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Testy Tuesday – Already?

Wheeeee, this is fun!

It's only been a week since I called for "Turnaround Tuesday" and asked the question "Will CNBC Apologize to America" for their ridiculous, sickening parade of negativity that chased their poor viewers out of the market (now 600 points ago) by completely misrepresenting the economic outlook in order to protect the TERRIBLE advice given by Jim Cramer, the Fast Money Crew, their sponsors etc. etc. – it was all one national frenzy of media negativity designed to shove retail investors entirely out of the market while the cognoscenti went shopping.

It's not just CNBC, of course, it's a problem with the whole MSM but I ranted about corporate (top 0.01%) control of the media last week so let's move on as we wave bye-bye to all the beautiful sheeple who were kind enough to sell us their stocks at the bottom, despite my warnings.  Our 500% upside plays are now well on their way to making 500% for us and our "9 Fabulous Dow Plays Plus a Chip Shot" are also looking good already.  Even the trade ideas I mentioned right in last Tuesday's post are well on track as I said last week:

On Friday, I had said to Members right at 9:38, in the Morning Alert: "If we run up, then it will be prudent to get more neutral into the weekend but if we stay down and hold our levels, then saying a little bullish will be fine. Out of short-term short trades if you haven’t already.  Keep in mind we have some great 500% upside plays you can still grab here if you think you are too short." 

The latter was a reference to our 500% upside plays.  We also went with EEM July $38 calls at .99, and a QLD $50/53 bull call spread for $1.30 (selling puts as well for more profits) as well as long plays on RIMM, AA, HOV, VLO and TASR.  My optimism was based on the considered TA analysis I shared with Members at 2:39:

After completing last month’s "Omega III" market pattern on the Trade Bots, it’s now time to spring the bear trap and run the "Apha II" into options expiration on July 16th.  Maybe there will be as little logic to the rise as there was to the fall – who really cares – it’s just our jobs to try to catch these waves when they come and ride them out for as long as they last (until the cheerleaders are back on CNBC and we know it’s time to bail!). 

So far, so good – right?  Of course, now that we are up 60 S&P points in 4 days, we have to consider taking on some new downside protection.  We'll be looking at that today in Member Chat this morning as I have to see how we handle our upside targets for this week (set last week), which are:  Dow 10,290, S&P 1,102, Nas 2,257, NYSE 6,930 and RUT 651 – the 5% rule off our (also predicted) bottoms.  I don't think we're ready for a breakout today but a good run on the Dow could give us a look at 10,300, which would be exciting

Europe is hitting all of our levels this morning on a 1.6% relief rally after seeing the first day of US earnings.  This despite Moody's downgrading Portugal and Sarkozy having to defend allegations of corruption.  Things have gotten so bad for Sarkozy that he had to cancel the Bastille Day Party (lest the peasants get any bright ideas).  Asia was generally flat other than the Shanghai, which pulled back 1.6% on a sharp rejection at 2,500.  The Baltic Dry Index is still looking like it should be renamed "Voyage to the Bottom of the Charts" and that just can't be good – probably our most worrying global indicator although increased shipping volumes may play more of a role in the drop than actual lack of demand:

It is still all about copper, which is about to test a "life cross" as the 20 dma crosses over the 50 dma and if that can't give copper a nice pop back to 320 then we will have to assume that it's been artificially supported and will be collapsing along with the BDI and probably followed by oil and gold.  Natural gas (not charted above) has already been knocked down to $4.38 with just one more month to go until the start of hurricane season so – if copper does pop, then I'd chase nat gas with plays like UNG and CHK.  Oil also made a life cross and you can see the critical test lines in our local indexes

Notice how the 50 dmas (red lines) are converging on our 5% test levels (and also notice how cool it is that we were able to predict where the 50 dma would be two weeks ago!) so we can expect some very interesting action around there and if we can clear them without a pullback – then we are good to go for another 5% run before the next serious resistance.  It will take some good earnings reports to justify 1,157 on the S&P but so far, so good with sales at AA up 18% despite lower aluminum prices and CSX reporting "volume gains across all major markets.

NVLS also had great earnings, with revenues up 169% over last year.  Later today we hear from AIR, ADTN, HCSG, INTC, INXI and YUM and tomorrow morning it's AMR, JTX, PGR and TXI and THEN things begin to get crazy (as you can see from this Bespoke chart).  Bespoke studied all 65,210 earnings since 2001 and found that, overall, 62% beat estimates and 25% missed with 13% in-line.  Revenues, on the other hand, never seem to be in-line with 62% beating and 38% missing for the full 100% there.

Later this week we get MAR, FCS, JPM, AMD, GOOG, SCHW, BAC, C and GE with our last three Financials on Friday and that's why our current hedge is FAZ but only until then, after which we switch to a more general, long-term index hedge – hopefully with our indexes much higher!

Still, in this "flash crash" environment, we will need to begin protecting our gains today because you never know when the market will drop 1,000 points for no apparent reason.  It's a silly, irrational thing to have to worry about but, fortunately, that means it can be covered with silly, irrational hedges that have huge leverage.  Small investors have been fleeing the market in droves for quite some time and we can never get too comfortable playing all day against Uncle Lloyd's TradeBots so we will play it a little bit cautiously until the sheeple come back to play as their behavior is much more predictable (and Cramer was already herding them back last night as he goes into full reverse mode without missing a beat).  "Could we be seeing a cease-fire, or even a truce, in Washington’s war against business?Cramer asked viewers on Monday. “That would be about the most bullish thing that could happen right now.” 

Much more data tomorrow including Retail Sales for June, Import/Export Pricing for June, Business Inventories for May, Oil Inventories for July 10th and Fed Minutes at 2pm.  Thursday we get another 450,000 layoffs (remember them?), 24 earnings reports, PPI, Empire Manufacturing, Industrial Production and Capacity Utilization and the Philly Fed and Friday we finish the week off with CPI, TIC Flows and Michigan Sentiment.  While this is going on, FinReg should be passing by the end of the week and keep in mind that this is all the same stuff that was blamed for taking us down a month ago in this silly, silly market

Barry Rhitholtz reminds us that: "The President had barely been in office for 18 months when the pushback to his agenda became fierce. The media and the opposing political party all focused on the budget deficit. Most of it had been accrued long before this President came into the office, but that did not stop him from getting the full blunt of the blame. “We must stop this fiscal profligacy, or it will be the end of us!” the critics all cried.  But the president ignored the critics, and put forth a deficit laden budget that contained a massive stimulus and tax cuts. He even joked about the debt issue: “I am not worried about the deficit. It is big enough to take care of itself."

Of course that President was Ronald Reagan, not Barack Obama who is is also dealing with huge deficits and targeting tax cuts to his electoral base while allowing policiies of his predecessor to expire.  "I continue to see the Austerian movement in the United States as thinly disguised partisan politics," says Barry.  "These are people who will say anything to keep the subsidies and tax benefits flowing to their electoral base. They will say anything –regardless of whether they actually believe these things — to thwart the opposing fellows priorities.  Anyone who believes the new deficit fighters care about deficits has not been paying attention.

"This is simply about power and money and legislative priorities and cash. With only a very few exceptions, it has nothing to do actual fiscal priorities and debt loads and deficits.  The vast majority of these new deficit chickenhawks — who voted for unfunded entitlement program (prescription drugs), who gave away trillions in unfunded tax cuts, who voted for a trillion dollar war of choice, are simply not to be believed. Their past actions speak far louder than anything they might say today."

Amen!

 


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  1. Phil,
    I searched the site to get information on the  "Alpha II" model that you referred to in today’s post but can’t find it.  Do you have a link?


  2. Phil / Baltic Dry   There has been a huge increase in shipping capacity during past year (orders placed during boomtimes) driving shipping rates down, so rather than rates need to look at volumes shipped for economic pointers.


  3. Phil -
    FTR – any opinion on the VZ spinoff? Wish i had thought about that one more and sold the calls pre-deal rather than the puts -


  4. Phil,
    Any thoughts on GOOG?


  5.  Hey Phil…
    got any target for yrcw….its funny how quickly one flips from fear to greed (2 days ago i was like if i break even im selling, and now I wanna hold :) )….
    cheers


  6. Good morning,
     
    IWM 62.49,63.05, 63.38, 63.97, 64.74
     
    Iam afraid that I will be unavailable for much of the day today, but it should be a normal "Monday". Good hunting !!


  7. Waiting for those hedges Phil, I believe it’s almost time…From here to 10600 is prime short entries I think…


  8. JRW groundhog day? Tuesday for the rest of us ;-)


  9. Phil
    How do you like selling some T puts here – and if so, trying to decide between Oct 10 24’s or Jan 11 22.5’s. Thanks!


  10. Good morning! 

    We are NOT impressed by anything less than making our levels now:  Dow 10,290, S&P 1,102, Nas 2,257, NYSE 6,930 and RUT 651.

    With the Dow over the line and the others lagging, they become our lead index and our logical short.  I like the DXD Aug $27/30 bull call spread at .90 and we can cover with the DXD $25 puts, now .35 and 10% out of the money, ONLY IF they get to $1 on a big run.  If we don’t have a big run against the call spread, then we don’t need to cover it… 

    Let’s keep our eye on Copper of course, which MUST hold $3 and oil is testing our $77.50 sweet spot.  up from 9,700 to 10,300 (6.2%) in 4 trading days is a lot and a 1.25% pullback to the 5% line is pretty likely but maybe not until the 7.5% line at 10,427 but the Dow will be getting very lonely over our breakout lines if no one comes to join them and it’s quite a big move for the others to catch up, maybe 2.5% for the day. 

