphs that show empty calories and their long-term health effects.  Nobody wants to listen so why bother?

    GOOG/Gucci – Why do I get the feeling that you didn’t REALLY want to own GOOG at $470?  How do you feel about owning them for $380?  You can just roll back to the 2012 $380 puts for about even, that should cut your margin too.  If you want a less time-consuming solution, I’d stick with the Sept puts for now and split the Aug $470 puts into the $440 puts ($23.50) and the the $470 calls ($12) because if GOOG gets back over $470 then your Aug putter will be worthless and Sept will be in good shape and you can roll the caller up to Sept $480s (now $12.50) or better and you’ll be in pretty good shape. 

    Another reason to buy stocks – Your strong dollars are getting weaker!

    1,000/Eric – Good call, we hit 1,006.

    JOYG/Rev – Wow, what a ride down.  I still like them long-term but it will be a slow climb for them most likely, looking at housing numbers.  If it’s a spread, I’d take out the caller and wait for a bounce but that’s me being bottomish again.  Same goes for the puts.  Tomorrow all hope will be lost if we’re down 150,000 jobs, not today.  

    Correllation/SS – Oh, I didn’t realize it was a minute by minute correlation…  8-)

    Levels/Sean – Those were the levels we want to get back to.  It doesn’t really matter what happens today, it’s all about the jobs tomorrow and THEN we can go straight to Hell.

    Wow, BCS at $15.35!  So hard not to buy things down here…  Jan $12.50 puts can be sold for $1.70 for a nice net $10.80 entry, which is another 30% off.

    TBT/Gucci – Well, they have no premium so if you can take the temporary loss, I’d roll down to the July $35 puts at $1, which are pretty much all premium and roll the other $4 (if you can double it now) to the aug $39 puts ($4.50) or wait for the $35s to expire.  If you are sick of watching it though, you can Just roll out to the Jan $38 puts at $5.30 or 2x the Jan $33 puts at $2.50 and then hope that the 20-year holds 3%.

    DNDN/Samz – See last night, we discussed it then.  I don’t see a play there.  It was a good buy on the panic but now their outlook is uncertain so it’s going to be choppy and I have no particular reason to love them at $29 (since we were buying them for $2 a while back!). 

    Class action/Kwan -  Well, is AAPL accepting returns?  If so, then they should countersue the law firm for idiocy but, if not, then that’s what class action suits are for.  They can’t sell a defective product, no matter how insignificant they think the defect is (think TM floor mats) without disclosing it up front.  Reasonably, there is no way to know a phone gets poor reception unless you take it home and try it so AAPL should be liberal about returns.  I don’t know that they are not but I can’t imagine how a suit can even be entertained if they are willing to take the phones back. 

    Democrats/Gel – Now how did I know this was going to be their fault? 

    TBT/Bass – LOL!  It has been 3 questions since the last one…  I like that plan, buying time does seem to be the best idea with TBT but I wouldn’t pull the trigger on the roll to 2012 unless the spread of the roll begins to get away from you.  Again, it goes back to waiting for the NFP data tomorrow and whether or not we’re dropping 150,000 jobs for June. 

    Volume/1020 – I’m way behind but volume at 12:14 is 113M on the Dow, stronger than normal 70-80M by a buch so possibly a good indicator that there are buyers about. 

    OIH/Jdub – Spreads don’t work for day trades because you can’t count on what you need to buy caller/putter back for and it makes the whole thing more complicated.  You just go in looking to make 10-20% and set tight stops once you are profitable.

    DXD/Drum – You have $2.05 of a possible $4 but you are also 40% in the money so it’s a judgement call.  I’d say yes because if you made $1+, then I’d rather see .30 risked on the short-term spread that makes 233% (+.70) if we keep going and you net $2.75 on the trades but, if we head back up – you’ll be glad you got out and you can always reload cheaper.

    FAS/Matt – that is getting interesting! 


  126. Phil:
    From yesterday AM
    BA got a good ruling.  $65 puts can be sold for $2.50 and I like the $60/62.50 bull call spread for $1.90 paired with the sale of the $60 puts at .75 as well for net $1.15 on the $2.50 spread that’s 100% in the money and you own BA at net $61.15 worst case.
    Do you recommend A)  $65 puts can be sold for $2.50  or…….

      B) I like the $60/62.50 bull call spread for $1.90 paired with the sale of the $60 puts at .75 as well for net $1.15 on the $2.50 spread that’s 100% in the money and you own BA at net $61.15 worst case.
    What would be worst case if you do both?     Thanks


  127. Exec – I place many Fibs intraday, for example once we hit the low level around 11, a fib between the open and low gave IWM 60.26 for 50% retracement…a tough line to break on such low volume upward momentum.  No real "book" reasoning, it just gives me something to do while I patiently wait for my next trade, so I don’t get bored and force a bad trade…


  128.  Looks like Tuesday pattern forming  1008-1007 must be the ultimate target last 15mins will have a small pop. I agree with Phil extremely bad job number is baked in, the question is buy before or after jobs


  129. Thanks Goldman


  130. "Democrats/Gel – Now how did I know this was going to be their fault?"
     
    Good Grief Phil……..Everything is their fault……you outta know that…..don’t you have your dial tuned to Rush?????


  131. gel1 - hope you got your short on TSLA @ 30 Wed..now at 21ish!  The hedge fund alpha window dressing theory may have played out, or simply the insiders and $15/share IPO owners simply cashed out!


  132. JRW,
    I am still pussled how resistance and and support levels of the past can help you in todays market. Pls explain when you have a moment thks
    JRW III
    July 1st, 2010 at 9:35 am | Permalink  
    Good morning,
     
    IWM 58.68, 60.70, 61.13, 61.97, 62.91, 63.31, 64.35, and 65.54


  133. I have a friend that has been working as a census enumerator. She told me yesterday that notices dated  the last week of June were sent out extending their positions through August. When she called to ask what this meant she was told that rather than terminate and then re-hire people if the need arises these notices were sent to ALL the recently hired workers.  These are intermittent temporary positions, meaning that they are given work on an as needed basis are are hired for 2 month periods. The vast majority of these people are not working since the data collection is pretty much complete. Could this be the government’s way of skewing the employment figures for a couple of months?


  134. Phil: did you not see my 11:14 ?


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


  136. Watch out for IWM 60.70


  137. Just filled on TASR SEP 5 calls @ 10c


  138. At the airport all….ARNA, I expect more upside if VVUS fails the safety review.  When in doubt sell 1/4 to 1/2 and let’s let the Ps erode a bit more….I am off to Hawaii and may not be back on until after next week, but let’s keep it together….Have a happy and safe holiday!


  139. Thanks JRW for the warning


  140. Thank you JRW will study this


  141. Geez- I took a couple of phone calls and now I see the end of the world is postponed til Friday?


  142. SDS/Cslan – See above DXD comment.  You are risking $4.50 to make $2.50.  Is that what you signed up for in the beginning?  Question number 2 is, can you make more than $2.50 between now and Sept using $4.50?  If you think you can then this spread is effectively done.  For one thing, your premise is, of course that they hold $36 so what about flipping to the $32/36 bull call spread at $2.40 and take $2.10 off the table, you still have $1.60 of upside with less risk.  If we head down, you can sell the $29 puts for $1.50 (now .50) if you are still market bearish and that would offset most of the bull spread. 

    Jobs/Gold – I am thinking it won’t be great but not -150K.  The set-up is just too perfect for a massive reversal to burn the bears.  With 84% bearish sentiment, a bull who can control the market can make MUCH more money betting up right now and Congress doesn’t investigate you for making money on the long side…

    SRS/Kinki – It’s amazing the things you can learn in a correction.   Speaking of which, BXP bounced off $70 – if they fail that, it’s a pretty good indicator the markets will be legging down further.

    Kinki’s 11:11 comment: "To the stock market" needed video anotation. 

    Banks/Tusca – I’d keep an eye on a cover but I’d wait to see what tomorrow looks like.  Right now the Fast Money crew is glooming up the place for lunch.

    TZA/RMM – Well that’s a spread for a proper disaster but you started with net $1.32 and now $3, which is a nice $1.70 profit and you can take $2.40 off the table (almost a double) by rolling to the $9/12 spread at .60 and you still have $2.40 more upside (another 200%) with no danger of losing your gains

    H&S/Arbolito – That’s great thanks!  I’m not a TA guy so I can’t explain WHY I don’t believe in a pattern, I just know when I think it’s BS…

    TZA/Cslan – See comment to RMM just above this. 

    Comment police/1020 – What’s that?

    XOM/Jdub – Don’t you REALLY want them for $45?  If so, then the artifical buy/write is best, why be delta neutral on something you really believe has long-term value?  Of course they won’t be bought out but they can fly up $5 in a day (see historical charts) so a little dangerous selling calls.

    Oil/Jrom – I’m not because I don’t care whether oil bounces or not right now and I don’t want to lose focus.  I do like the trade selling USO Aug $30 puts for .79 as that’s about $65, which we really think should hold up

    Locked/Shadow – You can buy back the position and release it but, otherwise, I’d have to know what position you are talking about.

    Posting to Frequently/1020 – Even I get that, it’s a WordPress thing.  Just try not to post comments in the same minute or two.


  143.  Phil- I get the feeling that we’ve been primed to feel bad about the state of the economy this week ahead of the jobs numbers.  I don’t see anything in the data that  could be considered surprising except for the consumer confidence numbers.  It just feels like a coordinated effort to set us up for a surprise upside on better than expected job numbers after we’ve been told how horrible they will be.  


  144.  TLT / TBT / Phil : I have a large position in TBT. I know you’ve answered this befor and you use TBT as a hedge for cash. But, lets just say that I sold a number of puts, based on the fact that i think treasuries are in bubble territory. But, i want to hedge this position against continued deterioration. (I have short TBT January 11 35 puts, and 40 puts. Some short August 45 puts ; also have some 2012 35 calls). Do you think a hedge with TLT call spread is reasonable? And if so how would you structure it? Or, should i just not worry about the face value of the position and wait for it to turn? Whole position down by about 35% so far….thanks


  145. If IWM 60.00 holds you can feel pretty good about going long, otherwise, it’s 58.68
     
    I’m a little distracted here as my CNBC screen is currently showing Kung Fu Panda, nanny’s gone to the store !!


  146. Any of you Rut Nuts – or JRW’s Disciples -
    Do you draw trend lines on the rsi and mom – I am finding this useful


  147. Phil
    You comment on below I hold the TZA Jan11 4/8 spread rolling to a 9/12 spread puts the long caller out of the money TZ
    TZA/RMM – Well that’s a spread for a proper disaster but you started with net $1.32 and now $3, which is a nice $1.70 profit and you can take $2.40 off the table (almost a double) by rolling to the $9/12 spread at .60 and you still have $2.40 more upside (another 200%) with no danger of losing your gains
    A trading now at 8.54 would this be wise ? thks


  148.  I sure like GOOG at 430 but I also liked them at 490, 480, 470 …


  149. Phil, u got a possible stick play? maybe the DIA 100 calls?


  150. BA/Jsurti – Well the put sale is sucking already at 3.50 now but, of course, rollable to Aug $60s (now $3) so nothing to cry about.   Turns out the EADS thing will take years to impact but it does make me like BA long-term so, today, I’d rather sell the Jan $60 puts for $6.90 and buy 2x the Aug $60/62.50 bull call spread for $1.45 as that makes $2.10 (for 2) if BA holds $62.50 and can be stopped out with a $1 loss or less if not.  If it works in Aug, we can do it again in Oct and Dec and Feb and April, making $2 a month playing with house money.

    LOL Exec!

    APOL suddenly gets a life?

    Census/Acd – I certainly hope so!  They’d better be doing something….

    11:14/RMM – I have no idea.  I’m very behind so repost if I missed it.

    TASR/Lionel - I like that!  You should offer to sell $7.50s for .10 too – then a free ride.   

    Primed/Jtiff – I hope so because this is getting tedious!

    TBT/Hanna – Well TLT is a logical hedge, of course.  It’s good now because TLT is $102 and TBT is $35 so a 1.5% move that moves TBT down $1 would move TLT up $1.50.  You could consider selling puts, like the Aug $98 puts for $1.05 as you will be pretty please if TLT drops 4% by then and, of course you can roll the puts.  You can pair that with Aug $102/105 bull call spread at $1.08 and you stand to clear $2.97 if TLT heads north of here with no loss until TBT is up at least 8% ($37.80).  If that works out, you can reload the next month.  

    TZA/Yodi – It’s not about putting the long caller out of the money.  Go look at what he started with.  If you buy a call for $4 and sell a put for $3, then you spent $1, right.  If the spread changes to $5/$2, then you have a $3 spread and if you roll up to a call that is $3, you are going to put $2 back in your pocket so the whole remaining trade can expire worthless and it’s no skin off your back.  Get it? 

    AAPL $248 with few buyers.  That is amazing…   I’m not a buyer either but how fast sentiment changes on something is stunning.   All props to Shadow, by the way, who was emphatic that people get out at $270!


  151. TNA for those that did not get in at 12:30


  152. I don’t want to make too much out of this, but the stock advance decline line has incrementally improved as the day has gone on, now about 2.5 to 1 negative, but I think it was closer to 4 to 1 negative early in the day.  It is too tempting not to buy something here after the collapse of the past few days so right here I nibbled on some DIA 99 calls for mid July.