    NYSE should be our next big breakout if we’re heading up but this is getting to be too much of a good thing so I would urge caution here


  11. Phil/small biz survey - I know small biz isn’t a concern for the markets, but it is really getting ugly for small biz out there per the latest survey:
    finance.yahoo.com/news/Small-businesses-grow-more-rb-784438204.html
    Very few small businesses plan to create new jobs, according to respondents. The survey showed that only 10 percent of firms plan new hiring, that is down 4 points from May, the NFIB said. About 8 percent of firms plan to reduce their workforce, up one point from the previous month, the group said.
    The number of business owners planning to make capital expenditures over the next few months fell a point to 19 percent, 3 points above the 35-year record low, the NFIB said.


  12. phil    i’ve have a little protection to go into last wekend on dia like we talked about. where do you think i should roll to
    thanks


  13. Pharmboy-
    Are we ready to short VVUS?


  14. Phil/Pharm – Maybe this is a dumb question but why is ARNA blowing up when it was VVUS who had the positive FDA report? I understand David Ristua’s theory of buying competitors when a company has a good report but I would think the biotech sector is a completely different beast. Im not complaining, I own a boatload of ARNA but I just thought that it would’ve been better for ARNA if VVUS had a setback….


  15.  hey phil..
    got a target for yrcw..
    cheers


  16. Phil would you take profits on the DIA 104s and wait on the 102s?


  17.  Wow Nas is up 0.7% and thats WITH AAPL down $8….they would also be flying if aapl wasnt dragging them down…


  18. AAPL just getting mauled on no apparent news.


  19. kururi67 – the new iphone 4 has some serious problems with "the talking portion of the phone"  It is a great phone unless you want to talk over the network.  I know, i have one.  So, i think people are realizing that this is a hardware issue, not a software issue.  Apple should come out with a new customized case that puts extra emphasis on the left lower corner, and distribute it at no charge.  people would be happy with a new case and lines will continue.  JMHO


  20. APPL/jomama:  Have you really had problems with your iphone 4?  I got mine the 1st day and I’ve had no problems at all (even w/ out a case).  I think it is complete bullshit.  First of all, no one buying the iphone is getting it for the "talking portion of the phone".  The iphone has always been inferior in the reception area.  I tend to think this is a problem the hardware and w/ ATT.  My previous phone was a Blackberry on Verizon and I had way more reception problems with it than on the iphone.  Now that i have it I can’t see owning any other phone.  just my 0.02


  21. George Steinbrenner, owner of the Yankees passed away of a heart attack.


  22. Out of all ARNA $3 July P.  VVUS FDA Data is out and they are hopping.  Does not mean anything, but I don’t want to risk more than we already have.    If ARNA can move back up through 4.20, then it might be worth covering 1/2 stock with the July $4 C, which can be rolled up if needed.  Otherwise, let them go and let the rest ride…..It is gonna be a wild one this week for VVUS and ARNA.


  23. Phil / % long    Could you update the guidance on what we should still be holding in cash %, in view of your short term bullish guidance, recognising that you might quickly turn more bearish after a run up.  This is working beautifully so far and you’ve kept me in the mkt heavily long, when my medium term sentiment is negative.


  24. Of course out of the DIA calls from yesterday!

    Alpha II/Exec – LOL!  That’s just a running joke.  We don’t actually have a book of secret chart patterns that predict the future but, once in a while, I do notice a recurring pattern.

    Capacity/Tusca – Good point, thanks.  We discussed that already but sometimes I forget when I write something that not everybody has been reading all the discussions on a subject (it’s what makes real journalism boring as you have to repeat basic points constantly). 

    AAPL is trashing the Nas and that’s enough to pull everyone down at the moment.

    FTR/Samz – I have not had a chance to really look them over but I do like both companies long-term.  Hopefully there will be a nice sell-off and we can get them cheap. 

    GOOG/Ocelli – Heck, you can’t even tell what WMT is going to do day to day in this crazy market and you want to guess GOOG?  China will have virtually no impact on their earnings, which should be good so they are way too dangerous to short.  I like selling the Aug $260 puts for $10.50 if you REALLY want to own GOOG for net $450.  I also like Jan $730 calls for $1.10 as they should double if GOOG gains about $40 and aren’t likely to fall below .50 so risking .60 to make $1.10 is a good risk/reward ratio if you are bullish on earnings.

    T/Deano – I love selling T puts because T is great to own so no downside worries.  Jan $22.50s sold at $1.05 are safer, require less margin and pay more money so that’s the way I’d go

    Steinbrenner died.

    Small Biz/Goldman – I ignored it this morning because it’s based on the same negative sentiment that’s been pounding the markets so it’s kind of meaningless. 


  25. Hey there is news on the Iphone 4 having issues.  However my wife has had one for 2 weeks and has zero problems.  Jomama it must be your area because again my wife has the iphone and has not had a single problem..  It’s her first Iphone and he loves it


  26.  This move in AAPL is so frustrating.   It looks to me like a flush of the weak hands before another blowout quarter with raised guidance.    The consumer reports item was on local tv morning news (this issue is what, three weeks old?), so I guess this is just the sheeple just doing their thing:  calling their brokers and sell, sell, sell!    Or maybe it’s that AAPL will report that nobody wants their already purchased Iphone 4….!


  27. Brooklyn -

    If you see this, answer about WFR is up now.

    To all - 

    I hope you got involved with AMR Corp. (AMR) this morning. It is my new Buy of the Day. Check it out here.

     

    Good Investing!


  28. daveo, i use the iphone a lot for everything including work & i have had a lot of reception issues – depending on how i hold the phone even with the case – just my experience, could be isolated but i doubt it.


  29.  Phil – roll mattress to Dec 104?


  30. If this is a "AA rally"…why is AA only up 0.83% and falling?


  31. ARNA/jro – they will follow each other for a while, as ARNA and VVUS have very similar data (VVUS a bit better).  It now comes down to safety…….VVUS has a bit of an issue, but many AEs are known due to the migraine data (JnJ owned topiramate for the migraine and antipsychotic franchise).


  32. to kururi67/ AAPL : Consumer Reports found signal problems in iphone4 and does not recommend it.


  33. sorry, I was asking abt DIA 102 & 104 short puts


  34. VZ   I’m short Jul 29 and 30 puts which have been adjusted so that I’ll get 100 VZ + 24 FTR if it’s exercised.  I’m thinking of taking the 29s and rolling the 30s --> Jan and then later selling a call to make a buy/write.   I’m comfortable holding VZ with its 7% dividend, but wondering if any folks are negative on it.


  35. Yeah, from the visual demonstration the Iphone 4g loses reception when your hand is touching the bottom part of the phone due to the antenna being on both the top and bottom.Definitely bad PR for Apple, they should offer those rubber cases for free until they fix the problem


  36. Phil/GOOG,
     
    thanks for the comments. I should probably be more cautious with it as you noted. I just wondered if their new license would help drive them upwards if the market keeps creeping up, even though China profits are small…..you are wise to advise caution.


  37. David – Starting last week, I have been receiving your emails after close of market (changed suddenly) – is there some setting I need to fix somewhere? I have a gmail id. 


  38. any news on MEE? It usually follows the indexs but not today.


  39. It is really strange watching the two stocks that lead this rally sitting at half the rally gains today…at this rate, CSX and AA are going to go negative, and join TSLA.  Update..>CSX just went negative…=D


  40. I just took my wifes Iphone and put my hands all over it while testing it on a call and there are zero problems for me.  It’s obviously not an across the board issue.
    The market goes lower.


  41. DIA/Z4 – You need to be a little more specific than that.  Which DIA position do you have now? 

    ARNA/Jrom – I would think it’s based on the FDA’s propensity to approve a similar class of drug.  It’s not about the fact that ARNA has a competitor, just having a product to sell and get some market share is going to be a big win for them.

    DIA/Morx – I assume you mean the short puts we sold.  The $104 puts are $1.10 with about .60 premium and the $102 puts are .37 and all premium and the sensible move it to put a .25 trailing stop on the $104 puts as we can always re-sell a lower put that’s all premium on the way down or, on a really big drop, we can roll the $102 puts to 2x something lower.  On the way up, we want to get $2.50 from the Aug $103 puts while we can (if the NYSE makes goal)

    AAPL hammered over yesterday’s Consumer Report where they said IPhone 4 is not recommended due to antenna issue.  This adds credibility to class-action suit and also makes AAPL’s dopey software excuse last week look like more BS than it did at the time. 

    IPhone/Daveo – I just got mine yesterday and it seems fine to this lefty (no Communist jokes Cap!).  I think a lot of the backlash on reception does come from VZ customers who switch to T to get the IPhone and have never experienced such crappy reception before.  If not for AAPL, I would never be a T customer but the overall functionality trumps reception for me and the 3G is quite spiffy for web browsing. 

    Nat Gas/Morx – Yeah that Citi note sent that whole sectror flying this morning. 

    % Long/Tusca – I’m for about 35% invested in buy/writes and 65% cash (including short-term plays) and the beginnings of layering into some hedges but not too much if you bought in at the bottom as we now have the original 20%+ cushion that was built into the buy/writes plus another 6% move up so we’re getting near 30% natural protection, which diminishes the need for a disaster hedge if the Dow has to fall 3,000 points before you get into trouble

    AAPL/LVM – I went to a very quite T store near my house to order after the AAPL store told me 3 weeks to wait.  The T store still took a week to get the phone in and I cannot empasize enough what a low-traffic, out of the way location this one is and, by the way, they were packed when I went to get the phone at 6:30 yesterday with all the people getting IPhones on this shipment and they were sold out of the cool blue-tooth adaptors too (another $120). 

    RIMM having a nice day. 

    Mattress/RN – Yes, we do want to be in Dec $104 puts now (or by Friday at least). 

    AA/Goldman – This is an end of negativity in the face of actual earnings rally.  Very little to do with AA in particular. 


  42.  The only way I see the AAPL justified in losing this much market value is if they are planning a massive recall.   Otherwise, where is the real financial impact, especially as the Ipad is having greater than expected success?