  153. Phil : I have 20 TZA Jan $6/ $11 bull calll spread with 1/2 Jan,$5 puts for net $.11. This morning I opened TZA 30 July $8/$9 bull call spread for net $.38. I’m looking to cover a 10 % decline from here on about $300 k of long term buy/write positions on long term blue chip stocks & artificial buy/writes that I want to hold. I don’t  have any of your mattress plays in effect. What is your recommendation ? Thank you for your help


  154. Post earlier about Head and Shoulders.  Said we needed 1009 for confirmation.  Low today = 1010.


  155. Phil, I have the new hedges, bot the DXD 31/32 bull call spreads (no short puts), and the TZA 8/9 bull call spreads + TZA Aug 6 puts.  If the markets goes UP, what are our exit plans on short-term hedges like these?  Do we put 50% mental stops, and take 50% loss on them?


  156. Phil / Doug Kass    He just called the days low at 12.45pm and thinks 50% chance years low, has added dramatically to long exposure.  Brass b--lls or mentally ill?


  157.  Hi Phil – on the UCO play I’ve got going (covered call – sold July $10 calls for $0.77 back a few weeks ago).  It looks like I can cover the calls now for only $0.15 to $0.20.  Should I wait to the OpEx week in July and wait for the last bit of premium to bleed away – or – should I cover the calls now and replace by selling July $9 calls for $0.50 and let that premium bleed away – or – the first thing I said (do nothing).  Thanks!


  158.  there is so much I want to buy and no cash to deploy :(
     
    bad money management!


  159. Phil / Gel -
    What is moving the dollar so much against euro??


  160.  - OR – roll to August


  161. Hi Phil. Back to my SLV. I know you don’t like it and now I am also convinced I want out. 2000 @ 18.52. You did not like my strategy of selling calls and puts that would lower my basis to 14.29, since that would leave me with 4000 of a bad stock. NOW. I want to get the most of my SLV position when selling, can you please give me a good strategy by selling calls, which strategy would be the best, selling 2012, 2011 or monthly to collect premiums? Thanks.


  162. Phil
    The stock IPXL sold puts and calls @17.50. I wanted to sell the stock  about amonth ago and have now learned you don’t do this with thinly traded options. I bought back callers but nobody bought putters. This week margin kept going away with spreads I was sticking with nomatter what happened. My thought of just sell the stock was denied. I realize I could wire money but I held back trying to decide on a TOS account. Indesision has consequences. What do you recomend?


  163.  Hey Phil…
    its not a big position, but should we be looking to give up on YRCW at some level or hold on for better days :)
    thanks


  164. OK, I did it… closed out all speculative positions that might be influenced by  negative government policy. Will re-enter after the November elections,  providing the crowd "that could’nt shoot straight" is on their way out.  In the interim, will trade currencies, and maybe even join JRW’s posse of Scotch drinking day traders!


  165. Initial Jobless Claims: +13K to 472K vs. 455K consensus. Continuing claims +43K to 4,616,000.

    June Monster Employment Index: +7 to 141, with growth +21% Y/Y. "Several industries and occupations are now displaying several months of positive growth trends… and this would indicate some fundamental strengthening in these areas."

    June Challenger Job-Cut Report: 39,358, up slightly from 38,810 prior. This is the third month in a row with job cuts below 40K. "While some may question the sustainability of this recovery, the dramatic decline in planned layoffs over the past six months certainly suggests that the nation’s employers are not anticipating a double-dip recession."

    Tomorrow’s nonfarm payrolls will probably show a net loss of jobs for the first time in six months. But before hitting the panic button, keep this in mind: The figure reflects the end of up to 250,000 temporary census jobs, and the number that should matter is how many net jobs private employers created.  Wow, what if the government were to NOT lay off those census workers? 

    WSJ’s Real Time Economics updates their scorecard of analysts’ expectations for tomorrow’s employment data – if by "updates" we mean "lowers across the board."

    EIA Natural Gas Inventory: +60 bcf vs. consensus of +65 bcf. Futures +1.39% to $4.681.

     

    May Pending Home Sales: -30% to 77.6 M/M, vs. -13% expected, +6% to 110.9 prior. Sales -15.9% Y/Y. “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” says NAR chief economist Lawrence Yun.

    May Construction Spending: -0.2% to $841.9B/year vs. consensus -0.7% and +2.3% prior (revised); 8% below the year-ago estimate.

    June ISM Manufacturing Index: 56.2 vs. 59 consensus and 59.7 prior. Prices index 57 vs. 77.5 prior. Employment 57.8 vs. 59.8. Inventories 45.8 vs. 45.6. New orders 58.5 vs. 65.7.

    PMI falling across the board: China’s Purchasing Managers Index fell to 52.1 in June from 53.9 in May, the second month that expansion slowed, while eurozone PMI inched down to 55.6 from 55.8, the slowest expansion in four months.  Note the spin on this, these are fluctuations, not downtrends.

    If the other economic powers all decide to reduce their budget deficits, they will have to look to China to drive global growth, Simon Johnson writes. The bet is that China can keep its growth high enough to sustain the global economy while also not getting drawn into a bubble that might involve big Western banks. "Given the nature of China and the volatility of global capital flows," Johnson says, "this is quite a bet."

    Despite the specter of a possible Moody’s downgrade, Spain successfully raises €3.5B ($4.3B) in an oversubscribed bond sale.

    Bond returns are beating stocks by the widest margin since 2001 as earlier optimism evaporates and investors question the strength of the economy. The recipe: “Equities are really volatile, global economic growth feels like it’s slowing a little bit, meanwhile inflation is coming down, and the Fed is on hold indefinitely."

    Sam called this one a month ago: Amedisys (AMED -9.05%) says it’s the subject of a formal SEC investigation, and has received a subpoena for documents. The company notes that "the SEC is also investigating others in the home health industry regarding matters being examined by the Senate Finance Committee."

    This will be FUNThe presidential commission investigating the Gulf spill has decided to hold hearings in affected Gulf states and will be calling upon top BP executives, including CEO Tony Hayward. Commission members acknowledge the hearings, set to begin July 12 in a 500-seat venue, could turn into a public trialI hear there will be a 12-stone limit per spectator… 

    UBS upgrades Dell (DELL) to Buy from Neutral, but cuts its price target to $15.50 from $17.50. UBS sees limited downside for the firm and "we continue to believe Dell will be a beneficiary of an enterprise PC refresh that should begin in [H2 2010] and grow in 2011." Shares +2% premarket to $12.30.

    Amazon.com (AMZN) launches an improved Kindle reader and cuts its price, in a move to address the threat from Apple’s iPad. Amazon’s new Kindle DX will sell for $379, down from $489, and will include free 3G wireless connection. AMZN +0.6% premarket.

    WellPoint (WLP -1.6%), backing off a plan to increase health insurance prices by as much as 39% for individuals in California, has re-filed rates with the state’s insurance commissioner that will result in a $100M loss in that market. WellPoint has been hammered for months by politicians and consumer advocates over the size of its initial rate proposal.

    Constellation Brands (STZ): FQ1 EPS of $0.38 beats by $0.03. Revenue of $788M (-0.5%) vs. $798.5M. (PR)

    Chrysler (FIATY.PK) June U.S. sales: +35% to 92,482 vehicles, vs. Edmunds expectations of 33.2%. Chrysler brand up 30%; Jeep brand up 25%; Dodge brand up 67%; Ram brand up 7%. Town & Country minivan +34% to 9,595; Jeep Wrangler +86% to 8,923. (PR)

    Daimler (DAI) June U.S. sales: +20% to 19,574 vehicles. Mercedes-Benz +25.4% to 18,997; Smart -48.3% to 577. (PR)

    Ford (F) June U.S. sales: +13.3% to 175,895 vehicles, vs. Edmunds expectations of +16.8%. The increase excluding Volvo was +15.4%. Market share grows for the 20th time in 21 months. F-Series Super Duty truck +58% Y/Y; trucks overall up 25.1%. Mustang +37%. (PR)

    GM June U.S. sales: +10.7% to 195,380 vehicles, vs. Edmunds expectations of +17%. Core brands (Chevy, Cadillac, Buick, GMC) +36%, the sixth month that the surviving marques posted gains of at least 20%. (PR)

    Hyundai (HYMLF.PK) June U.S. sales: +35% to 51,205 vehicles, and an 18th straight month of market share gain. Top-selling Sonata +49% to 17,771. Tucson SUV +208% to 3,382. (PR)

    Kia June U.S. sales: +18.9% to 31,906 vehicles. U.S.-built Sorento again its top seller with 8,608, followed by newly built Forte at 7,467. (PR)

    I told you guys this was coming:  U.S. initial public offering filings are hitting a post-Lehman-collapse high, with 89 companies registering to sell $23.6B in shares. But also at a post-Lehman top: IPO cancellations, with 50 offerings shelved globally last quarter.

     

    Three lunchtime reads:
    1) Stocks tracking job growth closer than ever
    2) Not convinced by recession call
    3) Austerity histrionics


  166. bambi / YRCW
    If you sell, Phil will be the sole owner !!


  167. Gel -
    What do you think about usd/euro here – this seems like a bs move to me with short covering or liquidation of short euro positions to cover margin by funds


  168. gel1,
     WELCOME !!


  169. Phil/wordpress  Good to know. Thanks


  170. Phil/iPhone returns – straight from their website:
    If you are not satisfied with your iPhone purchase, please visit online Order Status or call 1-800-676-2775 to request a return. The iPhone must be returned to our warehouse within 30 calendar days from shipment to avoid an $175 early termination fee. The iPhone must be returned in the original packaging, including any accessories, manuals, and documentation.
    Hence the idiocy of it all.


  171. Phil/Oil Witch Trials - LMAO…"12 stone limit per spectator"…can we bring tar balls and feathers also???


  172. samz/EUR
    OK… the moves are due to Dollar weakness, and thoughts (speculation) the Euro is safe for the moment. Trading the Euro is difficult, because it is an "in again, out again Finnigan" almost every day. The big boys are saying ( this morning ) that the Dollar could continue its trajectory to 82.57.


  173. Phil: Another one. BCRX 2000 @ 11.71. You dont like the stock. Decided to sell and buy PFE with proceeds. 11,480K. Buy 500 PFE @ 14.15, sell  5C 15 2012 for 3.35 and sell 5P 15 2012 for 1.68. premium received 5.03. If put 12.06, if not 9.13. Do you like this or is there a better one? Thanks.


  174. Hi guys, greetings from maui. celebrating tenth anniversary with wife and kids. market looks real ugly. this must be the bottom because i feel like selling everything.
    Not much of a recession at michael dell’s property here at the four seasons.


  175. Is anybody also in TSL (Oxen’s long-term recommendation)?  Up 5% today!  I wished that I DDed yesterday.  But overall I’m still green!  If it goes lower again, I’ll DD.


  176. samz/Euro
    There is also a lot of support for the EUR/JPY as a buy…. buy @ 109.12 … stop @ 108.50… take profit at 109.48  With the Euro taking on both of these safe haven currencies, it shows strength for the Euro ( at the moment)


  177. TASR/Phil:  What is the downside to a 0 cost basis call spread like that?  Bankruptcy?


  178. kwan
    Sounds like returing an IMAC in March except I had to absorb 15% restocking. They refuse to kiss you while you get screwed. What is the big deal about packageing? T won’t be nice either, fact is VZ does bend and maybe that is why they can’t strike a deal.


  179. JO…. Aloha…. markets were hit with a massive "ugly stick"….now waiting for the "hockey stick". Happy Anniversary!


  180. Phil / upside play – what’s your fav play for bullish move tmrow?


  181.  Phil, 
    I am trying to get my head around the insurance recommendation, and I know I am missing something…
    If I sell the DXD/SDS hedges and get into the July TZA, I would have to risk $6,000 to have the same $30,000 and if the market stays flat or goes up anything the whole premium is gone in 17 days! (plus the Aug putter is open and a big liability if the RUT moves 9% up).
    Meahwhile the DXD would have to fall 21% (rise of 7% on Dow) for it to be at breakeven (lose the same $6000 it is up now) and the Dow not move up more than 4.25% for max payoff.
    I do see that the payoff would be only another $5,000 for the DXD vs. potentially $24,000 for TZA… however it still seems it is a safer play. What am I missing? 


  182. Kinki/TASR 5/7.5 Call Spread
    There is no downside. It is free money! (after commission)
    But I havent been filled yet :)
    I had a good fill with the 5 calls and Phil with his twisted mind came up with an even greater trade!


  183. Hi, Jomama,
    Congrats on your 10th anniversary!
    If you folks stay over a weekend, can you look around and see if there are "Open House" signs for selling residential properties?  Not for buying anything, but it’ll be interesting just to take a peek and see how the markets look like.
    My wife and I walked into several open houses when we were there several years ago.  We took it as part of our "sightseeing" for fun.  Never bought anything.


  184. thanks gel. sitting poolside while kiddos swim and wife doing beach yoga. breakfast than a run for me. beed to avoid the real world at least until next thursday.


  185.  Phil
    What short term bullish plays do you like at these levels?


  186. sorry “need” not beed. damn fat fingers on iphone.