  43. Phil/AA rally – not according to MSM…which I know doesn’t count for much, but this is the headlines—>Upbeat reports from Alcoa and CSX to open earnings season sent stocks higher for the sixth straight day…per Yahoo finance.yahoo.com/news/Stocks-surge-after-Alcoa-CSX-apf-3162492258.html


  44. VZ/Eph – I like them but I now like T more as VZ has pulled back on FIOS and I think the stall is a big mistake as they will lose inertia and it will be very difficult for them to get it back.  Nothing wrong with them long-term at all. 

    Emails/RN - The PSW Report goes out at 8:30 so if anyone publishes at 8:30 or later, it is bumped to the 6pm mailing.  David often (and even I occasionally) misses the cut-off and that throws the Post on the 2nd report but you can still see it as soon as it’s published by checking the main page.

    MEE/Morx – Some court stuff is starting this week.  Also, another miner was killed on Friday in a different location. 

    Looks like we’re cresting as the NYSE couldn’t crack 6,900 – time for TZA I guess at $36.20.


  45.  ocelli7. I am in the GOOG 480 August calls, 1/2 covered by the July 500 calls short ; i got in at 460, but will stay in through earnings, as i think the stock is a good value here anyway. Total cost avg of $10/call cal. now.


  46. Phil and RN -

    Are you talking about alerts? This is a different problem entirely…


  47. MSM/Goldman – Yeah, well good luck following those headlines.  Don’t forget what I thought was going to rally us was positive CVX guidance and CVX is up 2% this morning and that’s a leading Dow component (due to price weighting) so it was easy to anticipate a pop and all AA and CSX had to do was not screw it up. 

    Meanwhile, Europe is quite content to hold close to 2% coming into the last hour.  Will be very bullish if there is no profit-taking at this level

    Alerts/David – I was assuming he means the PSW Report.  A lot of people ask that question.


  48. Rerun/Phil
    Phil – got advice from Pharmboy last night (PSW rules 1 & 2) but would like your take as well, please…
    BP
    Phil – your advice on what to do with this bull call spread, please…
    On June 23, I bought  10 Jan $30 calls at $5.90, sold 10 Jan 34 calls at $3.90, and sold 10 BP Jan $17.50 puts for $1.88.  I was thinking of sitting on this a while, but the pop today (yesterday) caught me by surprise. What do you think?


  49. CSX just went into the red.


  50. Yen is diving against the dollar


  51. Sorry strike that reverse it, dollar is diving against Yen


  52.  Report/Phil + David – Yes, I did mean the report – thanks, I did not realize the 830 cut off. 


  53. sorry phil,  bought two aug 90 puts @ .48   if you think we’ll get a pull back around 10400 level i might be inclined to ride this out.& depending on if the other index’s follow


  54. Tuesday’s economic calendar:
    1:00 PM Results of $21B, 10-Year Note Auction
    2:00 PM Treasury Budget
    5:00 PM ABC Consumer Confidence Index

    3 part Bankster round-up:

    The FHFA sent 64 subpoenas to MBS issuers to determine whether the firms misled Fannie (FNM) and Freddie (FRE), potentially paving the way for major lawsuits that could let the gov’t recoup some of the billions of dollars the mortgage giants lost. Targets weren’t identified, but potentially include Bear Stearns and WaMu (JPM), Countrywide and Merrill Lynch (BAC), Deutsche Bank (DB) and Morgan Stanley (MS).

    Dozens of brokerages and banks, including Morgan Stanley (MS), Goldman (GS) and Citigroup (C), are being sued by a Boston area-based fund over $1.2B of subprime-related losses. The fund claims the banks made untrue statements and violated their own standards for underwriting.

    Goldman Sachs (GS) is expected to ask for an extra 30 days beyond its July 19 deadline to respond to the SEC’s fraud lawsuit, say sources. An extension would give the two sides more time for settlement talks, which will supposedly begin as soon as the financial reform bill is finalized. (previously)

    Other news:

    ICSC Retail Store Sales: -1.5% W/W, vs. +1% last week. +3.2% Y/Y, vs. +3.9% last week. Even with soft weekly same-store sales, monthly sales are on pace for a rise of 3-4%.

    Redbook Chain Store Sales: +3.1% Y/Y in-line with last week. Retailers are cutting the prices of summer goods and were helped in the week by hot weather.

    May Trade Balance: -$42.3B vs. -$38.9B expected and -$40.3B prior. Exports +2.4% to $152.3B. Imports +2.9% to $194.5B.

    May Job Openings and Labor Turnover: Job openings at 3.2M, down from 3.3M in April but up 37% from the most recent trough in July 2009. Hires at 4.5M, up from 4.3M in April. Turnover remains low at 3.1%.

    The IBD/TIPP Economic Optimism Index fell 1.5 points in July to 44.7 vs. 46.2 in June. The index is now 3.2 points below its 12-month average of 47.9 and only 0.3 points above its reading of 44.4 in December 2007.

    Greece successfully sells €1.625B of short-term Treasury bills in a bid to roll over some of its debts, getting over €4.5B worth of investor bids. But while Greece has shown it can borrow cash for short periods, the auction doesn’t change the widespread belief that the country will default or need to restructure its huge debt burden.

    "We are three years in from a crisis that is far from over," HSBC (HBC) Chairman Stephen Green tells the British Bankers’ Association’s annual banking conference. "We are not out of the woods yet and may see some shocks from countries" that are facing big amounts of debt.

    A gloomy outlook from the National Federation of Independent Businesses, as its Small Business Optimism Index drops 3.2 points to 89 after posting modest gains for several months. "The U.S. economy faces hurricane force headwinds, and the government is at the center of the storm," NFIB chief economist William Dunkelberg says. The index typically bounces back quickly following a recession, but not this time.

    No double-dip outlook here: South Korean steel company Posco (PKX +0.8%) reports soaring profits and hikes global demand forecasts. The company says utilization has improved substantially since January and is expanding production "massively" this year

    The IEA expects oil demand to slow next year in China and most other parts of the world, suggesting crude prices will continue to trade at subdued levels for the foreseeable future.

    The people cannot win:  BP (BP +2.6%) will likely pay around $10B less in taxes over the next four years, as the company believes much of its Gulf spill costs can be written off against its tax liabilities. That would cut BP’s taxes to the U.S. and U.K. by more than 25%, particularly bad news for the U.K.’s efforts to reduce its budget deficit.

    Florida’s top banking lobbyist asks the FDIC and Fed to grant all local banks a 12-month break from higher capital requirements and new regulatory sanctions, noting Florida’s already-weak banks now have to deal with customers suffering from the BP oil spill.

    Even guidance is bouncingCalifornia Pizza Kitchen (CPKI +1.9%) raises its Q2 EPS guidance after lowering it last month, and sees EPS of $0.15-0.17 vs. $0.13 consensus and $0.10-0.15 prior guidance. Comps -5.9% vs. prior guidance of -6 to -7%. Revenue of $163.1M vs. $159.3M consensus. (PR)

    Vivus (VVUS) +22.5% premarket after the FDA posts briefing documents for its key Thursday meeting on Qnexa, noting all three doses of the drug were effective for obesity and focusing the panel on the drug’s safety without raising any potential red flags. OREX (+7%) and ARNA (+7.9%) also have obesity drugs under clinical review.


  55. All
    In digital rather than analog where you have your hand differences will not effect the reception, that is why unless you enter a metal building, always grounded you don’t loose a signal, maybe if extremely weak anyway. I believe the antenna problem is related to the fact that they have 2 which can either boost or lower signal strength. Problems are intermittant because the tower and your relative position of the phone make the difference. In high traffic areas there may be 2 towers near with equal strength and which one you get depends on where the most traffic is. My guess is the solution is 1 better designed antenna and to get it in and the others out is a redesigned phone. I also think AAPL knew this and is playing it to their best advantage. Time will tell.


  56. YRCW – is it too iffy now? rumor has it that there is a lot of insider buying.


  57. Hi Phil,
    Here a little nailbighter for you In April I set up a HOV vertical caller 7.5/ 10 jan11 120  with putter of them I closed the short 10 and putter  with a good credit but I am still stuck with the 7.5 caller for which I pd 1.80 now trading for .175 any good suggestion.  down 50% Thks


  58. IPONE! Another engineering fact is we often assume set conditions in design. If the tower is fixed and most people hold it this way everything looks perfect. The problem is it’s a movimg target and I’m sure the antenna people forgot that the apps people were designing in every direction. This design problem started in the 70′s when fear of coppies started and nobody is allowed to see the total design.


  59. Goldman back over $140, CAT holding $65 nicely, RIMM up almost 4%, AMZN up 2.25%,

    AAPL getting stable and starting to look interesting.  Aug $220 puts can be sold for $4.20, which I like and I can’t see a good reason not to sell the 2012 $185 puts for $22.70 and buy the 2012 $200/250 bull call spread for $26, which is net $3.30 on the $50 spread that pays if AAPL makes $250 by 2012.  The spread to make $5,000 should be about $4,000 in margin and $330 in cash and worst case is you own 100 shares of AAPL at net $188.30

    A more aggressive AAPL earnings play is the Aug $230/260 bull call spread at $16.30 and that pays 84% by itself if AAPL makes $260 after earnings (and holds it through Aug expiration) and that can be augmented by the sale of the Jan $200 put for $11.10, which drops the net to $5.20 on the $30 spread and the assumption is that the $200 put can be rolled out of trouble into whatever 2012 put pays $16.30 or more and whatever strike you roll to then becomes your worst-case AAPL put-to price

    Volume about average with 55M on the Dow at 11:13.

    BP/Snow – I think they have a major pop still to come when they cap the well and also, if they do cap the well soon, I think they are very undervalued below $45.