  187. JRW/
    Are you reloading on TNA?


  188. lionel:  Haha, watch me run up a $100000 commission bill on that trade ;D


  189. End of day sell-off? Dow down 200 points? Anyone? Anyone? Bueller?


  190. Goldman, re: CNBC/HIRING, "I believe businesses don’t NEED to hire…simply freeze raises, increase hours, remove 401k match, increase healthcare co-payments, get rid of the free coffee…this "was" your real earnings increases over the past few quarters on less revenue!
    I  have a very close friend who has worked in middle managment for HPQ for the past 25 years. He was recently moved from Colorado Springs to Albuquerque after HPQ decided it would save the company X dollars to close down the fab plant here. This was a mandatory move, at the employees expense, "do it or you can leave the company". After getting to New Mexico, he has had to fire employees, replacing experienced people with young (cheap) employees right out of college who are less productive b/c of knowledge gapd. He has been ordered to reclassify lots of employees so that their wages can intentionally be kept down. He personally has not gotten any increase in pay for the past 2 years. He has always been constructively optimistic, but in the past 6 months I’ve noted a big change. For the first time I’ve heard him say "I hate my job and can’t wait to retire". The lines on his face have grown deeper. He has moved his retirement date closer by three years b/c he can’t live with this "merde" anymore. While the company has done well on a profit basis, it’s been at the expense of it’s employees. I believe this is the type of thing that Phil is referring to when he talks about the building unrest, and states "Workers unite."


  191.  RIG just exploding here


  192. Phil hit me the last time with the 4th of July but a very quite question is Monday a holiday as well ???


  193. saw the monster at 60.40 in IWM?  300k to buy, 120k left…. filled


  194. lapper; 300k is 300000 ?


  195. thats right, it was bid loud through ARCA on a single order.


  196. Stick play/Morx -  I liked that TNA $40 earlier and it’s still $1.20 so that’s good but maybe we head lower first as oil ($72.45) and copper ($2.88) are still very weak.

    TZA/Dflam – Well keep in mind that you only need to cover whatever is not already hedged in the mattress plays, anything else is overkill.  That spread is now net $1.20, up 1,000% is where most people are happy to take some off but I guess $2,400 doesn’t seem thrilling off $300K, does it?  You need to make $30K in a drop (or less) but we don’t really think it’s going to drop much more than this (or maybe you do) so how about agreeing to buy $30,000 worth of TZA as long-term protection by selling 50 Jan $6 calls for $1.15 and buying 50 Jan $8/13 7/12 bull call spreads for $1.25 so you are net $500 out of pocket with a max payout of $25,000 at $12 and the RUT has to go up 10% before TZA is put to you and then you lose $5,000 for each additional 15% drop in TZA (5% up on RUT) so just make sure you take some longs that make $5,000 if the RUT moves up over 15%.  

    Hedges/Cwan – Yes, 50% stops is good.  There’s the underlying assumption you will make/recover far more than that on the way up and, of course, there’s always the quick momentum play you should have ready if we start flying up.

    Kass/Tusca – I totally agree with him.  I don’t think it’s balls to do fundamental analysis and take a stand – it’s kind of the whole point of FA…

    UCO/SrF – With 2 weeks to go can they get back to $10.20?  There were there ($10.80) on the 21st so it’s very possibly you get burned on a big move so I sure wouldn’t be greedy and risk another $1 for .30 more right now but (and I’m assuming you own the stock) there’s no need to pay .20 either.  You don’t want to roll into a weak call either.  Just collect your .20 and then worry.   

    Dollar/Samz – They are demonstrating sound fiscal responsibility and being rewarded like the market and our coutnry is full of spoiled little children who like to run up debts and pay no taxes.  Get used to it because Gel is voting Republican in November!  8-)

    SLV/Arbolito – Ah, all you people hoarding shiny bits of metal to stave off global collapse really crack me up….  You are down $1.10 and want it back right?  So how about ditching the stock and taking 30 2012 $11/13 bull call spread for $1.40 ($4,200) and sell 20 2012 $13 puts for $1 ($2,000) and that puts you in the spread for net $2,200 with $3,800 upside at $13 and your break-even is $12 and your worst case is you have 2,000 shares put back to you at net $14.10, which is not a terrible price. 

    IPXL/Shadow – You bought back callers for a profit and the stock is at $17.32 so I assume no big loss yet so why not just sell stock and leave the naked putter?  It will either get put back to you at $17.50 or it will expire worthless but, either way, you’ll be able to sell the stock easeir than the puts. 

    YRCW/Bambi – Nope.  We got great numbers from air frieght and I’m pretty sure that once those planes land, trucks come to pick stuff up.  Also, YRCW is being attacked by FDX who is doing everything they can to put them out of business, including issuing what I now think is suspect negative guidance, which tanked their stock but, more importantly, put YRCW’s backs to the wall so very clever by FDX.  Zoller (CEO) says they are getting through it and I like him and believe him so I’m willing to stick it out but this saga could go on for ages (see SIRI). 

    LOL Gel – That is some serious capitulation! 

    IPhone/Kwan – Then I agree with you.  AAPL should counter-sue the law firm and tie them up in court for 5 years and cost them millions to defend – just to teach them a lesson!

    Tar and feathers/Goldman – I think I saw them gathering the supplies up at the beach already!

    PFE/Arbolito – I do like that trade. 

    Happy Anniversary Jomama!  Don’t worry about the markets, by the time you get back it will look like it did when you left and you’ll wonder what all the fuss was about.  Give my best to Dell, tell him he needs to reengage on the design side of the business if he wants to regain his traction….

    TSL/Cwan – Congrats!   And to David too, great call – especially in this market! 

    TASR/Kinki – Yes, bankruptcy and you are forced to buy 2x of a worthless stock but that’s always the case.  Obviously, you should allocate less capital to TASR than to KO or WMT but, if you think about it, are they riskier than a bank or an oil driller? 

    Tomorrow/Terra – As a flyer, I like the FAS $21.33 calls for .52, they were $2.40 on Monday.  You can pay for them by selling FAZ Aug $13 puts for .55, maybe 1/2 and stop the $21.33s at .25. 


  197. Kass – he’ll change his mind when he sells his longs and goes short.
    Talks his book like everyone else.


  198. Bought some IWM July 63′s @55 cents this morning; just for fun !!


  199. Phil – what’s your take on Apple’s iAds and its potential impact on Google?
    This Forbes article made me think that GOOG could end up being completely outside Apple’s walled garden
    http://www.forbes.com/2010/06/23/apple-aim-reshape-web-ad-cmo-network-steve-rubel.html?boxes=Homepagecmonetwork


  200. Phil…long 1k faz from 7/09 @ 44.44/share. Sell Jan 11 18 calls for 5.50 and 11.00 puts for 1.60 to partial dig out ?


  201. Austerity / Phil -  I’m happy to wait until after the close for your opinion on this. I liked Amit’s "Austerity Histrionic" at http://seekingalpha.com/article/212662-austerity-histrionics, and wonder how this falls on the economic time line. In the very near term we may be at a market bottom, but if this austerity thing is really put into practice here, in Eur, and to a lesser extent Asia, then according to Amit we’re heading toward depression which, at some point, looks like another 50-60% down in the markets (just historically). And then after the deluge, a recovery… at some point. What kind of bottom do you think we’re at now, and are you expecting a bounce and then expecting the market to get K.O.’ed by austerity, or is that looking too far out to be anything more than conjecture? Perhaps the practical answer I’m looking for is how much of this 75% cash portfolio should we expose to the market, and how quickly should we take it off the table if we bounce?


  202. lionel,
    Sold at 60.70 again, in cash now.


  203. Here’s the down elevator again!


  204. Phil…. oh yes… I will even change my long established Vodka drinking habits,and switch to Scotch  just to get away.  Here is one for you… in my long hold "parking lot" portfolio,  DEO was the only "green" position ….see, I am not alone!


  205. JRW – Any chance the 2:15 spike up on low volume (118k IWM) was a "program trading test spike?"  The "strech" between IWM and TNA was extreme at that moment.


  206. "stretch"


  207. Phil: the government is getting out of a lot of their C stock: what will this do to the stock ?


  208. samz… it looks like the dollar is weakening – http://www.bloomberg.com/apps/quote?ticker=dxy%3Aind … the projection of 82.57 shows there is weakness ahead.


  209. goldman,
    I think it was a full fledged effort that failed, which is why I sold; you have to remember, a dollar on TNA is now 3% so I’ll take it every time if it doesn’t blow through the resistance !!


  210. Austerity / Phil -  to further clarify: I know your general indications of taking half profit when in doubt, and grabbing 10% if it comes in a day, and so forth for cashing out and D’ing D ("doubling down") so I’m really asking a kind of strategic question, not a tactical one.


  211. Phil, #1 question right now is, what upside do you see leading into options expiration on July 17? Are there enough earnings reports prior to then, to force the upside? (assuming we really are oversold)


  212. DIA Mattress:  Where should we be now?  I’m thinking of rolling the Sept 108s to Dec 99s or 100s.


  213. DPO= @$9.40. Pays 10.5% dividend- no options. Added here.


  214. Phil, 
    Also, should I have mattress plays in conjunction with the other hedges? It is clear now that the 30K in protection is not really there unless we go to expiration and fill the spread, so there is a gap that leaves me uncovered…for example now my hedges have only covered $12K of losses but I have had around $20K, Is this where the mattresses come in?? 
    Thanks


  215. Hedges/Amatta – I took it that you already have nice profits on the other hedges and that they were July also.  The point was if you put down $6,000 and now have $18,000 in hedges that you cash out and take $12,000 off the table and then invest $6,000 in a new trade that makes good money and you lock in a double, even if the new trade is wiped out.  If we bounce back and you stop out at $3K on the hedge, you will have done a lot less damage than if you had let $18,000 ride.  

    TASR/Kinki – Oh, if you were asking about the $5/7.50 spread.  If you can fill it for 0 there is no downside, you have no obligation.    The only way to fill it like that is to get the $5 calls for .10 and THEN offer to selll $7.50s for .10 (Good to cancel) and hope you get a bite one day. 

    Wow, 2:30 anti-stick is now coming like clockwork this week.  Dow volume at 2:44 is 170M, very heavy for positive stick anyway.  

    Short-term/Yshen – see above

    Unrest/Jbur – Yep, that’s exactly what I’m talking about.  They are past the point of trying to get blood from a stone in the US workforce. 

    Monday/Yodi – Yes, you can come here but it will be very quiet as that’s the official holiday. 

    IAds/Soccer – The thing about GOOG is their system is very user-friendly while AAPL is not known for getting along well with people who don’t want to follow their format to the letter.   As long as GOOG is the seach engine that AAPL users choose, GOOG ads will do fine.  AAPL is just taking advantage of their proprietary space and the ad game is very tough, just ask YHOO and the dozen companies GOOG has buried. 

    FAZ/49O – Ouch!!  You are down $26,000 now adn you want to recover $7,100 and lock your top with a call-away at $18?  I’d cash the $18,000 remaining and sell 30 Jan $7 puts for $1.60 ($4,800) that obligates you to own 3,000 FAZ at $7, which is your worst case.  Then you can buy 24 Jan $11/18 bull call spreads for $2 ($4,800) and if they hold $18 through Jan you make $14,000 back and only if they fall below $7 are you back in them and THEN you can sell puts and calls for the next year.  Hopefully you have some bullish financials that offset this somewhat….

    Deluge/Tenger – Remind me later although we talked in detail about this kind of thing yesterday.

    Not alone/Gel – No you are not, I think we’ve gotten ALL the conservatives out of the market now so we can hit the blue button and make all the Democrats rich while you guys sit on the sidelines cursing and screaming at what BS the recovery is – Just like we did under Clinton! 

    C/RMM – It will keep it down for ages but I still like them long-term.


  216. goldman,
    Nice call, I tripped my buy button just a couple of minutes after your post !!


  217. IWM 60.70: be ready to sell……….or double up if your not all in !!


  218. TASR/Phil:  Thanks! Sounds like a fun stupid option trick to try out.


  219. got a macro question for anyone that can help…
    an expected slowdown would lead to commodities (oil,copper) and equities dropping. do stocks dropping lead to the carry trade to unwind and yen going up, or does the yen going up unwind the trade forcing selloffs- if so why is yen strengthening so much.
    More importantly, unlike the first dip the dollar seemed to have topped off and declining…so is it usual for commodities/stocks/dollar all to be going down or is this temporary trend. 
    thanks


  220. Out of TNA at $35.53.5; how many times can one make the very same dollar ?!!


  221. Phil — I was thinking that all the in-app time spent by users on the various Apple devices (iPhone, Touch, iPad) is off limits to Google. Content in apps is not available on the internet and Google can’t index it. Only Apple can sell ads against this segment of media consumption.
    As the installed base grows (and its almost at 100 million) Google will be forced out of a growing segment of digital content consumption, which will significantly impact GOOG. Which is probably why Android is made available for free.


  222. Be careful, rising wedges usually resolve DOWN !!


  223. Upside/Jvest – I think we should retrace to 10,200 at least, filling in the gap from Tuesday’s close.  After that, we could go either way but that will be a great place to take profits and re-up downside hedges. 

    Mattress/Daveo – No change, 1/2x Sept $108 puts, now $12 with stop at $11 and 1x $102 Sept puts, now $7.60, short 1/2 x July $104 puts, now $6.90 and 1/2 July $100 puts, now $3.70.  The roll is not a bad idea, we want to be out of the Sept $108s as soon as we have a good reason to be.  

    Protection/Amatta – Keep in mind though that if the market recovers and your hedges DON’T pay you in full, then your long plays won’t be down $20K anymore.  Remind me later and I’ll be happy to work out the math and strategy with you. 

    Now CNBC has discovered the DEATH CROSS (again)! 

    Carry/Bambi – Big topic but most carry traders aren’t playing equities (not the ones who live!).  The trick is to borrow $1Bn in Yen at 1% and lend $1Bn in Dollars at 3% and make $20M for the year.  That works great unless the dollar (or Euro or whatever) drops in value more than 2% to the Yen, in which case you don’t have enough money to pay back the loan to the tune of $10M per 1%.  So currency fluctuations force carry traders to buy back TBills, even while they are dropping so they can get the money converted back to Yen as quickly as possible.  Just like us, they get margin calls on their trades so there are certain stress levels that cause frenzies (90 Yen is a usual breaking point).  If they liquidate with a $20M loss and they don’t want to rack up another $10M loss on the loan interest in Japan, sometimes they have to dump stocks to make up the difference. 

    GOOG/Soccer – Or GOOG could develop their own on-line games and give them away for ad revenue.  This will be a very long battle.


  224. Gold bouncing off $1,200 for all you gold bugs who wish you bought at $1,250.   That’s plenty for the GLL play, by the way!


  225. JRW – looks kind of like 9:45 this morning


  226. A slew of bad news from Britain this week has the potential to substantially impact the United States. While much of the public’s attention is focused on the country’s unceremonious exit from the World Cup, the world’s central bankers said Britain’s mountain of debt could leave the country powerless to launch another rescue bid in the wake of a fresh financial crisis. The group, which comprises the Bank of International Settlements, presented a frightening picture of the impact of a second banking emergency on heavily indebted nations such as Britain, The Independent reports.
    According to the paper, The Bank of England’s Governor, Mervyn King, has estimated that the Government has pumped as much as £1trillion ($1.5 trillion) of taxpayers’ money into the banking system. Billions of pounds were spent part-nationalising the Royal Bank of Scotland and Lloyds Banking Group, as well as fully nationalising Northern Rock. Measures such as the "special liquidity" plan propped up other lenders and prevented the system from freezing up.

    To add to the misery, fresh data from the Bank of England suggests housing is headed for another slump, as gains made in the second half of last year are on track to reverse themselves by the end of 2010, with a "double dip" recession in the housing market now "more likely than not", the paper reports.
    All of this comes on the heels of a controversial emergency budget passed by the government last weekend, and supported new Prime Minister David Cameron, that includes the steepest budget cuts and austerity measures since World War II. Unions and other Labour Party constituents reacted angrily to the plan with Bob Crow, head of the National Union of Rail, Maritime and Transport Workers (RMT), referring to it as "fiscal fascism."

    A slew of bad news from Britain this week has the potential to substantially impact the United States. While much of the public’s attention is focused on the country’s unceremonious exit from the World Cup, the world’s central bankers said Britain’s mountain of debt could leave the country powerless to launch another rescue bid in the wake of a fresh financial crisis. The group, which comprises the Bank of International Settlements, presented a frightening picture of the impact of a second banking emergency on heavily indebted nations such as Britain, The Independent reports.
    According to the paper, The Bank of England’s Governor, Mervyn King, has estimated that the Government has pumped as much as £1trillion ($1.5 trillion) of taxpayers’ money into the banking system. Billions of pounds were spent part-nationalising the Royal Bank of Scotland and Lloyds Banking Group, as well as fully nationalising Northern Rock. Measures such as the "special liquidity" plan propped up other lenders and prevented the system from freezing up.
    To add to the misery, fresh data from the Bank of England suggests housing is headed for another slump, as gains made in the second half of last year are on track to reverse themselves by the end of 2010, with a "double dip" recession in the housing market now "more likely than not", the paper reports.
    All of this comes on the heels of a controversial emergency budget passed by the government last weekend, and supported new Prime Minister David Cameron, that includes the steepest budget cuts and austerity measures since World War II. Unions and other Labour Party constituents reacted angrily to the plan with Bob Crow, head of the National Union of Rail, Maritime and Transport Workers (RMT), referring to it as "fiscal fascism."


     


  227. Phil: have AAPL july 250 calls with a small loss: should I keep until tomorrow ?


  228. Back in TNA at $ 35.43


  229.  C’mon buyers


  230. I can’t take credit for this last one, you can thank Lloyd for pump !!  There’s the 200 sma then that trend line and THEN we’re free !!


  231. Worse than anemic? Japan’s population is decreasing at the rate of 0.2% annually, thus its projected "anemic" 2.6% growth rate translates into a projected per capita growth rate of 3.1%. Most forecasts put U.S. GDP growth in the 2%-3% range, but since the U.S. population is increasing at a rate of 0.9% annually, the U.S. per capita GDP growth rate is a mere 1.1%-2.1%.

    The plunge in pending home sales is "textbook economic behavior" after the end of the home buying tax credit, Peter Boockvar says. "As with any temporary tax credit that is introduced to stimulate activity, demand gets pulled forward and is then followed by a sharp decline… it’s crackpot economics on the part of our policy makers."

    Another reason to be bearish on housing, courtesy of Felix Salmon: Bankers are human beings who often do things not in their self-interest, and they are forced to take a loss every time they do a short sale – and that’s painful. "So it’s understandable, from a psychological perspective, that they will drag out the process as much as possible."

    Overall car sales in the U.S. fell in June from a month earlier, a signal that the auto industry’s recovery is slipping along with the rest of the economy. June auto sales are often slightly lower than those in May, a month that typically gets a boost from buyer incentives tied to Memorial Day weekend, but automakers were hoping for more.

    Nissan (NSANY.PK) June U.S. sales: +10.8% to 64,570 vehicles. Nissan Division +8.2% to 56,266 – including Altima -2.6% to 15,920, Versa +23.6% to 6,762, Sentra +6.1% to 6,187. Infiniti +31.7% to 8,304. (PR)

    Just before today’s drop in gold futures (-3.2% to $1,206.07, the biggest one-day drop since Februrary), CME says open interest in the futures hit a record Wednesday of 605,792 contracts – part of a build that has been going on since gold hit a record $1,258.30 on June 18.


  232. Phil: will the decisionmakers EVER learn that this does not help ?????
    As with any temporary tax credit that is introduced to stimulate activity, demand gets pulled forward and is then followed by a sharp decline… it’s crackpot economics on the part of our policy makers."


  233. phil ;where’s all the value buyers. XOM at 52 week low.


  234. Out of TNA at $35.80; 10% on the day !!  Hope all had a good profit. See you all tomorrow.


  235. The force of this gold sell-off makes me skeptical that 1200 holds near-term, but maybe. I was out at the failure of 1220. Could have picked a lot worse (TBT). : )
     
    Looking at SPX the yearly chart, there’s a fair bit of chart congestion between SPX 980 and 1005 from last August. Even if we have a little rally near-term, I suspect we’ll have to go down and spend some time in that range before anything more substantive gets going. Unless I’m missing something, I don’t see much around this (1220) area myself. Anybody see anything?


  236. AAPL/RMM – I would ride it out but I don’t like having AAPL calls in the first place!

    Learning/RMM – Well, we have records of this going on in ancient Rome so I’d have to say – no….

    Values/Dfalm – As I said above, people are terrified to act ahead of the jobs numbers tomorrow, we were driven relentlessly down on tons of bad number and they promise a death cross tomorrow on the S&P so how can you buy here – it’s MADNESS! 

    Nice finish JRW! 


  237. Thanks JRW on the news out of GB. I was stopped out of the long GBP currency positions that were doing so well.. now I know the reason. Time to go short!


  238. Phil: what about selling AAPL call july260 against the 250 calls ?


  239. dflam/value — I was just wondering the same thing. I see a lot of value, for example, 23 Dow components have PE’s less than the S&P PE. CVX 10, MSFT 12, XOM 13. Almost half (13) are below a PE of 15. Is a double dip being priced in?


  240. Rainman: Sometimes you just got to hold your nose & buy. I did learn from Phil to start out with 25% so if it goes down,I’m happy so I can buy another 25 %


  241. Hammer candle on the SPY daily chart. Hoping for some follow through on the jobs numbers tomorrow. This stuff feels soooo overdone


  242. Phil…. ha ha… With all of the Conservatives out of the market…. who is left to buy the junk that is depreciating everytime the administration launches a new version of Socialism.  Maybe the Fed wants to buy the equities and park it all next to  the Treasuries they have accumulated  The last one out – please turn off the lights..


  243. gmarts,
    That’s why I bought those IWM calls today; tomorrow, we go UP !!


  244. Rainman:
    Hit the button too fast. Last time XOM at this level was in Dec.2005. I bought it in IRA acccount and sold 2012 $75 c for $2.17 for net $54.54 .Nice dividend of 3% for my conservative account and 37.5 % at $75. S&P has "strong buy" recommendation with $85 target in 12 months. 


  245. I saw this as Turn Around Thursday and JRW stuck his neck out, confirmation! I even made 1% today, how strange.


  246. We’ve had 9 straight flat or down days.  Bought some FAS in case we finally get a greenie tomorrow.


  247. Gel- closing down your equity/options trading. Are you still keeping FX department open for business? Or going to cash/daytrading business?


  248. I would like some upness tomorrow; will help me reposition some things a bit.


  249.  Phil,
    Hard to be putting on longs into jobs number tomorrow.  I just had to sell ATM calls against my profitable SSO stock.  I couldn’t bare leave those gains turn into losses within a blink of an eye.  BUT I do think we should at least retrace to 1040 (the neckline of your lovable h&s ;) . My thinking is that jobs number comes in as expected (hard to believe but maybe expectations are so low) so we rally only to fade it into the close with no one wanting to hold much into the long weekend.
    Plus, it’s possible, thin trading tomorrow and powers that be can have an easier time propping the market up.
    Missed out on your TNA and QLD calls this morning as my internet was choking and TOS just wouldn’t load fast enough.  Had let take profits on those hedges as per your request.  Was about to go long XOM but my portfolio is just a tad bearish and that’s not good enough with so much downside risk.


  250. Regards FAZ/490..OUCH ..I assume you mean Jan 2012..not 2011?


  251. Good Lord, Socialism, Britons eating out of garbage cans, global depression…. did I fall asleep and wake up in the 1930s!


  252. I may be late to the party on this, but this may explain a little of what’s going on:
     
    http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aclQSu2rzjG0
     
    "Increased bank demand for liquidity" + " Libor, increased to 0.718 percent" = cash scramble by EU banks (demand for Euros) and liquidation of commodity longs. Not good if true.


  253. Phil / "RBS Get ready for the cliff edge", the article you referred to and posted under ‘Favourites’.  Can you explain the extract below where he argues QME will be used to induce a 2% rate on the 10 year?  How would that be done and why?  Pensioners and savers get very little on their savings already, does the Gov’t plan to have us all  spend our way into bankruptcy?
    "The next shock and awe will be in the form of large scale QME, but with one massive difference – it will be focused on lowering yields, not expanding money supply (I think). So do not be surprised if the next QME is about guaranteeing yields at, say, 2% 10-yr US, or lower. Even if it is a vanilla buying programme as before, expect it to focus along the curve and bring all yields down in a monster bull flattener (you cannot bring down 5s and not 30s because that just changes savings’ maturity preference, it does not deter saving). Note today’s Telegraph article alleging that the Fed are already mulling more QME of another US$2.6trn (to take their balance sheet to US$5trn), which is totally unsurprising (we think CBs are far more dovish worldwide than investors/investment banks are). Others will follow. We are getting more bond bullish, not less.”


  254. tuscadog
    I don’t get your logic, bonds appeal to long term holders not day traders and long term interest rates can’t stay at 0, when that happens and it will because the only solution is inflate our way out bond prices go down and burn all those who ran scared. This may not be the bottom for stocks but it is for bonds. Actions are failing or faking, the big bucks people are getting ready for the rotationin in cash, the suckers are mostly in long term bonds at 3%, and increase the burn, "inflation", will double jam the slam. A perfect storm to take more money from the masses.


  255. Enough of that Death Cross anymore, there was some statistics on the The Big Picture this morning showing that there is about a 50% chance of being higher 6 to 12 months after. What’s the big frakin’ deal? 


  256. oil down 4%, eur up 2,5% =oil in euro -6,5%. Gold, silver, copper…very interesting..