    Wow – dollar getting killed across the board into EU close.  Down 1% against Pound ($1.517) and Euro ($1.269) and down half a point on the Yen (88.1) but that’s down almost a full point off the 3am play at 88.1.  Copper $3.02, oil $77.10, gold $1,215 and nat gas $4.42

    DIA/Z4 – Well those were used because we figured they wouldn’t lose TOO much if we popped higher but if we don’t pull back this afternoon – I don’t think they are worth keeping.  Of course, you could flip them to a $102/101 bear put spread at .33 and those pay $1 if the Dow falls just 250 from here so as long as you make that .48 back if the Dow stays here or heads higher, it’s not a bad continuation hedge. 

    YRCW/Morx – I still like them and haven’t sold yet but would have lightened up if I caught the spike up to .27!  I think they are way undervalued and do expect $1 but maybe not for a year or two.


  60. Phil, from one lefty to another, I cannot get over what a BS market this is !!
     
    FMD people !
     
    How this is holding up above 1090 w/ AAPL getting hammered is beyond me !


  61. IWM $66 calls for .09 are a fun trade as IWM jumped $3 last Tuesday and a $1 move up from here should double them but keep in mind it’s an all or nothing play.

    HOV/Yodi - You say caller but I assume you own the $7.50 call, now .17, right?  Nothing to fix, really, you could add money and roll to a lower spread but not much point as your delta is .19 and that’s better than the net delta on the spread so you just need to hope HOV pops for you but not very likely by Jan.   You could go back to selling the $4 puts for .90 to start making some money back. 

    NYSE closing in on our mark.  S&P not too shabby either…  RUT at the 2.5% line at 637 so that’s a key breakout now.

    Man, SQQQ is down to 59.80 – we should have held those puts!


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    GUIDENCE Needed…
    I’m long 300 TNA;  and long  3 Aug 39 puts; and short 3 Aug 43 calls. This is my first time to use a collar.  Should the price reach 43, what happens?  I am using Ameritrade TOS.  Does TOS automatically transfer my 300 TNA to the owner of the calls and cancel my calls?  Do I have to do something to make this happen?   Do I then sell the Put, or if I expect the price to decrease below 39, maybe I hold on the puts for a better price. What if the calls are not exercised immediately?
    I know how I got into this, now, I need some advice about how to end it.
    Thanks


  63.  Not much of a move in copper off dollar weakness


  64. What about a call spread on the tza ?


  65. hia5
    TZA call spread maybe if no breakout


  66. The Senate has the votes for passing FINREG.  That’s the cover they need to take down the banks today.  Please?


  67. TNA/Roscoe – Relax!  If TNA is over $43 at expiration and you don’t roll the caller to another month, then the puts expire worthless and you keep the money and the calls expire and you keep the money but the caller exercises the option and the stock is removed from your account in exchange for $43 in cash.  That’s the beauty of a buy/write – there is no bad outcome to the upside – your worst case is you are back in cash after a nice win – which is never a bad idea.   The execise is automatic at the end of Friday’s (Aug expiration in this case) trading but you won’t see it until Monday probably. 

    TZA/Hia – The Russell has been lagging, not leading so not too exciting to short.  It’s the Dow that’s gotten ahead of the race and any Dow component missing earnings can take the whole index down so they are my favorite short until we see about 10 positive earnings reports on that index. 

    FinReg/Matt – I think that’s a done deal.  Sorry bud….


  68. roscoe
    Sould the TNA stock exceeds 43 by 1.2 a penny  the 300 stock will be automatically called away you do not have to do anything. You keep  the proceeds of the short caller which you can set of against the loss on the putter 39.
    Phil seldom buys insurance. If the stk drops by Aug experation below 43 you still keep the proceeds of the short caller as well as the stk but you mostly lose on the putter. Hope this helps


  69.  Hi Phil/ I am quite sure that Intel is not going to disappoint on the other hand I am not going to be surprised if it gives back the gain by Thurs. The question I have is sell tomorrow’s pop or sell calls against it. 


  70. i m with you Matt. I need BAC under 15 on friday.


  71. Washington, D.C.- Despite the fact that Social Security is fully funded through 2039, there have been calls to cut Social Security benefits in an effort to reduce the long-term budget deficit. A new analysis from the Center for Economic and Policy Research [http://www.cepr.net/] (CEPR) finds that three of the most common proposals to cut Social Security would have a substantial negative impact on low- and middle-income families.

    "There is a great deal of talk in policy circles about cutting Social Security, but very little discussion of the financial situation of those affected by the cuts," said Dean Baker, co-director of CEPR and an author of the report.

    The study, "The Impact of Social Security Cuts on Retiree Income," analyzes three of the most common proposals for reducing Social Security benefits and calculates the implied cut in benefits and income for various age groups and income quintiles of near and current retirees. The proposals examined are the adoption of progressive price indexation, raising the retirement age to 70 by 2036 and reducing the annual cost-of-living adjustment or COLA by 1.0 percent below the rate of inflation. It is worth noting that these proposals would only have a negligible impact on the deficit over the course of the next 10 years.

    The analysis of the proposed cuts show:

    • The most frequently suggested PPI formula would imply cuts in benefits of 6.2 percent for a household in the in the middle income quintile between the ages of 45-49 in 2007 and 9.6 percent for a household in the middle quintile between the ages of 40 and 44 in 2007
    • Raising the normal retirement age 70 in 2036 would result in a 4.0 percent reduction in benefits for workers between the ages of 50 and 54 in 2007 and a 10.0 percent reduction for workers between the ages of 40-44
    • Reducing the COLA by 1.0 percent would result in a benefits cut of 12 percent for a retiree at age 75 and more than 20 percent at age 85
    • For retirees in the bottom income quintile at age 85 who were between the ages of 55 and 59 in 2007, reducing the COLA by 1.0 percent implies a 14.6 percent reduction in income and a cut of 16. 5 percent for retirees in the bottom quintile at age 85 between the ages of 40-44.

    "The vast majority of near-retirees will rely on Social Security for most of their income in retirement," said Baker. "All of these proposals will result in significant cuts in income for low- and/or middle- class retirees."

    The full report can be found here.

     


  72. The Fed says its $2B auction of 84-day term deposits goes off at 0.31%, with bid-to-cover ratio of 3.70. The central bank has been ratcheting up the tests of the deposits to see their viability for soaking up excess liquidity as a recovery gains strength.

    With excess capacity in the economy, the risk of deflation is up and "more of a risk than I would like to see at this point," says Boston Fed President Eric Rosengren, who has an FOMC vote. Incoming growth data is "weaker than many had anticipated." The central bank has plenty of tools in an inflationary environment, he says, but they’re less effective in deflation.

    Chevron’s (CVX +1.6%) looking toward downstream profits and the stronger dollar to boost second-quarter results in a sharp reversal. Gulf Coast refining margins are up 61%, and net charges of $250M-350M will also be less than forecast.

    INTC/Chyer – I do not like to guess earnings during the first week or two.  Once you see a sector start to report, then you can make educated guesses but before hand it’s a crap shoot.  INTC hits downtrending resistance rigth at $21 and is up over 10% on the run since last week and the put sales are not very attactive so I would do nothing unless you just want to take advantage of volatility crush and buy 5 Oct $23 calls for .50 and sell 3 Aug $22 calls fror .42 as that’s net .25 on the Oct calls and very easy to roll out of trouble to the upside


  73. Lunch time and here we are near highs of the day, this is rare..looks like they are taking advantage of every opportunity to jam the markets higher


  74. Phil/Yodi
    Thanks Y’all,
    Another scenario – I expect TNA to max out at ~ 44 and then go south.  I want to take profits at 43 -44 and be done with the trade.  What’s the best way to handle this?
    or…
      If the price is below the Aug 39 put at expiration, do I get to sell my 300 TNA at $39 and the calls expire?
    Thanks again.


  75. Phil, where is your gut telling you we finish today? Im short the RUT and have to go to class for 90 minutes – debating whether to let it ride with a stop about .3% higher than where we are or just taking my losses now and being able to focus on the boring lecture….


  76. VNO and BXP seem to be topping out so be careful up here as we test our NYSE level at 6,930.

    MA is very stretched and could be a fun short if consumer stocks look week.   Aug $190 puts could pick up 100% on a move back to $200 in the next week and earnings volatility should keep them near $3.60 into Aug 3rd earnings so this is a play I like for a few sessions to take advantage of any ferarful pullback

    TZA $35 calls are a fun momentum play at $1.40, looking to sell the $36 calls for $1.40 (now $1) to make a free downside cover so I like the idea of risking .20 (stop) to possibly get a free $1 hedge.  Out at RUT 641.

    TNA/Roscoe – If you sold the puts YOU have an obligation to buy the stock for $39 if it falls below it at Aug expiration.  When you BUY a put, THEN you are protecting the downside of your stock. 

    Guts/Jrom – Lower.  I feel like something will disappoint us and I’ve been reading all morning and can’t find it.  Maybe I’m just paranoid after such a nice run but I know Matt’s hoping it’s a blow-off top today.  If you are short a July position, keep in mind that a move up from here and another gap and you are just toast.

    Three lunchtime reads:
    1) Moving out of equities
    2) It’s time to reform Fannie and Freddie
    3) In investing, do the hard thing


  77.  this month long rally is just getting started and I already bought a few more DIA Aug-98 puts


  78.  Hi Phil,
    I’m still in the FAZ bull call spread Aug 15/17 from last Friday.  I’m holding it right now waiting for that other shoe to drop as there’s likely more bumps in the road between now and Aug expirations.  Please let me know if you think I should do something different with this position. 


  79. David,
    So after your recommendation yesterday on AMD I loaded up on stock and some options.  Options are up 25% so I took half off the table.  Good job.