  257. Jbur…. I still have lots of leap options and will keep them, as well as long term equity trades that are permanent positions.  I will be spending most of my concentration time on the currencies, which is fun, and to do it well requires skills that I am working on at the moment. I have traded currencies for many years, and always followed the strong fundameltal movements and did very well.  However I am attempting to trade successfully with only technical skills, notwithstanding the fundamental influences ( much like flying IFR at night in rough weather)  Frankly, this is what the "best of the best" currency traders do…. the fundamentals are important but secondary.  I have at my fingertips the best trading platform available anywhere in the world, for trading currencies, and I am asembling the best  research sources available anywhere…. so I will be preparred.  My trading success since the first of the year is over 100%, and I hope I can do much better as this all plays out. The FX is the largest market in the world, 24-7 and 6-1/2 days a  week with traders in every country in the world…. not much BS manipulation that can blindside you. To beat the market, you have to either be lucky, or better skilled than the so many novices that trade the currencies.


  258. Gold/Eric – I was shooting for $1,150 but not enough winners to let that one ride after that gift today.  Speaking of TBT, if you look at the volume, there was MAJOR buying at $37.50 on the 23rd and today at $35 so we’re not the only ones expecting a turn sometime this decade.   As to the S&P – we peaked on Apr 26th (blow off top) at 1,219, which was 130 points (10%) above the 200 dma.  Now the 200 dma is at 1,111 and – 130 is 981 so that, to me, should be as low as we are likely to go.  BUT the 200 dma has been pulled down sharply by the flash crash and several other major spikes down so I’m not sure it should be as low at 1,111 at the moment if you throw out the downspikes (pretty much the moves below 1,070 but it remainst to be seen whether we reverse this in time to call it a spike (2 more days)).

    Again, this goes back to what seems to be a major disconnect a lot of people have about why I am "bullish."  We don’t know for sure that we will go down to 980 (-4%) and we don’t know that, when we get there, the VIX will be 40 and give us such great prices to sell premiums.  But we do know that we can buy XLF for $13.65 and sell the Jan $13 calls for $1.90 and the Jan $12 puts for $1 and that’s net $10.75/11.38, which is 16% lower than this even if put to us – roughly S&P 862.  We could go to 2012 and knock another 12% off the price but $11.38 for XLF sounds pretty good for a first round entry because, even if they drop to $6 or something crazy like that, we can DD and be in for an average of $8.19 and that’s 40% down from here by Jan

    So when I am "bullish" down here, it’s because I can buy 1,000 XLF spreads for $11.38 and I’ve already decided I’m willing to fill up a $32,760 allocation by owning 4,000 shares at net $8.19 and, if we drop all the way back to the all-time low of $5.73, I can see buying another 4,000 for $22,920, putting me into 8,000 shares of XLF at $55,680 or $6.96 a share.  If we get even 1/2 the bounce we had last time XLF tanked, we could end up at $9 with a $16,320 profit so I can live with this trade becomming a full $50,000 (a little over) allocation. 

    Meanwhile, that’s the Doom and Gloom scenario of course and assumes I don’t hedge or cover or roll or anything but just sit there like a dumb bastard and buy more XLF every time it drops another 30%.  BUT I CAN LIVE WITH THAT!  So why shouldn’t I be excited about buying it for $13.68?  If you believe that the entire banking system of the USA will fold up and collapse, then don’t buy – you’ll need your money for guns and ammo anyway.  If you believe our country might actually make it through the decade with some semblence of a Capitalist society intact – then why wouldn’t you want to own a part of the banking system?

    AAPL/RMM – If you sell the calls you will be trapped in the position.  You only want to buy a bull call spread if you are damn sure of the outcome at expiration day or playing a specific hedge target. 

    Conservatives/Gel – Well that’s what happened in the 90s.  All the hippies were investing in internet stocks and all the tight-assed Conservatives were cluck-clucking on the sidelines saying it would all end in tears and these were not real companies etc.  They were not wrong, but they missed a 1,000% rally on the Nasdaq that was virtually uninterrupted for 8 years.  Anyway, Gel – be very careful what you wish for (and note this chart would be much worse if up to date):

    Copper back to $2.90 at the close.   Too bad they are not higher or we could have used them for a hedge again. 

    FAZ/49O – Sorry, yes that was 2012. 

    Garbage cans/Kururi – They wrap their fish and chips in newspapers so eating out of the garbage is not such a stretch for the English.  8-)

    QME/Tusca – I don’t agree with it.  This is all part of the attack being staged by Pimpco et al to drive rates down (which helps people who owe them money at high rates refinance and make their high payments) and impose global austerity so the people of Earth pretty much end up working just to service the debt they inflicted.  They don’t want money out there so they run up Libor and force the banks to hold their cash.  It’s a global game and it works well because there are so few IBanks now it’s very easy for them all to get on the same page.  Look what they are doing to Spain – push down a country’s ratings and their borrowing costs go up.  Then Pimco buys their high-yeild paper and, once they get their fill, Bill Gross goes on TV and tells people that the economy of Spain looks fine to him and he’s buying.  That sends money flooding back into Spain again, driving down the value of new, lower-interest notes and driving up the value of Gross’s older high-yield notes, which he then sells at a premium and gets back to cash for the next cycle.  These guys are so large and so powerful now that they can push governments around – it’s sick!


  259. stjeanluc
    It is the big FAKING thing, right now there is only one place to make a buck, it hasn’t ever been easy. Death Cross = Bull Crap! I saw 2 H&S patterns in the 1 min charts today, those patterns only work in history and write a book and a Million suckers buy it and then believe it. Got to go Cramer is calling, he didn’t see that.


  260. Phil – In my short membership tenure, this may be the first admission I have seen on your part that the Dems ran up the market on fake companies in the 90s only to cause the crash in the early 2000′s. :-)  


  261. Phil
     I did’t read your post until after I sent mine, but really you coppied my democrats are richer and they make you more money last week. The far right wears sunglasses at night and blinders at light!


  262. Democrats/Repubs- returns- so take out the spikes and what do you get?


  263. Just got an email from TOS.  They have a new web-based platform in "beta testing" mode, but it’s real.  I spent about 10 minutes on it.  Very cool!  Go to http://www.thinkorswim.com/ta (notice the additional "/ta" at the end) and log in normally.


  264. DKGuy
    You need to read more than this blog, like history books, do you think its Bill’s fault not George? Really!


  265. Gel- thanks for response, I was just curious. Is it because the equity/bond/options markets are so manipulated, and the negative economic and political backgound are so bad that it makes your time less productive here than in FX? I have to be honest, after 30 years of equity trading, I am having a hell of a time NOT losing money at this game. And I didn’t spend 20 years trying to perfect my golf swing (unusual for any dental specialist, even a retired one at that), like Phil jested a few weeks ago. I know that it will take years, not months for me to be really, really good at this. Perhaps it’s just it’s a remarkably difficult time to go at the options business.


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    Phil,
    I thoroughly enjoyed  your little animated Crises of Capitalism video from the early AM. The audio trailed off at the end so the final few moments were lost. In any event, it appears the conclusion was to focus on re-allocating the ill-gotten capital gains of the financiers/hedgies, etc. and redistribute to the masses. Pretty much standard quasi-Marxist dogma.
     
    BTW, the animation presentation is very effective. It presents a fairly radical concept in a very friendly , entertaining,  non- threatening manner. Excellent  propaganda.
     
    While the animation is fun, I also  think it is fun to carry the effect of such proposals all the way down from the abstract to actual individuals.  For example, its easy to persuade folks on the merits of seizing the wealth of the demonized classes (hedge fund managers; bankers; oil company execs, Wal-Mart; Haliburton, et, al.).  But what if we say we are going after these guys later. We are going to start with some targets within the more favorable segments such as sports or entertainment or even “good’ corporation like Apple?
    So, we begin with say, Derek Jeter; Oprah and Steve Jobs.  A great ball player; a very popular entertainer and a technical visionary. Viewed from the darker side – I could assert they all sucked their gains from the little people. A grown man playing a little boys game and getting paid exorbitant dollars; A skillfull TV personality who has manipulated millions into buying sponsors products by prattling on about diets, vapid celebrities and giving away cars; And,  a master con-artist who has made billions convincing mindless teen agers of the imperatives of having three or four thousand digital songs in their pockets plus paying hundreds or even thousands for slick and flashy telephones and laptops to waste countless hours Tweeting and Facebooking.
    One could assert their accumulated wealth is, ipso facto , greed as they could pursue all their supposed noble ends for far less remuneration.
    A bit twisted, perhaps but you get the point – my ox or yours?  
    Ain’t Marxism grand?


  267. Phil,

    I am reminding you as requested to see if u kindly would run the math on the hedges.
    Thank you much.


  268. Last time gold fell this hard was Feb 4th, which was the last down day (but the 5th we has a massive spike low and then went green) which was followed by a rally from 1,060 on S&P to 1,110 (5%, of course) and then a little pullback and then off to the races through Apr 28th. 

    Guy on CNBC saying -230,000 tomorrow!  

    Barry’s market overview:

    The Recovery that we have seen has been uneven, with the Economy best described as “lumpy.”  Pockets of growth not evenly distributed; lots of Fed and Treasury largesse driving activity.

    Corporate (non-fin) balance sheets are cash rich and debt free, earnings are strong.  The bright spots are Manufacturing and Industrials; On the other hand, Retail (except Autos) Housing, Finance, Materials are weak or weakening.

    But overhangs of another leg down in Housing and weak job creation make it unlikely we will see any more 3-4% GDP over the next few Qs. And as we have noted for nearly a year now, record low hours worked means Employers can expand production without any new hires — they simply add hours to workers who gratefully will accept them.

    Based on the economic data, what we see now is for economic growth to slow — right now, we project the next few Qs of GDP to be in a 1.5 – 2.5% range. We do not rule out a double dip or a recession in 2012 — we simply do not have sufficient evidence to draw that conclusion.

    Why? Recoveries typically surge once pent up consumer demand rushes into the early stages of a bounce. That surge eventually fades. As it does, a simple slow down and a recession look all but indistinguishable in the data for the first 6 to 12 months or longer. We are in that period now, and cannot differentiate between the two — yet.

    So now, all we can say with any degree of confidence is that we see growth slowing, and await more data prior to making a recession call . . .

    At the close: Dow -0.44% to 9731. S&P -0.33% to 1027. Nasdaq -0.37% to 2101.
    Treasurys: 30-year +0.2%. 10-yr -0.04%. 5-yr -0.05%.
    Commodities: Crude -3.76% to $72.79. Gold -3.88% to $1197.50.
    Currencies: Euro +2.3% vs. dollar. Yen +1.01%. Pound +1.66%.

    Market recap: Stocks slid again as more weak data on home sales, jobless claims and manufacturing renewed concerns that the economic recovery is fading. Prices of precious metals plummeted; oil plunged, while natural gas displayed strength. Treasurys rallied, sending the 10-year and 30-year yields to their lowest levels since April 2009. Decliners outnumbered advancers two to one on the NYSE.

    ISM manufacturing was 56.2, below the forecast of 59, down from 59.7 in May and is at the lowest level of 2010. The overall level however is still well above the 10 yr average of 51 but the direction is of course the focus. New Orders fell 7 pts to 58.5 and Backlogs fell 2.5 pts to 57. Export Orders fell 6 pts to 56 to the lowest since Dec ‘09. The Employment component remained elevated at 57.8 but is down 2 pts from May. Inventories at the manufacturing level was little changed but below 50 for a 3rd straight month while inventories at the customer level rose 6 pts but at a still depressed 38. Prices Paid fell a sharp 20 pts to the lowest since Nov. Of the 18 industries surveyed, 13 reported growth, down from 16 in May. The ISM said “comments from the respondents remain generally positive, but expectations have been that the 2nd half of ‘10 will not be as strong in terms of the rate of growth, and June appears to validate that forecast.”

    While the Death Cross isn’t always a bearish sign, a market falling at such an accelerated pace as the current one may signal a further drop ahead for stocks. "It could be only a day or two off if downward momentum continues," one analyst says, but the market’s anemic volume indicates that neither bulls nor bears are making major bets.

    Blockbuster (BBI -3.4%) shareholders fail to approve a proposal to combine the company’s Class A and B shares into a single class and undertake a reverse split of its stock. The NYSE informs the company that it will begin the process of delisting.

    GE says the blunt language reportedly used by CEO Jeffrey Immelt to describe China and the Obama administration doesn’t reflect the company’s views. Among other things, Immelt expressed concern that new regulation would hinder a "tepid" U.S. recovery and complained about a "terrible" national mood.

    TrimTabs Investment Research said that because of massive layoffs by the Census Bureau, the economy lost 152,000 jobs in June while private-sector hiring was positive but weak.  "Private sector added just 91,000 jobs in June, much less than the 150,000 needed to keep up with population growth," said Charles Biderman, chief executive officer of TrimTabs.  TrimTabs bases its employment estimates on an analysis of daily income tax deposits to the U.S. Treasury from all salaried employees.


  269. "I  was shooting for $1,150 but not enough winners to let that one ride after that gift today."
     
    Actually Phil, if today was a forced liquidation, as I’m thinking it may have been by the Europeans, I should be getting back in.
     
    Either way, until I read that LIBOR thing, I was having trouble making sense of today’s moves. Initially I thought, "more bad U.S. economic data = dollar down and rise in Euro with some short covering for fuel." But the dollar breakdown corresponding with the weakness is equities, oil and gold all together was still strange. However, if European banks are needing EURO liquidity, then a forced commodity sell-off makes more sense.
     
    That sell off, and the one in gold, had the feel of a rush to cash, not a shift in sentiment.
     
    So — my point — what happened today may have had more to do with Europe than it did with the U.S., although we were all focused on the U.S. numbers. In which case, I still don’t want TBT, but I do want gold.


  270. Hi, All,
    Is there a tool (on TOS platform, or any charting service, or whatever) that takes two options and plot the historical price differences over time?  Let’s say I want to roll a putter down and out to a new put.  I’d like to see what I could’ve achieved if I did the roll yesterday or day before.  Is there such a tool anywhere?


  271. Shadow – thats not what I said but it may be what you think I said. I know I’m not smart enough to place blame.


  272. Phil/POT – how to adjust POT Sep 90 short puts…there aren’t any good calls to sell to help me roll down, etc.


  273. Phil
    "Tar and feathers/Goldman – I think I saw them gathering the supplies up at the beach already!"
    Now that is resourceful… Good use of Crude and Pelicans.


  274. Phil; others … what to make of GOOG ? 
     
    I heard today its down something like 11 consecutive days …. 437 today.


  275. Phil… The chart you have put up is colorful, but not really relevant to the market success derived fron the tenure of the various  previous Presidents.  At present, our primary problem is trying to figure out the solution to address the insurmountable level of debt that has accumulated ( we are following Europe in this regard, as our economy is far newer compared to Europe)  Our friends in Europe, for many decades, engaged in the same overspending practices and irresponsible liberal grants to those that were in the majority voting populace, in order to keep everybody "happy". The chickens have come to roost… as you can not spend money that has nothing more than "hope" in the implementation of a repayment plan. – Irresponsibility at its worst!
    Your charts are relevant, but not to correlate market success to Presidential  tenure.  Markets are usually influenced positively by corporate success in the form of earnings, and lack of stress looking forward.. Roosevelt, Clinton, and Johnson were the "last of the big spenders", until Obama surfaced.  He has spiked our deficit spending 300% ( in 18 months) over any other contenders. Since our debt is considered to be our largest problem at the moment and a damper on the markets.of today, we must concern ourselves with which President was most responsible for this malaise.  Your ‘Blue Boys" are at the top of the list…. how about Johnson’s "Great Society"? –  just a $ trillion of money spent on programs to solve the problems of  those on welfare.  Well, they are still on welfare and increasing in numbers as a percentage of our population… but the programs are still on the books and obviously doing nothing for poverty. This reckless spending and its lagging effect has an impact on the markets which exist  for decades  This has little relevancy to the credibility of the existing occupant of the White House, as the cause and effect of this overspending was precipitated by previous administrations.  We are still trying, as a society, to swallow the $ trillions of debt laid on us by Roosevelt.  What does the S&P market levels during his tenure have to do with anything?  With the trillions of overspending by Obama …. this will not show up until some Republican president suceeds Obama and is blamed for a weak S&P index, because of a insurmountable debt hanging over us from the past, JMHO


  276. Gel,
      Did you forget Reagan, Bush I, & Bush ii ?


  277. dkguy pastas jel1
    First dk you by implication chose a time line that did place blame
    Second pastas what is that is that first stuff supposed to mean, look at my smoke?
    Third jel1 you sound like you have plenty of money but you my freind are brainwashed by the people who plan on taking it away, you will loose if you really think people are that stupid they just have no way to counter the BS.
    All 3 that is why Phil warns of revolt and JRW has a view and plenty of amunition!
    Now beat me up with more BS.


  278. ekor… Yes, Reagan and  GWB were prollific spenders, and their legacy will live on for ever as we try to repay the debt. Reagan and Bush, however trimmed taxes, in hopes of energizing the economy, and suceeded in this regard. My point, in my correntary to Phil, was to focus on the disconnect between the S&P performance and a current presidency, as I, for many reasons do not see the connectivity. In a four year presidency, I do not believe market preformance is closely tied to presidential sentiment, unless there are radical attempts to derail the typical operations of corporation, banks etc in their quest for profit formation. Socialization of private industry is a concept that does not make the equity markets too happy!


  279. Phil:  Not sure this is anything worthy of paying attention.  But I noticed that EEM (and Asia Pacific excluding Japan) has been outperforming S&P since 5/20:  it seemed to have bottomed on 5/20 and since then has made higher lows on June 7 and is now still higher than both 5/20 low and 6/7 low, while S&P500 has made lower lows.  In the previous cycles, emerging markets bottomed out a few months before the US (Nov 08 vs March 09 for US) and then peaked a couple weeks before the US in April 2010.  Can it be a signal that the bottom is near?


  280. jel1
    Your post was quite revieling and I m glad you see some truth. I voted for Reagan and if he just repealed those stupid banking changes he would be as close as anyone to perfect. I will not explain Phil but you need to know I abandoned republicans in 2000 because of Bush, I did not ever vote for Clinton although I believed  the Ms Clinton was the only chance to save the economy and that was the first primary I ever voted in, 2008.


  281. Phil: I dont know if you will read this, but I loved your stratgegy for XLF, woud you use the proceeds from SLV to do this strategy?


  282. shadowfax… first let me say, that I am in debt to you for your heads up on AAPL weakness. I bailed at just the right moment, and your comments helped me reach the decision to close out my positions.  Your intuition helped many of us…. Regarding my mind-set relative to a "conservative" approach to government control, I have had too much disappointment in my life watching the lack of efficiency that prevails in the execution of governmental responsibilities. I believe the best solution is to have the government contract out every activity that typically is performed by the government, to outside entities on a competitive basis, and we could probably save 25% immediately. Our government should be but a fraction of our economy, but it is sucking up almost 35% of our resources, with poor results..


  283. Gel: perhaps you didn’t see my earlier post.

    Jbur
    July 1st, 2010 at 5:25 pm | Permalink  
    Gel- thanks for response, I was just curious. Is it because the equity/bond/options markets are so manipulated, and the negative economic and political backgound are so bad that it makes your time less productive here than in FX? I have to be honest, after 30 years of equity trading, I am having a hell of a time NOT losing money at this game. And I didn’t spend 20 years trying to perfect my golf swing (unusual for any dental specialist, even a retired one at that), like Phil jested a few weeks ago. I know that it will take years, not months for me to be really, really good at this. Perhaps it’s just it’s a remarkably difficult time to go at the options business.


  284. Gel- and by the way, when I say "here", I mean the stock/options market, not PSW.


  285. Government; Congress; public sector employees … no accountability; no motivation to work hard or efficiently.  This is a generalization for sure, but it applies to most of Congress and the permanent gov;t bureacracy.


  286. jel1
    Thanks, I agree with your last post 100%. The answer is not go back to Bush stuff he actually finalized the present situation and I dare say every republican idea is the blame game and never admitting the real problem and as long as that is what is preached we get nowwhere and I doubt they will take over this year. If they woud go back to conservitive ideas per diff. and give up promoting the pet prog or friend they could get me back. People are not so stupit, they know but as most of us only so much. The apple press is way beyond reasonable and as I posted last night how they played the low stock production and solution was perfect. I said buy that guy a case of schotch. You give me hope, now if we just have a market up day I will be out of the woods and I do have most in cash @0% just don’t like 20% down on my 25%. It hurts as much as my neck.


  287. Obama at a rally yesterday blaming his critics, who say, "Unemployment is 9.6%, but if we didn’t have the stimulus, it would be 12, 13, or 15%".     Is that so ?
     
    Pelosi:  More Unemployment checks is stimulative and creates more jobs than anything else, any expert will tell you that.
     
    These are the dopes running this country  (or ruining it).


  288. gel, what are you talking about?  Clinton was a big spender?  He balanced the budget.  Yes I know he had a republican congress, but he was not a big spender, just the opposite.  He was a fiscal conservative.  You forgot Bush 2- the biggest spender in history to that time. He doubled the debt in 8 years.  He took us to war on false intelligence- the intelligence that he wanted. 


  289. The exact quote from Pelosi is that unemployment benefits "create jobs faster than almost any initiative you can name".
     
    This idiot is Speaker of the House !
     
    We are doomed !


  290. fjd10595.
     
    I’m sorry, but what are you saying … Clinton spent less than Bush 1 ?   NO.
    Government spending declined under Clinton ?  NO.
    Balanced the Budget ?  Smoke, Mirrors, Stock Market Bubble Cap Gains Tax Revenues; and a Republican Congress led by Gingrich.
     
    Stop this nonsense talk … any semi-responsible Clinton economic efforts were foisted upon him by the Republicans who he had no choice but to work with.
     
    Unlike Chauncey Gardner, to whom one liberal Republican co-opted vote = bipartisanship.


  291. Clinton left office w/ the economy in Recession.


  292. gel, your history is all wrong.  Reagan and bush 2 raised taxes on our kids and grandkids through massive deficit spending that gave a largess to the living at the expense of the unborn.  It is the ultimate disgrace, especially coming from ‘conservatives’.  Don’t you realize this?  We largely paid our way prior to Reagan.    Bush recklessly drove the nation off a cliff on every front.   In other words, the tax ‘cuts’ of today that Reagan and Bush gave us were on the backs of the unborn. Reagan- ‘The deficit is big enough to take care of itself".  Really Mr. President.  But won’t our kids have to pay down that debt, ultimately wont they have to pay for your ‘tax cuts’.  Your tax cuts are phoney if they are not fully paid for by today’s users of programs.  You took the easy way out- you sold out our grandkids. 


  293. cap, I acknowledged that clinton had a republican congress.  The same way that Bush 2 had a republican congress in his first term, and during that time spending went up astronomically.  Both sides are frauds.  Democrats tax and spend, republicans tax cut and spend.  Take your pick.  It is a matter of who gains the benefit.  Spending went down under Clinton.  The deficit doubled under Bush 2, a republican. 


  294. Look, we may as well go back to the markets cause’ we can talk all night on this.  Clinton left the economy in recession.  Great, bush 2 told us every month "the economy is strong’.  Really Mr. President.  We doubled the debt that must be repaid by children, we don’t make anything here anymore, we have no savings, we have no energy policy, we are out of step with the world on climate change, our entitlement programs are broke, including the one that you pushed through, a drug benefit for seniors that you wanted ("get the bill on my desk so I can sign it") but which you did not fund.  You sold more bonds to china.  You guys keep taking about Obama, at least he has tried to put forth plans to solve some of the problems as opposed to the republican way which is to give tax benefits to the wealthy by passing the bill to the unborn (deficit spending).


  295. Please, Obama has no sensible plans.  He only knows borrow, spend, borrow more, spend more, grow government, grow entitlements, waste money ("stimulus plan being perfect example"), shake down companies, bail out banks at our expense, borrow, spend, raise taxes, borrow, spend and raise taxes.
     
    Did I miss anything ?


  296. Wonder if Jeff Immelt will have to step down over Obama comment  :-)
    Business executives dislike the president, and the president doesn’t like business, Immelt added, according to the Financial Times.

    Strong statement made by Jeff….this means war..


  297. Cap
    Seriosly you need professional help. Your problem is denial and I feal sorry for you. I have with those drugs you say devisated our economy am still alive. You may think uthansia is the answer to those pesky old people but if you don’t kill yourself before 65 you will change your mind.


  298. EricL – Euro / Gold -
    I hope you are right – I  shorted the Euro at 3 am when the futures were down – I assumed wrongly that further market declines would lead to additional dollar strength.
    But forced liquidation does not explain dollar weakness across the board, does it?
    Dollar was down against the Yen as well – thoughts?


  299. Shadowfax, what alternate universe are you inhabiting ?  You can’t spell, 1/2 of your sentences make no sense, and I need professional help ?
     
    BTW, Its Obama’s healthcare advisors that favor denying elderly people medical care (rationing), so get a grip.
     
    There is also no need for you to "feal" sorry for me.


  300. Cap
    Different from you I have admitted on this site I have problems typing, walking, seeing as I had central serious retinopothy repaired, or anything with my left hand. It does suck and bothers me beyond your conception. I have repeadedly asked why didn’t I just die but that is history, here I am and it seems people like you think I am part of the problem. Fact is if insurance companies paid when they should you would not be paying taxes for my health care and it is totally inadiquite. Is it good enough when it happens to you? You either need help or are part of the problem. Sorry! I like you and all the rest are working in their own best interest, I love the debate but if you don’t understand what I write you are part of the problem again by blaming me for this.


  301. Hilarious Futurama episode … trashes Apple and Twitter. 


  302. Sorry to hear about your health issues Shadowfax.
    I don’t know why you seem to think anyone’s political comments that you don’t agree with are directed to you – they are not.


  303. Cap and anyone reading tonight,
    I also admitted spelling was never my best asset, I try to get my thoughts down including my typing problems, fact is I don’t know how to run spell check on this site or I would, I do have 19 years of education and a 165 IQ which conflects with my inability to accept incontinence. Whatever you think or want to believe I am for ending this unsolved situation. The rich get multimillion dollar setelments, I got screwed and again admitted on this site I am a little bit ? bitter about it. Look back I really don’t give a shit what I said but I also said once I don’t lie. Sorry if I offended you by pointing out what you said and how you EXPRESSED it.


  304. samz,
     
    I think forced liquidation could move it that much, yes. We’re talking about major European banks raising cash here. I also think a EUR short will continue to work but, if there’s continued euro strength tomorrow it’s probably better to cover and wait for a fresh entry, IMO.