  80. Hey all,

    I have a new Two Day/Overnight Trade in Marriott International Inc. (MAR). I like the travel sector a lot this earnings season. I think we are going to see big things from MAR. 

    Check out my analysis, entry, exit, etc. here.

    Good Investing!


  81. wow, does anyone really think that the Dow is not going to give up at least 100 points in the next few days? Too much too fast.


  82. Suddenly CNBC thinks double dip is a curse word. THEY ARE ALL BULLISH…I hate this tv network. They have about as much spine as a jellyfish and stick to what they say like a 12 year old girl. 


  83. David, your link isn’t working. at least on my screen.


  84. Appears my link was not working.

    Here it is again. 


  85. "I feel like something will disappoint us and I’ve been reading all morning and can’t find it."
    Let me/us know when and if you do !


  86. Morx -

    Should be working now.


  87. David… I switched a long time ago to Fox Business Network for the breaking news. They have a better format, not as much BS – and the babes are far smarter and certainly more attractive.


  88. Phil/ BlowOff :  No, I was just hoping for a pullback today.  Not a blowoff top.  We didn’t open high enough or go up fast enough for it to be a top.  At least in my experience.  I think FAS will close up today.  Just not 6% up.  So, can a guy at least get a pullback?  I think I am.  8-) 


  89. To double dip, Copper is a little on the puny side presently.


  90. Gel -

    Haha I will keep it in mind. I am not sure I have it. I have Bloomberg TV, but they are really dry…


  91. FAZ/Jbaker – It’s a ’till Friday spread as we hear from C, BAC and GE that morning.  JPM is tomorrow and will offer some clue so hopefully we can dig Chase out of that mess and figure out what’s up. 

    Too much, too fast/FJD – I’ll be surprised if this morning’s gap isn’t filled on some pullback before we break out.

    Fox/Gel – I haven’t tried them lately, have you noticed them actually affecting the markets with something they say?  That’s my benchmark – CNBC can affect the market from time to time and that makes us money so watch I must…

    Poor Steinbrenner – Why does everyone wait until you are dead to say how great you were?


  92. Phil/ Sorry I meant I owned INTC since 19, not too sure to take profits here outright or sell calls against it 2012 22.50 calls


  93. AAPL — Hi Phil I saw your comment on aug 230/260 bull spread, I open last week aug 250/280 bull spread net 12.6, should I adjust down to your strike for 6.65 debit and sell jan 200 1/2 position to cover the cost, I have 10contract on the bull spread — thx


  94. The Treasury sells $21B in 10-year notes at 3.119% (.pdf). Bid-to-cover ratio of 3.10, vs. a recent 3.35; indirect bidders take 41.7%, vs. a recent 36.9%. Direct bidders take 9.8%, vs. a recent 16.2%. Treasurys slipped further: the 30-year yield +0.04 to 4.10%; 10-year +0.05 to 3.11%; 5-year +0.06 to 1.90%.

    Good news, bad news: Foreclosure starts fell to their lowest quarterly number since 2008, but completed foreclosure sales rise to 291,381, the highest in U.S. history.


  95. Hi, gel1,
    How are currencies?


  96. roscoe
    July 13th, 2010 at 12:37 pm | Permalink  
    The seller of an option has the obligation to deliver the stk at a given price.
    the buyer of an option has the right to receive a stock at the given price
    In your case you made a buy/ write on the stock. you can sell the stock and buy the call option back at any given price over 43. The stock increases in value over 43 always faster than your 43 short caller but you will not receive more money out of your stock if it goes over 43 as you set your limit of gains at 43. And you need to close them at the same time as the caller might run away from you once you sold the stock!!!
    Should the stock at experation be between 39 and 43 you can keep the stock and you gain the proceeds you received from selling the caller but the putter becomes worthless. Even if the stock drops below 39 the putter will lose very quickly its value until experation. Obviously if you would have bought a long BP 50 putter you are in the pound seats today. !!!!! I recomment to study the option game very closely specially with selling puts or calls.
    Read  the beginners guide.
    Phil/Yodi
    Thanks Y’all,
    Another scenario – I expect TNA to max out at ~ 44 and then go south.  I want to take profits at 43 -44 and be done with the trade.  What’s the best way to handle this?
    or…
      If the price is below the Aug 39 put at expiration, do I get to sell my 300 TNA at $39 and the calls expire?
    Thanks again.


  97. Hi Phil : What do u think of DD at $37.30 with buy/write Jan. 2012 $30 calls&puts for $13 for net $24.30/$27.15 ? Provides 24% return plus 4.4% dividend.thanks
    Ps: I won’t wait until your dead to tell you how great you are. I’m going to tell you now that your great.


  98.  Phil, any thoughts re: setting up bearish positions on real estate using SRS or IYR options? Looking to hedge anew real estate investments that are already fairly battered, but may have more to fall.


  99. Phil / Dow vs Rut    Strikes me that the big multinationals will continue reporting good eps and outlook since they are international and have huge operating leverage to control costs.  The smaller more domestically focused cos will have more problems with guidance, especially in light of the small bus (UN)confidence index today.  ? a play might be to stay long during Dow and large cap announcements and then cash in / cover prior to the RUT volume announcements, assuming they are mainly published later?


  100. dflam
    July 13th, 2010 at 1:58 pm | Permalink  
    Something smells on this page but I must admit you right, do not praise to much or "HE" wan’t talk to us any more!


  101. Phil/Fox Business Channel
    I actually found the network by accident, in an effort to distance myself from Cramer, and the other commentary they offer that has a distinct bias. I recommend FBN for a trial drive, as it is for me a far better choice than CNBC. Not the usual political bias that is found on the other Fox channels – just the strait stuff!


  102. David…Your just finding this out?  CNBC is the best of the best haven’t you heard?   You could ask 10 people on the street that haven’t heard of the SP500 and they would provide better forecasts than CNBC.  If you’re listening to them for advice your going to lose.


  103. Yip -

    Obviously I don’t listen to them…


  104. Phil / 65% cash    You replied earlier 65% cash including the short term plays.  Wondered what your net actual cash position was currently.  I’m at 50% currently, is that about right?


  105. cwan/Currencies
    The summer doldrums are well entrenched in the currency markets. I am for the most part on the sidelines, waiting for the action to start.  As soon as we begin to get some breakout signals, I’ll post.  I have upped my GFT trading status to platinum level, which gives me the best access to research support – more insurance for the positions I make a play on.


  106. David that sounded wrong… I was actually agreeing with you I was not assuming you were taking their advice even though it sounded like that…lol…sorry


  107. Phil – Steinbrenner – because he is one of those hated rich guys you keep talking about. I thought the guy was a genius but……..thats just me.


  108. SPG now over 85; b/c retail is back !   LOL.


  109. Hi, Phil,
    I entered one of the hedges you recommended about a week ago: SDS Sep 36/42 bull call spread cost $2.15, covered with selling SDS Jan 26 put for $1.17.  So, it was $0.98 for a $6 spread.
    Now, the bull call spread is about $1.00 now.  September is not that far away.  Do you think I should adjust it to make it more effective as a hedge?
    Thanks.


  110.  Re: Fox Business
    I used to Tivo "Bulls & Bears" on Fox Business but have discontinued in disgust.  It has now degenerated into a 1/2 hour of bashing the Administration & Congress. The panel usually consists of 4 extreme right leaning and 1 token lefty whom they all pile onto.  A blind person could tell it’s a Fox production.


  111. yodi/Thanks. That’s filling in the blanks for me.
    I’ve read "Winning Stock Options and Strategies" so many times, I’m dreaming about it.  I’m following the game plan, It’s in the fourth quarter of my trade, and I just want to be sure I know all t;he possible ways to end the game for max profit. 


  112. yodi/Thanks. That’s filling in the blanks for me.
    I’ve read "Winning Stock Options and Strategies" so many times, I’m dreaming about it.  I’m following the game plan, It’s in the fourth quarter of my trade, and I just want to be sure I know all t;he possible ways to end the game for max profit. 


  113. We getting sticked or anti sticked?


  114. Anyone know where one can find the current (Yahoo is over a month old data) short ratio for stocks?


  115. Gel1,
    Look forward to your currency plays.  Thanks in advance.
    BTW, how much do you have to put into your GFT account in order to qualify for the platinum status?


  116. Phil: do not know whether you answered my question the other day:
    I have stock GE,INTC,MO,MRK, ALL GREEN EXCEPT ge,
    THESE POSTIONS HAVE NO OPTIONS SOLD AGAINST THEM: WHAT WOULD YOU RECOMMEND ?


  117. Phil – I seem to be more short than long (about 60-40, am still majority in cash, though) – would you recommend re-balancing with some longs? Or wait for a drop (that I think we should have) and exit the shorts then?


  118. Phil on the mattress – I guess i havnt been rolling the way i should and if i go to the Dec 104s at 6.70 (from Sept 101 at 2.80) it’s going to cost me way more than the puts i have sold. Help me out please.


  119. roscoe
     
    Well TNA to me is more like a gambling stk it is one JRW plays with I enter it yesterday and could not get out of it. So just to get my money back I sold equal Jul 40 calls against the stock cashed 2.00 and I put it in my pocket. So I did not lose on the game if the stk stays over 40 it will just be called away. If it closes below 38 I am even. So we see what give on Friday. Do not expect a day like today will be every day. The best way to do your trades incl. Phil.s buy write plays, he gave 10 of them recently, is when there is blood on the street. Not good for a day like today. Just enjoy the gains you make, and hopefully you have enough margin left to deal with the down side.


  120. INTC/Chyer – Ahead of earnings, I’d take the money as the premiums for the calls suck.  If you want to stay bullish because you think you’ll miss out, I’d cash the stock adn sell the Jan $20 puts for $1.62 so you make 8% more if we head higher and worst case is you’re back in at net $18.38 but you have all that lovely cash to play with for 6 months.  If you don’t want to take profits, you could sell the 2012 $20 puts and calls for $6.90, which is 30% in 18 months plus the 3% dividend.