  305. Cap
     The fact is it takes me forever to respond and constantly by the time I thik it is correct 10 posts have been put up, I try to catch the errors but I have trouble seeing. I am sorry if I offended you but I stand by ny statement verified by your responces you need help, how are other relationships working or not. I might be wrong but be careful, I might be right. I really try to help.


  306. All
    For those of you on exchange who have an iphone & upgraded to iOS4 – if you’re having problems you may want to try this. iPhone 3 was driving me crazy but this has fixed it (found from a WSJ article):
    http://support.apple.com/kb/TS3398


  307. Phil – Not sure you ever posted this chart for all the people who complain about President Obama being a big spender…
    http://www.businessinsider.com/chart-of-the-day-bush-policies-deficits-2010-6
    The chart presents the ugly truth.


  308. jromeha
    Charts have a way of showing proof, Thanks it shows the truth in color.


  309. Phil,
    Thank you for your clarification on AAPL yesterday, re: 10%, 20% (NOT the COMPANY, but the portfolio, Haa).
    Please address the RIMM puts tomorrow, that we sold a few days ago and are now in the red. These were for July 52.5.
    Could you also advise on the FCX puts from last week, July 60 that are now in the red and were sold when the stock was at 65?
    Thank you for your help.


  310. Protection/Amatta – Well I had hoped you would be more specific about what it is you are protecting but let’s talk about what is generally a good idea for the benefit of all.

    Right now, ideally, we are 65-70% in cash.  Cash includes short-term trading but no more than 10% of a conservative portfolio should be allocated to that anyway and you should follow the same rules with short-term trades as we do with long-term trades, which is to scale in in no more than 25% rounds of commitment.

    So if you have a $100K portfolio, then $10,000 is OK for short-term trading and no trade should be more than 10% ($1,000), which means you want to keep initial entries around $250.  For one thing, that mean, out of hand, you don’t even want to consider entering a position that is expensive. 

    Once you enter, you follow the rules in the Strategy section (and all Members should read the main article, the attached article and the comments because we discuss all kinds of fun stuff there).  The most important rule, and this goes for anything is to stop out with a 20% loss.  That would be 20% of a full position so, for short-term trades, it’s fine to (assuming you feel strongly about it) watch a $250 position drop to $100 and then decide to Double Down but – if you do, then you’d better be right because if that drops in half, you’ve lost $200, which is 20% of $1,000 and you should get the hell out

    Ideally, each 20% move should be an inflection point where you make a decision on the trade.  So, if you are buying a call for $1 at 1x (which would be $200 since you would buy 2 contracts) and it drops to .80, you already need to make a decision as to what you plan to do.  If you are excited about it still, you want to look to DD but ONLY when you are sure it’s done going down – you don’t just mindlessly DD at .80.  If you think it may go down only a bit further, then you can offer .70 and see if it fills.  If it doesn’t fill, and the trade jumps up – then great, you didn’t lose any money!  If it does fill, then you are in 2x (4 contracts) at an average of .85 ($1 + .70) for $340 and the current value is .70 ($280) and you are down 17%, even though the position is down 30% from where you started. 

    Any time you double down or roll, at the point where you get back to even, you need to look to take 1/2 back off the table to reduce your commitment.  That means at .85, you really want to cash out 1/2 because that will leave you back at 1x (2 contracts) at .85, which is 15% less than your original entry.  Now, you can survive a pullback all the way to .55 and DD again for an average of .70 on 2x (4 contracts).  That puts you in a very comfortable $280 for 4 contracts and you can afford to let that ride since it is now hard to lose your 20%.

    Keep in mind that you don’t stop out the moment you get even if you are fairly certain things are going your way after a slight pullback but your mindset needs to be that A) You were already wrong about the stock’s direction and B) You are very lucky to get even so don’t blow it if it doesn’t look strong.  Really, if you bought it for $1 originally and you DD’d at .70 and now it’s having trouble getting back over .85 – you may want to consider ditching the position entirely! 

    There are a LOT of factors of course like how long you have left, whether or not you have a way to cover, do you have a plan to turn it into a longer position, etc.   That’s why my favorite short-term trades are ones where the exit strategy is to be in the position long-term.  So selling naked puts is fun because my worst case is I have a stock I want cheap.  Also, calender spreads or diagonal spreads can end up being long-term positions but buying a front-month call or buying a put is a very limited bet that will either be right or wrong and so you have to be very disciplined with your stops. 

    So that’s the play money.  The idea of taking profits at 20% and taking losses at 20% is, if you have good discipline, you will never lose more than 20% but, if you have a $1 position that you DD at .70 and then DD again at .50, putting you in 8x at .60 for a $480 entry, once in a while that will run up 100% or more for you.  If you do 10 trades a week and you end up even on 9 and have a single 100% winner of $500, that’s going to boost a $100K portfolio by 6% a year and is a 60% return on the $10K you are playing with!  You don’t have to take big chances to make big returns

    There is also scaling to the upside, of course.  If you have 2 $1 contracts and it runs up 10% or 20% and you feel strongly that you want to be in 4 contracts, then if you DD you will be up 5% or 10% and, very simply, as long as you stop out 1/2 even, you can’t be harmed by the DD (other than being a bonehead and losing the 20% you had because you were greedy!).  Again, you always have to try to be realistic and think of the time you have left and what a realistic goal for the stock is etc. 

    So that’s your 10% of the cash for short-term trading.  We also allocate 35% to long-term trades.  Ideally, in this market environment, they should all be hedged positions, either buy/writes or covered calls or short puts – things that have built-in protection. I won’t get into the Buy/write strategy, that’s done to death in the Portflio section but let’s say you have $35,000 worth of positions that have 20% built-in protection so your commitment is to DD on them at about $28,000.  That means you have committed $63,000 out of $100,000 to being in 2x your long positions (or 1x on sold puts) if the market drops 20% or more.  

    If the market drops "just" 20% (S&P 820) then you are in $68,000 worth of positions that are worth $68,000 – THIS IS NOT A PROBLEM!  What you would do then is look over your positions, decide which ones you like best and toss out the rest or maybe – since we are down 20% and forming a bottom – you may want to add more to your favorites or maybe they are all great and we keep them all (we did that in March of last year and it went great!). 

    This is why I get excited about market drops.  I WANT to DD at 20% off, making 20% on 35,000 is not as much fun as making 20% on $68,000.  Trust me, I’ve checked!  So it’s all fun, fun, fun on the way down UNLESS we cross below the 20% mark and now I’m committing to buy $68,000 worth of positions that are worth just $50,000.  That is not good!

    So we hedge.  The hedge should match the time-frame of the trade.  So if you sold 2012 buy/writes, you don’t give a damn if the market goes up and down 30% between now and then 5 times, you only care about where it finishes on Jan 20th, 2012.  So we’re worried about a 40% drop in the S&P that costs us 20% of our $68,000 ($13,600).  To the extent that you are REALLY worried that the S&P will be at 614 in 2012, that’s the percentage of coverage you should take.  Also, you are not really going to sit there like a dumb bunny while the market drops 20% and you do have $65,000 in cash so it’s not too crazy to imagine you may take a few downside bets somewhere betwen a 10% and 40% drop that also mitigate your losses.  Also, if you REALLY think the S&P is going to drop 40% in 18 months – why are you buying stocks at all? 

    Let’s say we have decided that losses would be intolerable and we want to hedge for a $15,000 loss.  We will now look for something that gives us a good pay-off if the S&P falls below 820.  TZA is currently at $8.36 and a 20% drop in the indexes should (other than normal ultra-ETF decay) take is up 60% to $13.30.  We can commit to buying $8,000 worth of the ETF by selling 20 2012 $4 puts for $1.05 ($2,100) and we can buy 20 2012 $5/12 bull call spreads for $1.30 ($2,600).  So we are using $400 of cash and (according to TOS) $3,000 in margin to get $14,000 of upside.  Don’t forget that a 20% drop is only the begining of where we need protection.  If the market falls further, then it’s much more likely that our TZA will be well in the money. 

    What is our downside?  Well if TZA falls further than 50% (about a 17% rise) we will be forced to buy TZA for $4 ($8,000).  To whatever extent TZA is LOWER than $4, we will take a $2,000 per $1 loss.   We know for a fact that if the market is up 17% (as long as our positions follow the market) we will be collecting 20% of our $38,000 or $7,600 so our worst case is TZA is zero and we have our stock and our profits pay for TZA.  This is why hedge funds don’t like strong up moves or strong down moves – when you are hedged, you are playing for the middle! 

    This is why I caution against over-hedging.  You must make a decision.  Do you REALLY think you need to protect against a 40% drop?  Maybe mitigating 1/2 your potential losses will be fine.  Of course, the nice thing about this kind of play is, if we do flatline (between down 20% and up 20%),  we can actually make a payoff on both ends of the trade and, right down the middle, we can get a double!  Another thing to consider is that, with the Russel up 17% and you are back in cash (because all your longs would be called away), having $8,000 worth of ultra-short hedges in your $108,000 portfolio means you can buy your next round of buy/writes without the need for an additional hedge.

    Again, there is also the dumb bunny factor – you are not going to sit there and watch the Russell go up 20% and not buy anyting else or not add to some of your longs.  We were saying last time that if the Dow got over 11,200, we would go for another round of longs.  It didn’t happen so we stayed in cash (actually we took a ton of shorts 2 weeks ago).  So you don’t need to hedge 100% of your potential loss if you aren’t walking away for 2 years and coming back only to see how you did

    The more committed we are, the more we hedge but, when you have 65% cash on the sides, then you don’t need to cover ALL of your downside losses.  What’s my worst case? 

    • 500 shares of XOM at $56.61 = $28,305.
    • Sell 5 2012 $52.50 calls for $10.10 = $5,050 (net $20,255)
    • Sell 5 2012 $52.50 pus for $7.75 = $3,875 (net $16,380, margin $8,000)

    So my net entry on XOM is now $38.76/45.63 which is a $6,870 profit if called away (41%) and a 19% discount if put to us.  By the way, people sometimes say, why don’t you count the margin?  If you buy the stock, you only use 1/2 the margin so, technically, the net margin requirement on this trade is $14,153 + $8,000 less the $8,925 collected, which is a net margin requirement of $13,228 to make $6,870 (51%) but who’s going to sit there and calculate that every time?  So I just count the profits against cash committed. 

    Now, what if I don’t hedge at all and XOM falls 40% to $33.97?  I have a committment to own 1,000 shares at $45.63 and I can assume I can do another 20% disount spread to take my entry down to (apx) $28/34 for 2014 so, without hedging at all, my damages are that I’ll own 2,000 shares of XOM at $34 in 2014.  If I can live with that I DON’T NEED TO HEDGE AT ALL!  Again, if you are at your first stage of scaling in, you are hugely flexible and should have plenty of cash so your need to protect against phantom damages is not so great. 

    And again, we’re making the dumb bunny assumption that you sit there for 18 months while XOM goes down and down and down and you do nothing to hedge it and you don’t stop out and you are essentially a helpless victim of the markets with no abilty to intervene.  Not what we try to teach here….  

    So, if you are confident in your momentum trades, you have little need to hedge other than a disaster hedge for an unexpected 1,000-point overnight drop but a long-term disaster hedge doesn’t really help you with that, that’s what the short-term ones are for.  If you have 10 positions, you may decide (as above) that XOM doesn’t need a hedge at all and you’d also be happy to own lots of KO, MCD, INTC, AA and MMM so you’re not even going to hedge them but PFE, WFR, HPQ and CHK all concern you that if they are falling 40%, there may be something seriously wrong with them and you may not REALLY want to own them for the rest of your life so you calculate JUST THE ONES YOU ARE WORRIED ABOUT and protect them

    So not really that complicated but, like all things in life, it takes practice and experience to get good at hedging and, unfortunately, these positions take time to play out so the learning curve is slow as well.  That’s why it’s good to practice with at least some 2011 plays – just to at least get the experience of running these plays out to expiration more than once every 18 months so you can get more confident. 


  311. Quasi-Marxist Dogma/Pstas – LOL!  I’m glad the "radical concepts" were "non-threatening" enough for you to endure them.  I feel like we’re finally making some headway with you.  8-)

    Greed/Pstas – Again, you are catching on.  YES, the wealth of a person who has more than $100M is nothing but GREED.   What NEED is there for $200M or $500M or $1Bn that justifies taking that money from Millions of other people who are struggling?  Why is that such a hard concept to understand.  There is nothing wrong with being successful but, at a certain point, you are doing nothing but squandering capital resources that could be better put to use in society so you are, in fact, GREEDY.  A person earning (not one-time gaining) over $10M a year should be PROUD to have 50% of their income over $10M go towards the common good.  That right there would take us out of debt and, if we got our "corporate citizens" to pay their fair share, then we could run a surplus bigger than Clinton ever gave us.

    That’s what the VAT is about.  Europe figured out years ago that there is no tax law you can make that corporations won’t find a way to wriggle out of so they simply circumvented the accounting BS and said that 10% of all sales will be paid as tax.  This means a company must have a business plan that takes this into account from day one and it means a company like GE with $36Bn in sales would pay $3.6Bn in taxes, not the $431M they did pay (15% of net profits).  Will this be passed on to the consumer as the corporate lobbyists are trying to claim?  Yes, but only to the extent that they can be in the FREE MARKET that the same corporations claim to love so much.  And a VAT does not disproportionately effect the poor because it’s not a tax on necessities – only on the crap that people with disposable incomes buy and things businesses sell to each other. 