    Here’s super bull Jim Cramer saying buy on a pullback because "the news is too good to ignore."  Amazing how he gets away with this a week after telling people to cash out.

    AAPL/Gucci – It’s still $8 so you are not to far behind.  I would take out the $280 caller for $4.30, roll down to the $240s for $5.60 and sell the July $250s for $5, which expire on Friday.  Earnings are next Tuesday so worst case is you roll the callers back to Aug but they will lose their $3 premium in 3 days – that’s nicer than your $280 caller.  If AAPL heads up, you can roll callers to Aug $270s (now $6.80) even or better and then you are still in a $30 spread and you’ve rolled $10 lower for about net $5 so $17.60 on the $30 spread even if things don’t go so well. 

    Reports of my death…/Dflam – LOL, thanks!  Not sure what stock you are doubling down on but the strategy is sensible. 

    SRS/Tpuck – Oh Noooooooooooooo!  I can’t believe you mentioned them!!!!  Don’t you know that’s the ETF that must never be played???  SRS always looks good but never works, likely due to the fact that IYR is so volatile and grinds SRS down faster than it can make gains.  IYR has been up and up and up so those must be some awful RE plays you have there.  IYR is testing $50 and maybe that gives them trouble but I’d go with something simple like Sept $46 puts at $1.45 because it seems to me that you are not correlating with IYR anyway if you are down when they are way up.   You can sell all or part Aug $47 puts for $1.10 to lower your entry cost too. 

    Dow/Tusca – I agree, that’s why the Buy List and our Dow Picks are all big boys.  As I said yesterday, the closest thing we have to a sure thing is to bet the rich get richer.  Of course, don’t forget that RUT stocks are not exactly small businesses and they enjoy massive competitive advantages vs Main Street businesses as well – they probably are not sitting on $120Bn in cash like GE, though…

    Cash/Tusca – Yes 50% cash is about right, you don’t want to go to crazy with short-term plays either as we never know what this crazy market will do next. 

    Steinbrenner/DK – As a businessman, he invented modern baseball and turned it into the business it is today (he bought the Yankees for $8M in 1973, worth about 100x that now – THAT’S A GENIUS!).  He’s also very charitable and works very hard for the cities of New York and Tampa - very underappreciated by most people and he will very much be missed. 


  121. Pharm - ShortSqueeze.com


  122. cwan/GFT
    The platinum level requires $250,000 in your account. This can leverage out to $25 Mil in trading power. This is far beyond my trading activity, but I have the funds on deposit primarily for the research advice, that is probably the best in the world.  Some day in the future, an opportunity will surface that will allow for exponential profits, and I hope I will be on board.  Eventually the US Dollar will take a severe nose dive, as the debt issues will not just evaporate on their own. That might be the "big one".


  123. Hi Phil
    Regarding buying Aug MA puts, do I have to buy the stock also?
    What if I just buy the puts. Can I not buy the stock at expiration especially if it’s going to be lower?
    Plan would of course be to sell the puts later if your thesis of them dropping turns out to be correct


  124. Can everyone say "SQEEZE"; this is what I meant by a typical "Monday" kustoms !!


  125. Phil – Steinbrenner – glad we agree. See there are some good rich guys out there.


  126. Hi Phil,
    Mattress, I rolled the other day my short puts from JUL to Aug holding them at 4.87 now trading for 2.03 more than 50% shall I take at least 1/2 of the table. Pays part for the Sept Dec rolling. Your thoughts pls thks


  127. Phil, you are great.



  128. WFR down on a green, green day!


  129. Phil/ CNBC - "70% of corporate expenses is labor based"…that seems really high,  but would explain how we are getting such high earnings at this point in time.


  130. Jailed for $250 debt
    More & more people across the nation are being jailed for small debts. Why?


  131. Phill : MUst have caught u in a weak moment. DD is Dupont. any reasons u know that would discourage me from buying them now?


  132. Phill : MUst have caught u in a weak moment. DD is Dupont. any reasons u know that would discourage me from buying them now?


  133.  Hey Phil…
    Got F august 11 calls and short july 11 calls…..the july calls have exploded,  should I flip into a 11-12 august spread..is there anything else I can do…do u suggest waiting till friday to roll them or is there a chance they might be called before..
    cheers


  134. All- Someone mentioned the other day that there is a way to format how comments are viewed on PSW. It might have been Goldman?! Can anyone help? Thanks.


  135. Be careful at IWM 64.36, and then 64.51


  136. Phil – RUT666 tomorrow? ;-)


  137. SDS/Cwan – As long as your bullish positions are doing well, there’s not much you need to do.  It doesn’t make sense to keep plowing money into hedges that you ultimately hope will expire worthless – it’s like doubling down on life insurance every day you live.   You can add a buck and roll to the Dec $33/40 spread at $2 because at least that buys you some position and 3 more months of coverage but we’re a long way from hitting the Jan $26 puts.  Also, keep in mind you can stop the downside bleeding on that position buy just buying some Aug $29 puts for .23 and those will gain about $1 if SDS falls another 10% (Dow up 5%) so it depends how worried you are. 

    Bulls and Bears/Csl – Yeah, I used to watch too but they went rabidly insane after Obama was elected.  

    Stick/Exec – Jeff Immelt said the economy is getting better and he was standing next to an electric car charger when he said it so I’d say it’s game on now.  RUT blew through 2.5% line, now 641 and we’re just waiting for NYSE to give green light for the next leg up.

    Positions/RMM – I think I said at the time and the same goes now, you have a nice, free cushion from the now 700-point move up so there’s no sense in covering until/unless we have a pullback at the monment as the pullback will boost the VIX and give you better sale prices.  INTC is the exception at the moment and there’s a play above for that.  Immelt just said things look good for GE, MO almost never has a bad Q and MRK seems OK too. 

    Getting long/RN - Well we’re pretty much all long since last week but now I want to get more short so I’d say you may be stuck watching our levels but if we pop 3 of 5 – you’d better have some longs you want to add. 

    Mattress/Morx – Well I hope you ended up with Sept $101 puts AFTER you sold your $108 puts and not that that’s you actual original position.  You can’t make money if you stay in an out of the money long – all you do is chew up premium until you have nothing.  If you can’t afford the roll, just wait and see where you stand on July expiration but there is no way you should be in that position without having cash from other positions in your pocket.

    $25M/Gel – That will be a fun trade when the dollar hits the fan!

    MA/Maya – No, no stock, just the puts and we are BUYING the puts to be short on the stock, not selling  them to own the stock.  The idea is we are shorting a high-flying financial that is not reporting so if JPM shows weakness on the CC side, we will benefit and, hopefully, strength at JPM won’t rally MA too hard if it goes the other way and we get out with a small loss. 

    50%/Yodi – Absolutely you take 50% profits after a week when there are 5 weeks left!

    Thanks Sean! 

    WFR/JBur – A lot of SOX are down even thought the index is up.  Kind of strange but they had a huge run so maybe rotation. 

    Labor/Goldman – Of course, that’s what I’ve been saying.  It’s all about impoverishing 300M people so the corporations can pay globally "competitive" wages at home.  They outsourced all they could and now the game is to break the backs of the American worker.  Once they squeeze all they can out of us, I guess it will be time for the robots…

    Debt/Gel – It’s good to make examples of a few people before the general public starts getting any funny ideas about not paying.

    DD/Dflam – I thought you were talking about doubling down on some random stock.  DD sounds good as CVX just said their Chem division is doing great and MON is having Round-Up issues so maybe a great time to be in them. 

    IWM $66 calls are .20 so mission accomplished folks – DON’T BE GREEDY!!!!  If they even twitch lower, 1/2 off by .18 and then a .05 trailing stop locks in 80% gains.


  138. They’re totally painting the tape right now.  FAZ about to take out the low on 6/21..  Please tell me WTF has changed for the better since then?  On second thought.  Nevermind.


  139.  Longs/Phil – yes, I was long all of last week, repositioned starting late Friday into today (and sold some longs into profits). Most of the shorts are hedged puts into August, so I have time (well, a couple of weeks at least) on my side. 


  140. JRW…Those pieces on debt are great.
     WHen you say squeeze are you infering today the market is going up mostly as a result of a short squeeze? 


  141. mattress – youre right there must be some money in there somewhere. I did cash out at a lucrative point, just need to go back and check the records and apply that amount.


  142. TNA/jodi
    Yeah, The TNA/TZA are good for short time swing trades during these volatile times .  I’m up about 15% since Thursday, so I’ve got a little wiggle room.
    I really appreciate your help.


  143. Phil – thx for the FAZ/UYG hedge last Friday, I went back and re-read the thread over the weekend and better understand the need for some protection. 
    After another big move today, I added the DXD Aug 27/30 bull call spread you suggested this morning for $0.72, although I did NOT sell the puts against it.
    Anything else I should be looking for at this point?  Think I’m pretty close to neutral now….


  144. Speaking of CVX Phil, how about selling the 2012 60 Put for $5.90 and buying the 2012 60/70 C Vertical for $6.25. The $10.00 vertical is already $13 in the money and cost you $0.35! Margin for each contract is only $610. Worst case, I get CVX at $60 and change! Not very aggressive though. 


  145. Longs/Phil – To clarify, I booked profits off about 50% of my long position and am holding the rest. 


  146. Pharm… Are you sitting down?  Our VIAP is up 25% today.  Are you aware of any news?


  147. JRW: Wow, I am in awe of your intimacy with the RUT.  It took a dive right between the range that you called.  We’re not worthy!


  148. not sure why the world is crashing but i just bought MAR for 31.9. I assume its just profit taking.


  149. Very impressed by today market moves on solid volumes
    Almost perfectly orchestratred to reach your levels, Phil.
    We are now just 800 dow points below our BS top of the year (or -7.5%).
    I sold all my long positions today, waiting for the next predictable big move – hopefully down!


  150. 666/Diamond – I think we fill this morning’s gap first.  Maybe something bad happens in Europe again.  We’re just way overdone here but we could go either way although we’re already in a record run going back to 2003 now and there’s been no stimulus or other major announcement.  Imagine what would happen if we get something….

    Nevermind/Matt – See above comment.  It’s all in how you spin the news.  Wax on – wax off, wax on – wax off….

    Neutral/Hoss – Neutral is good.  We could pop here or we could retrace and the best thing you can do is wait until we have a proper level test.  The RUT did a nice catch-up job today, we’ll have to see what sticks.

    CVZ/Stjean – That’s a good play but I like XOM way better at $59.43.

    50%/RN – Well then not too much to worry about.  Smart to play for a pullback at our tests but then must be ready to flip-flop bullish if tests go well (3 of 5 levels over). 

    Waiting/Lionel – Wise! 

    What an exciting day that was! 


  151. roscoe
     
    Glade I could help. I am still learning a lot every day. The only way you learn is ask questions.
    See you tomorrow


  152. Well that was fun not watching from 8:00 on; wish I had done a full position instead of 1/2 !! $2.50 on the trade, 3% on the day for the portfolio with my eyes closed !!


  153. If FAZ goes below 13.56 tomorrow I’m obviously wrong but by the looks of it FAZ has bottomed today.  Today was total tradebot control.  Folks were dumping into it and the bots just kept coming back for more.  Looks like a top to me.  Unfortunately, OE isn’t for 3 more days.  Lionel, I think you made the right move-


  154. Pharmboy
    Hi Do you still see any light in APPY or shall one just take the loss?  thks


  155. Wax on Wax off!  HAHAHA….  At least it’s exciting but nothing is different than it was 2 weeks ago but I love the movement, 8-8 today and 2% mostly on TZA if you could believe, counter trend trading!  It’s been a long time since that’s happened. 
    I’ve added standard 20, 2, -2. 0 bollinger bands to the 1 min charts on TNA – TZA WITH the 8MA chart.  Take a look at the relationship with the bollinger bands and the 8MA, it helps me see if it helps you.  If the market is trending they work particularly well if the market is choppy forget it. 


  156. Matt…. I want to agree but it might breach that low and rally for a few more days but I would strongly guess in 10 days things will look much different and much lower.


  157. Phil,
    Nice call on the IWM 66 calls, a double for the day !!


  158. INTC beats!


  159. Sorry another post.  What does the grey color around some of our names represent, I’m sure Phil mentioned it but I’ve been out of the loop…
    Thanks


  160. INTC .51 cents  "best qtr ever"  67% GM’s. SPY popping,


  161.  Intel reports best quarter ever – Yippee!

    Intel Corporation today reported second-quarter revenue of $10.8 billion, up 34 percent year-over-year. The company reported operating income of $4.0 billion, net income of $2.9 billion and EPS of 51 cents.

    Estimated revenue: $10.25 billion

    Estimated EPS: 0.43

    AMD … yippee!


  162.  Intel is slamming it!! Tmr we may have a blow off top IMO. China GDP on thurs most likely overshoot


  163. Phil / ‘Them’     I guess the Intel guidance gives ‘Them’  an opportunity to take us over your levels while we sleep?  Does this set up tomorrow for another Pamplona?


  164. At the close: Dow +1.43% to 10363. S&P +1.52% to 1095. Nasdaq +1.99% to 2242.
    Treasurys: 30-year -0.69%. 10-yr -0.4%. 5-yr -0.27%.
    Commodities: Crude +2.99% to $77.19. Gold +0.98% to $1210.50.
    Currencies: Euro +0.97% vs. dollar. Yen +0.09%. Pound +0.87%.

    Market recap: Main Street’s pessimism was nowhere to be found on Wall Street today, as stocks closed higher for the sixth consecutive session. Investors reacted warmly to results from Alcoa (AA +1.2%) and CSX (CSX -1.4%), ignoring sovereign debt worries and regulatory uncertainty. NYSE advancers outnumbered decliners five to one, but the continued light volume casts doubt on the strength of this run.

    Some good news in the trade imbalance: the hefty gain in imports points to a pickup in business and consumer spending that indicates the economy in Q2 was the healthiest in four years, according to Morgan Stanley economists. “With much of the upside surprise in imports in a surge in capital goods, the outlook for domestic investment looks even stronger."

    Today’s Debbie Downer award goes to:  David Rosenberg’s explanation for the market surge of recent days: a "few jolts of liquidity" and a short-covering spree… "nothing fundamental here."

    Battered individual investors are bailing out, and the market more and more looks to be dancing to the same beat, leading to the question: Should the little guy be heading for the mattresses (or at least bonds)?  See, that’s Pimpco’s plan (and Treasury to keep rates down).

    It’s not just small investors who are grumpy. Fund managers turn bearish in their outlook on the global economy and corporate earnings for the first time since February 2009. But if upcoming economic data fails to confirm the double-dip that fund managers expect, risk assets should do better in Q3.

    Key ETF pair to watch ahead of INTC‘s earnings after today’s close: USD/SSG. Intel’s Q1 beat sent ProShares Ultra Semiconductors ETF (USD) up nearly 8% the next day, while ProShares UltraShort Semiconductors ETF (SSG) should provide significant upside if INTC disappoints. INTC makes up 35% of both USD’s and SSG’s total portfolio.

    Dispatch from the business of moving stuff: Rail giant CSX was up as much as 2.7% after its earnings beat, but has retrenched down 3%. Increased coal transport bodes well for the economy, and MarketBeat notes that if the sell-off is because people are looking for tastier returns than in rail, it could be that risk is still on the way back.

    James Altucher loves his Apple (AAPL -2.1%) gadgets, but headline risk from the iPhone4 antenna problem prompts him to endorse three other tech stocks: 02Micro (OIIM +7.8%), which does the LED lighting for iPads and currently trades for only two times cash; KLA-Tencor (KLAC +4.1%), which will benefit from Intel’s (INTC) growth; and Yahoo (YHOO +3.1%), which will win big from its search outsourcing deal with Microsoft (MSFT).

    Sam Antar called this a month ago (See Insider Zone on main page):  Amedisys (AMED) is plummeting on heavy volume after warning its business weakened in Q2 and that its profits will fall short of analysts’ forecasts. The company will ratchet down its growth plans as a result. Shares -23.4%. (see also)

    No, don’t let Goldman be Goldman (GS) – that should be the whole point of financial reform, Wallace Turbeville says. "Wall Street’s attention must turn away from churning derivatives on existing products and instruments and toward growth of the economy and jobs. If more government intervention is needed to force this turn, so be it."

    A New York Fed paper shows how the shadow banking system remains larger than traditional banks despite its contraction, and that the system’s inherent weakness makes it vulnerable to future bank runs. But unsnarling it is problematic: Regulate it more tightly, and you probably need government backstops. Shut it down or restrict it, and you suck credit out of the system.

    KC Fed’s Thomas Hoenig says the U.S. economic recovery is on track despite setbacks and the Fed should take no additional actions to encourage growth. "When you look at the long-run trend lines, I think the most likely outcome is for continued growth, and that’s what we should act on," renewing his call to raise rates to 1%.

    Yum! Brands (YUM): Q2 EPS of $0.58 beats by $0.04. Revenue of $2.6B (+19.6%) vs. $2.5B. Shares -3.1% AH. (PR)

    Intel (INTC): Q2 EPS of $0.51 beats by $0.08. Revenue of $10.7B (+34.2%) vs. $10.3B. (PR)

    Nice beat by Inel – not moving the stock yet but maybe it’s halted.  Futures are living it – on to 666!


  165. JRW- RUT- I know you deal with daily support/resistance but do you have any thoughts on S/R lines for the RUT going out to August opex? I am looking at repositioning some short strangles, i.e., flipping some puts to calls on this run up.
    Thx.


  166. Phil / Valero   The stronger refining margin guidance from CVX would seem to support a buy on VLO?


  167. VIAP/gel – that was ME!!!!!
     
    CaFords – thx.  VVUS and ARNA still have a huge short interest (25% float), so I think there is some covering going on.  Days to cover b’w ARNA and VVUS are 2:1.  Now, VVUS traded 30M shares, almost 50% of their float where ARNA was about 10%.  Just trying to figure out which way ‘they’ are going to take it after the DCTH debacle.


  168. David be careful with AMD, looks like INTC is cleaning their clock.


  169.  Pharm- What is the "DCTH debacle"?


  170. pstas / R/S

    resist.
    74.17
    2

    resist.
    71.62
    2

    resist.
    70.55
    2

    resist.
    69.23
    2

    resist.
    68.00
    6

    resist.
    66.73
    8

    resist.
    65.36
    2

    resist.
    64.67
    4

    supp
    63.94
    3

    supp
    62.55
    13

    supp
    58.86
    4

    Note these levels change with time !!


  171. Hi Phil-- sorry just now able to see your comment, see if I get this right from you, buy back the august 280 short call, roll my aug 250 long put down to 240strike, at the same tiem sell july 250 put — after market i see the price is at 2.67-- did not see 5, I gues it decay so fast since last you enter the comment, wait till after earning, and possible sell the august 270 short call again to make 30$ spread again after earning — I am not sure why you recommend to sell july 250 short put — ? to pay for rolling long 25call down to 240 strike ??? and also expired in 3 dys and hopefully wortless — am I thinking right? thx


  172. JRW- thanks- what are the numbers below the numbers? 2, 2, 2, 6, 8, etc?


  173. Pharm,
    Do you have an anticipated target price for ARNA if approved, either short-term trade-wise or long-term based on sales and penetration?