    Very simply, if a corporation can’t sell something for enough money to pay a 10% tax then DON’T FRIGGIN’ SELL IT!  Why should the US taxpayers subsidize GE so they can pay 15% tax on $2.8Bn in profits (and GE has paid -770M in taxes on $150Bn in sales in the past 4 years!!!   Does GE use our infrastructure?  Do they use our public airwaves?  Are they protected by our police?  Is our army out there fighting and dying to protect them?  Do they take money from our government?  Do we educate their employees?  This is the INSANITY of the US tax system.  GE paid $9Bn in dividends last year and $24Bn in 2008 and 2007 but paid -(NEGATIVE) $900M in taxes during that time!  In 2007 they also bought back $12Bn worth of their own stock.  No wonder they are so anti-change – it’s friggin’ great to be GE and have a 304,000 person company that pays no taxes but pays the top 5 guys in the company $50M in cash and bonuses while getting government bailouts for all the poor decisions they’ve made – what a country!

    Libor/Eric – Funny you should say that.  Cramer was telling his minions last night to ignore Libor because it doesn’t matter.  How’s that for advice?  The Euro is all the way up to $1.25 now and the Pound is back to $1.51 but the Yen was rejected at 88 so still work to be done.

    Tracking tool/Cwan – You should call the TOS support, they can do all kind of crazy things if you ask them.

    POT/Ajay – When the whole market is down and it’s not just your stock (not that I like POT, though), then you may as well try to ride it out.  They are only down to $85.50 and the Sept $90 puts are $9.70 so that’s a lot of premium still to go.  You can roll them to 2x the $80 puts at $4.80 or 1x the 2012 $70 puts at $9.70 so, unless you think POT is going lower than that, there’s no reason to worry and, if you do think POT is going lower than that – then why the hell would you want to stay in the trade at all?  If you want to stick it out, you may want to use the $85 line as a place to take a momentum play like the $85 puts, which have a .47 delta so if POT falls below, they will cut 2/3 of your downside losses and, when it stops going down, you can cash out and you’ve got a little cash for your rolling fund. 

    GOOG/Cap – Well everything is pretty much down for 11 straight days.  Don’t forget they hit $250 down from $800 in the crash so there’s no stopping this train once it starts heading down hill.   In fact, I was looking at ISRG and thinking they might be a good short if the markets start falling because it’s very hard for big dollar shares to hold value when people are scrambling for cash because they can only be covered in lots of 100, which is still $43,000 for GOOG and $31,000 for ISRG and, even in a fund, liquidating one position to raise more cash than 10 others is very appealing.

    ISRG ratio backspread.  Buying 3 Oct $360 calls for $13.30 ($3,990), selling 5 Aug $350 calls for $8.30 ($4,150).  There is margin on the spread and margin for the open calls but, if ISRG faile to make $350 by Aug expirations, you make $160 plus whatever value remains in your Oct calls.  If ISRG goes higher, you can add 2 more calls (say, if ISRG gets over $325) and then just roll the calls up to Sept whatevers and you have a normal calendar spread

    Chart/Gel – I will accept the fact that you should credit the market to the success of a previous President if you will accept the fact that you should blame the total failure of the US economy on the previous President, rather than the current one.  It is absolutely amazing to me that you blame Obama for racking up debt.  For one thing, the majority of the debt increase was caused by moving $600Bn of "off the books" war costs onto the books so we could have a realistic look at the budget for the first time in a decade.  Second of all, blaming Obama for deficit spending is like blaming a doctor for using blood in a transfusion by saying "the last doctor just made a bunch of wholes – he didn’t put in all that blood, what kind of quack are you?"  How can I even respond to nonsense like that?  It saddens me that you actually belive that’s the way things are – that’s all.  Yes Roosevelt took the country out of the last major collapse caused by Wall Street crooks and fought a war in Europe and Japan for 4 years (and won it, unlike the boobs you support) and we ended up $2Tn in debt (adjusted for inflation, it was actually $500M) so take all that rage you have for FDR and direct it at EVERY President that ran up $2Tn in debt and then I will take you seriously:

    Oh keep in mind this misses the stellar last 2 years of Bush, where he pushed the deficit up $4Tn in just 2 years.  It took Clinton 3 years to regin in the first Bush deficit and, as I’ve pointed out before, the Republicans have filibustered 150 out of 180 attempts at legislation since Obama took office so it might take him longer than 18 months to get Bush IIs rampant irresponsibility under control – especially since the most aggregious deficit of all is the tax cuts you guys are all so quick to defend (after the idotic war and followed closely by the interest we have to pay on all the debts he wracked up).  Gel, you are some sort of buisinessman, have you ever taken over a company that’s on the wrong track with a ton of commitments that’s bleeding cash?  How fast do you turn them around?  How about if you have a board of directors that fights you every step of the way?   Your attacks on Obama (and now Roosevelt?) are ridiculous and undercut whatever logic may be buried in the rest of your argument but they are a great example of how deeply screwed up this country is with othewise intelligent people twisting the facts in order to maintian their world view. 

    EEM/Sean – I think that’s very telling!  EEM is a great exaggerated indicator and often an early indicator of our own performance but today it’s all about the NFP report.  If we can get past this, hopefully a nice relief rally and then we’ll see where we settle down.  I said in April that we should drift around 10,200 into earnings and it would be some trick to get there today but AA doesn’t report until July 12th, which is the official start of the season so I’m feeling pretty good about it

    XLF/Arbolito – Sure, it’s better than SLV! 

    Unemployment/Cap – Yes that is probably so.  You are another guy who needs a chart!  We were LOSING 700,000 jobs a month when Obama took office, now we are losing 100,000 (maybe), which is less than we have lost since late 2007.  Your boys had a whole year to do something other than make their friends richer and, instead, they let unemployment rise and rise and rise and rise and rise and rise and rise and rise and rise and rise and rise and rise and rise – until they finally got booted out of office. 

    Do you know why they got booted?  For making ridiculous statements like Nancy Pelosi is wrong when she says unemployment checks stimulate jobs.  People who have actual jobs that talk to real people in the bottom 80% are very keenly aware of how many of their customers are living off unemployment checks and when discounnected jerks like you spout off like that, you may get back-slapped by your other elitist pals but the voting public is rightfully outraged that you treat their problems and their lives like a joke.

    Cappy says:  "Clinton left office w/ the economy in Recession."  And what did Bush do, seeing the economy in recession?  Why he cut taxes to "stimulate" the economy and lost the most jobs since the Great Depression and, as Cap said in the previous comment to criticize Clinton, Bush’s budget projections to justify putting this country Trillions in debt were: "Smoke, Mirrors, Stock Market Bubble Cap Gains Tax Revenues; and a Republican Congress."  It’s amazing how similar our conservative pundits are in their reasoning – no matter what it is, if the Republicans do it, it’s good and if the Democrats do it, it’s bad.  This is the problem liberal have as we feel free to criticize our own party but I think the only way to overcome the conservatives is to radicalize and get completely dogmatic in our views so that we can present a united front – no matter how wrong it may be and we need to stick with it – no matter how badly it turns out and, if anyone wants to try something new – we will fight to go back to the way things were so we can go back to whatever policies clearly failed the last time.  Ah, blissful fanaticism…


  312. Phil -
    I have a 401K with no options trading – any recommendations at these levels – I have been in all cash since 1160 on s&p – might start scaling in to vti – but wondered if there were any other plays
    wish I was that smart with my own trading account -
    thanks – I know the conservatives need to be taught some lessons – but i don’t know how you find the time to write all this stuff and do research – I am starting to think of you as some kind of sci-fi  – disembodied brain – just soaking up the feeds – Did you see Serenity? I highly recommend the TV series – only 10 or 11 episodes – sci-fi with a western twist if you like that kind of thing (Firefly is the TV series)


  313. Grandkids/Fjd – Great point!

    Yes Cap, you miss everything.  8-)

    Immelt/Kustomz – See my note on VAT above.  Immelt is a scammer who runs a scam company that takes and takes and takes from this country and gives nothing back but screams for help whenever they hit a bump in the road because "GE is important to America."  Obama is onto his scam and Immelt now has it in for Obama and he’s got a whole network working overtime to cast everything Obama does in the worst possible lite and Rupert (who’s NWS has paid net $1.4Bn in taxes on $90Bn in sales in the past 3 years while buying back $1.8Bn in stock and paying $1.1Bn in dividends) has his Journal and other papers and, of course, FOX, making sure that everyone has the "facts" straight.  The rest of our media is controlled by Disney (who actually pay their taxes) and Viacom/CBS (who are owned by another Billionaire and pay little tax).  That’s what’s going on in this county – the top 0.1% have taken control of the media and they move to crush all opposition.  Obama, if he survives, may be the last President that will ever have enough power to challenge these people because they already got the campaign laws changed so they can buy all future elections and THAT is why I’m seriously considering where I intend to live down the road….

    "The average age of the world’s greatest civilizations has been two hundred years. These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance, from abundance to complacency; from complacency to apathy, from apathy to dependence, from dependence back into bondage." – Professor Joseph Olson

    Forced liquidation/Samz – That is the same crap as "oh it was a fat-fingered sell-off."  It’s the kind of think they say when they are not done selling and want to make sure the retailers hold their posiitons (or maybe even buy on dips) while they move to dump evertying they’ve got. 

    Communized/Cap – Hmm, not much change is there?  Much funnier when applied to your site8-)

    Don’t let Cap get you down Shadow – he’s an equal opportunity offender…

    Beware/Rstu – At this point, I’ll be worried if we find a bullish article.  I cannot imagine the maginitude of a short squeeze we would get if some good news popped the market – especially into the holiday weekend.  Could you imagine if we gap up 200 at the open and go up another 200 during the day and the bears have to decide if they want to stay short into the weekend?  Staying long is comparatively easy – you already spent the money.  Staying short when things go against you is spending money on stocks you don’t own and, obviously, don’t want – very unpleasant! 

    Resonses/Shadow – No pressure.  No one expects a respnse right after they post (I’m writing this 7 hours after you posted).  I would assume you know this but have you used the page magnify function on IE to view things?  Due to the insane resolution of my Mac display, I keep my pages on 110% (one-time setting) to make the text bigger but it goes up to much higher numbers (400%) and it works perfectly on every page I visit.  Might make life easier for you….

    Chart/Jrom – Thanks!  I would have hoped that this is obvious to people and they don’t need a chart but, clearly, they do:

    chart of the day, bush policies deficits, june 2010

    Also, the chart does not take into account the $450Bn of interest we’re paying to service the previous debt – that’s an amazing legacy to leave the next President,

    RIMM/Maya – If the jobs are bad we’ll be rollin’, rollin’, rollin’

    Serenity/Samz – I do happen to be an advocate of the "Serenity Now" technique…  Never saw the series, will look for it.  Also, I am not yet a disembodied brain but I do look forward to becoming one in my old age!  As to stocks, if we either crash or don’t crash there are going to be a lot of bargains to be had, like RIMM and FCX that Maya was just asking about rolling.  If you can’t even sell option calls to cover, I suggest moving your 401K to a plan where they let you make money. 


  314. Communizer; Phil — yes, funny


  315. Phil – Shakespeare/Socrates would be proud of your prose and reasoning.


  316. Good morning Phil!  rollin’,rollin’,rollin’,…. thats funny!!!


  317. Phil: I have come across a small booklet that claims to be translated from Russian text of a meeting that took place around 1905. I wanted to share some of the quotes and would appreciate your thoughts:
     p. 22—“…hatred will be still further magnified by the effects of an economic crisis, which will stop dealing on the exchanges and bring industry to a standstill. We shall create by all the secret subterranean methods open to us and with the aid of gold, which is all in our hands, a universal economic crisis whereby we shall throw upon the streets whole mobs of workers simultaneously in all the countries of Europe. These mobs will rush delightedly to shed the blood of those whom, in the simplicity of their ignorance, they have envied from their cradles, and whose property they will then be able to loot.”
    p. 30…“ To complete the ruin of the industry of the [people] we shall bring to the assistance of speculation the luxury which we have developed among the [people], that greedy demand for luxury which is swallowing up everything. We shall raise the rate of wages which, however, will not bring any advantage to the workers, for, at the same time, we shall produce a rise in prices of the first necessaries of life, alleging that is arises from the decline of agriculture and cattle-breeding: we shall further undermine artfully and deeply sources of production by accustoming the workers to anarchy and to drunkenness and side by side therewith taking all measure to extirpate from the face of the earth all the educated forces of the [people].”
    (many other things are in there also) And further in reference to some of the things we have talked about--
    They also claim to name the presidents, and have control of the press--they provide the scheme on how this is being accomplished—they say this is all being orchestrated so as to establish a super-government ran by a despot.  One of the many very disturbing quotes, is that people will serve them just for the right to exist.


  318. Phil,
    I’ve been at a funeral all afternoon.  My only question is whether SPX will close higher tomorrow?  The last time we had three up days on SPX was, I think, April 16th.  Seems like we’re due.