  174. Pharm/VIAP
    Thanks for the move today — ha ha – I’ll do the same for you tomorrow, and maybe we can get  some new interest in this stock!


  175. pstas / #’s
    Relative strength


  176.  Phil, thanks for your insights on SRS :-) . Funny thing about real estate – IYR doubles since 2009 low, but you will be hard-pressed to find an actual piece of real estate that has appreciated in that time frame. Do the REIT’s underlying IYR just keep buying down and rely on rental streams to keep growing? Or is IYR just up on speculation?


  177. Phil…Questions
    I just went over your disaster plays and I have a question on these 3.
    DXD Oct 23 calls
    your price 3.90
    current price 5.00
    Selling Oct 27 calls
    your price 2.10
    current price 2.40
    Selling Oct 23 puts
    your price 1.55
    current price .55
    NEXT PLAY IS FAZ
    Oct 9 calls
    Oct 14 calls
    Oct 10 puts
    NEXT PLAY IS SDS
    Sept 26th calls
    Selling Sept 32 calls
    Selling Sept 27 puts
    Are these plays are still current according to month and current prices? 
    Thanks
    Ryan


  178. Only person in the media asking the important questions
    http://www.msnbc.msn.com/id/31510813/#38211035


  179. BP Cap Test  - I believe the file below is the BP test gage live feed (can open in media player).  8,000-9,000psi needs to be held for 6 hours once the valves are shut (sometime today)… less would bring into question the structural integrity of the casing.  8,000 psi should be at the "3-o’clock" position, yet hard to read due to sediment covering the gage, and the visual distortion from the saltwater currents… (also note the gage is rotated 90 degrees CW in the feed).  
    mfile.akamai.com/97892/live/reflector:30948.asx
     
    Below is the article explaining the procedure in more detail:
    news.yahoo.com/s/ap/20100713/ap_on_bi_ge/us_gulf_oil_spill_20100616040818


  180. Hmmm…actually this ROV might be the correct pressure gage instead…there seems to be two gages out of the twelve video feeds:
     
    mfile.akamai.com/97892/live/reflector:45685.asx
     
    Here is the oil live feed:
    mfile.akamai.com/97892/live/reflector:45685.asx


  181. second gage is actually this one:
     
    mfile.akamai.com/97892/live/reflector:35461.asx


  182. VIAP/gel – I am not confident that they are going to be around FWIW for my puny amount did not do a thing.  It is too bad, b’c their drug, whilst not the greatest, is a trailblazer for a potential market that could be exploited by another big pharma IF they had the cahunas to do the proper clinical trial.  I would stay away from them.  ‘Nuff said.
     
    DCTH/jtiff  – I am confident that this stock was manipulated by hedge funds and big block traders (GS??).  Big black pools of stock are out there, and someone either wanted in so they drove it down, or they drove it down to make good on both the up and the down.  DCTH data from a scientific point of view is stellar, and there no reason for them to have been risen from the ashes to be clobbered down other than sheer manipulation and greed.  VVUS and/or ARNA could be in that boat.  I recommended DCTH at $6 many months ago and remain in them for a long, but it was very painful to be up big, only to have my pants dropped to my ankles and…..You get the picture.
     
    ARNA/ac – from $3 to $15, so a 5X.  It is a WAG, but my premise is….VVUS goes belly up, ARNA gets approved and Eisai buys them for a max of $15…..With Fen/Phen being at ~$4B drug b’f w/d from the market, and obesity being a bigger problem now than it was then, the market is now > $10B/yr.  ARNA has 100M shares outstanding, a 400M market cap, so paying a premium of 4X now is pennies for 10% of that market share.


  183.  Hi Phil, 
    What is the current mattress play? To put in place AFTER we hit resistance I guess right?  


  184. Phil, 
    Are you still feeling the financials will dissapoint and to put the FAZ hedge now? I am long 4,000 shares of C, trying to get back to 5.1 where I bought it… so I don’t want to hedge a losing position right? What do you recommend?
    Thx,


  185. "BP new cap test to stem Gulf oil flow delayed"….so much for the OPEX long and short hedges I was working on for Wednesday.  Now we will get the test results post OPEX due to "additional analysis" BP decided to perform instead of pressure testing the well head Tuesday evening as planned.  All of the calculations should have been performed already via computer fluid dynamics simulations….wish they would allow an engineer to explain in further detail what is really going on…
    http://www.reuters.com/article/idUSTRE65O5TA20100714
    On a positive note, at least the markets can’t be hurt this week by a possible failed BP pressure test…


  186. Phil/All- OK, I’ll try asking the question in a different way…. how can I view PSW pages so that the comment number is in front of the comment? I hit a few buttons on my keyboard accidentally and saw that view and really liked it… but I can’t replicate what I did. Thanks.


  187. PHARM, i  totally agree with your premise on AReNA.  I have been watching from the sidelines -- they will get taken out by someone.  Having said that, all of these drugs have side-effects that are going to keep the trial lawyers busy for years.  Looking at the avandia stuff is pretty disheartening…all of these drugs have serious side-effects.  It is always a true risk/reward analysis.  I’m sure all of these drug companies play some games/fudge data etc – but as a practioner i am always aware that drugs come with risks….Most diabetics have small vessel disease and are prone to cardiac disease – avandia is a good drug for many people, but now it will become a political football.  Just ask all the rheumatoid/arthritic  patients who depended on vioxx.


  188. This is a newb question--apologies in advance.  Is there an evergreen guide to how to maintain disaster hedges?  I am into the DXD hedge suggested on July 3--actually I got in a bit later after DXD was $3 lower, so it hasn’t gone as far against my adjusted positions (long Oct $27 calls / short Oct $35 calls) as the strikes suggested in the post.  I am unsure as to whether I should leave something like this in place, roll options to "stop up" behind the DIA’s upward movement, or get out completely and put something new in place.  Thanks for your suggestions, or pointing me to a link.


  189. Good morning!

    Futures are very much calmed down since Europe opened.  No particular bad news, just everyone taking a break. 

    Our 3am Yen play works again, with a half-point drop from 89 back to 88.5.  The Pound is way up at $1.526 and the Euro is still on the $1.27 line.  Copper is $3.03, oil $77 and gold $1,214 so nothing unusual going on at all. 

    Italy rounded up the Mafia for some reason – that’s very odd, maybe they just need the money…

    Grey/Yip – The background just alternates white and grey for regular comments, I think it makes it easier on the eyes, that’s all.  Anyone with a colored box interupts the pattern but that’s it. 

    VLO/Tusca – I love those guys any time you can work out a $16.50 net entry or better. 

    AMD/Kustomz – Good point!  It does seem there’s a lot more business out there than people thought, though.

    AAPL/Gucci – Not sell July $250 put, selling the CALL to maintain cover and make the quick $3 premium.  You’re still going to roll it to the same Aug whatever call (whatever is even) and turn it into a vertical but if AAPL stays at $250 – you pick up a nice bonus.  Maybe too late now as another day of premium is gone. 

    IYR/Tpuck – I have decided that IYR is up because it is an index of the strong and the strong REITs are devouring the weak REITs you never heard of at bargain-basement prices and, long-term, real estate is a good investment so this is another case where the rich will get richer and wipe out everyone else and that’s the general bet on IYR – a lot of patient money that understands the game.  I was shorting it on the premise that CRE would implode like housing but the "extend and pretend" policies by the banks and the Fed buying up about $1Tn worth of commercial real estate (did you know you own the Red Roof Inn?  Your Uncle Ben bought it for you with your retirement money…) at face value has avoided at least the first wave of that crisis.

    Disaster hedges/Yip – Sure they are still good mid-term disaster protection although we oficially took them off last week (DXD was up over 500%).  Notice how well that DXD play is holding up despite the massive move against us.  When the VIX is high they are great to sell.  It’s much riskier when the VIX is low but, of course, since the VIX usually goes up when the market drops – not so bad then either.  Currently, there is an Aug DXD spread above and a FAZ/UYG play from yesterday – both short-term hedges because I expect a short-term pullback. 

    Mattress/Amatta – Dec $104 puts, now $6.70 and 1/2 covered with July $102 puts ($104 puts stopped out) and looking for new Aug cover at about $2.50 to be new 1/2 cover.  Collecting $2.50 (at least) in Aug, Sept, Oct and Nov on 1/2 pays for $5 of the $6.70 spread so the cost of insurance for 5 months is $1.70 and we try to work that off with momentum plays on the other half.   All we need to do is make .25 7 times and our long-term puts are free.  The problem most people have with this play is a lack of patience – if you just leave it alone and collect your $2.50 a month and always stay 1/2 covered, then your insurance cost is .35 a month vs. a $6 gain if the Dow drops 1,000 points.  Everything else is just playing for people who are comfortable day trading since we have the 1/2 open long puts and we (day traders) hate to waste free margin.

    Financials/Amatta – Sitting on C naked is not a good way to get back to $5.  You can sell the 2012 $4 puts and calls for $2.05 and drop your basis to net $3.05/4.03 or, if you don’t want another 4,000 shares of C at $4, you can just sell the calls for $1.20 and drop your basis to $3.90 and there’s your 25% back if C just holds $4.  Spending money to cover a naked position makes no sense at all as you are only cutting into potential profits with the losses on the hedge.  Always look to sell premium whenever possible and buy it as a last resort. 

    View/Jbur – I have no idea what that is.  I didn’t even know we had comment numbers.  We do have an IPhone view that shows the last comment at the top but I don’t think that’s available on the web. 

    Welcome/Markz!  Feel free to remind me in the new post but, for now, you can look under the Portfolio tab above of Google "Hedging for Disaster" and you should be able to find posts on the subject. 

    Oops – time to go to work!


  190. Phil, what would you recommend as safe target margin cushion on 30K and 100K reg T margined portfolios? So as not to over trade. Thx!