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Tech Wreck Tuesday – IBM and TXN “Disappoint”

Wheeeee – this is fun!

Well, it’s fun when you have disaster hedges anyway.  I already sent out an Alert to Members this morning reminding them that there’s no point in having disaster hedges if you don’t use that money to buy on the dips, though.  Yesterday we added downside, leveraged plays on SDS (2) and DXD and our focus short was on NFLX (last week it was MA, and that went very well) along with our usual DIA Mattress play.  That shifted us a bit negative as we failed to hold our watch levels and now we are sadly looking all the way down to those low closes of:  Dow 9,686, S&P 1,022, Nasdaq 2,081, NYSE 6,434, Russell 590, SOX 332 and Transports 1,905 as a possible re-test if things get really ugly.  

On July 3rd I laid out "5 Plays that Make 500% if the Market Falls" and, fortunately, we didn’t need them as we took off on Monday but they are still good plays and a little cheaper now than they were when we last tested our bottoms.  If you are not well-protected – I strongly suggest you read this post and at least be ready to initiate a hedge if we can’t turn this morning around.  As with most day’s lately – it’s all about copper and the $3 line…   

That being said, I do think we will turn this morning around eventually - because IBM is down $7 and the Dow moves about 8 points per $1 of component value so that’s hitting the Dow for 56 points all by itself.  IBM’s earnings were great but revs missed, in large part due to currency issues.  BRIC revenues were up 22% for the company, despite the crap exchange rate. 

TXN got whacked too on their report that profits nearly tripled on a 42% jump in revenues (not kidding).  "Demand has continued very solid and very broad-based," said Ron Slaymaker, the company’s vice president of investor relations.

Mr. Slaymaker said the biggest positive surprise in the period was stronger demand from companies that buy industrial equipment, which have rebounded much slower than consumers from the recession. One notable area of weakness, he added, was sales of chips used in cellphones. TI has long been a major supplier to handset-maker Nokia Corp., which in June lowered its second-quarter forecast.

The company reported net income for the period ended June 30 of $769 million, or 62 cents a share, up from net in the year-earlier period of $260 million, or 20 cents. Revenue rose to $3.5 billion from $2.46 billion.

For the current period, TI projected earnings per share of 64 cents to 74 cents, and revenue of $3.55 billion to $3.85 billion.

Stacy Rasgon, an analyst at Sanford C. Bernstein, noted that TI’s guidance was strong. But the fact that TI did not beat revenue expectations in the second period may have prompted jitters that momentum for the company is starting to slow. According to Thomson Reuters, analysts on average had expected revenue of $3.52 billion for the second quarter.

I mean, come on people – this is just silly!  Of course, I mentioned yesterday that CNBC had Mohammad El Erian coming on this morning at 8am and the plan was for him to bust on earnings and spin things down so this overnight flush is a great background for his negative spin – trying to chase another wave of suckers into low-yielding bonds.

Things are certainly not great.  TUP, ZION, ATHR, NE and STLD all missed last night as well, but that doesn’t mean there’s nothing at all to buy:

  • UnitedHealth (UNH): Q2 EPS of $0.99 beats by $0.24. Revenue of $23.3B (+7.4%) vs. $23B. (PR)
  • Bank of New York Mellon (BK): Q2 EPS of $0.55 beats by $0.01. Revenue of $3.3B (-1.1%) in-line. (PR)
  • Pepsico (PEP): Q2 EPS of $1.1 beats by $0.02. Revenue of $14.8B (+39.7%) vs. $14.4B. (PR)
  • Weatherford International (WFT): Q2 EPS of $0.11 beats by $0.04. Revenue of $2.4B (+22.3%) vs. $2.3B. (PR)
  • Whirlpool (WHR): Q2 EPS of $2.64 beats by $0.51. Revenue of $4.5B (+8.8%) in-line. (PR)
  • Packaging of America (PKG): Q2 EPS of $0.38 beats by $0.07. Revenue of $616M (+12%) vs. $594M. Shares +0.8% AH. (PR)

PKG by the way (or companies like it) are Warren Buffet’s favorite tracking indicator of economic outlook!  Sales of packaging products are up 12% from last year.  This morning those packages will be put to use as we have ICSC Retail Store Sales jumping 1.4% this week, after being down 1.5% last week and up 4.2% year over year.  We get Redbook Sales at 9 and we’lll see if they can confirm the trend.  At the moment we’re waiting for Housing Starts, or lack thereof, to hit us at 8:30 and this evening we should get an AWFUL ABC Consumer Confidence Index as every poll taken lately has been downright DEPRESSING.  

8:30 Update:  Mohammed is on CNBC saying the markets have to reprice growth to reflect long-term low returns – JUST LIKE BONDS!  Wow, that’s an amazing coincidence – the guy who makes his money selling long-term, low-yielding bonds wants his competitor, the stock market, to also be valued for low yeild.  This would, coincidenally I’m sure, make his bonds seem more attractive and make Mohammed more money but, of course, there is no disclaimer to what he says – he is simply presented as a world-reknowned expert who we should all be listening to and the people at CNBC, who accept his advertising dollars, could not possibly kiss his ass more without moving to Cinemax.

8:45: Mohammed’s 45-minute block finally comes to and end and he didn’t do enough to keep the futures at their lows but boy did those lows suck!  9,946 on the Dow, 1,050 on the S&P and 600 on the Russell – all nasty, nasty levels I hope we don’t see in regular trading.   June Housing Starts were down 5% to 549,000 vs. 574,000 expected (about where we were last month) but Permits were up 2.1% to 586,000 from 574,000. 

GS booked a big miss as they included the SEC settlement in Q2 earnings as well as the new UK Bonus Tax, which dragged earnings down to .78 vs. $2.75 expected.  The bonus tax won’t go away but the SEC is done and it will be back to raping and pillaging as usual next Q so they are still a buy at $140 (selling puts is a good way to enter).

According to the WSJ, many small banks are feeling squeezed, but it’s not just because of the weak economy. Mega-banks like BofA (BAC), JPMorgan (JPM) and Wells Fargo (WFC) are "hoarding" customers, as market power becomes increasingly concentrated in the hands of the nation’s largest banks.   The big 3 hold about $3.50 of every $10 in local deposits, are "squeezing" and "hoarding" customers "any way they can," says Jeff Wagner, chief financial officer at Florida Business Bank. Corporate customers are being told by the biggest lenders not to move their deposits to other banks or else they might not get a new loan, he says.  Ah, the joys of unfettered Capitalism… 

[TOOBIG_p1]Fortified by infusions of taxpayer capital and takeovers of other large institutions killed or wounded in the crisis, a handful of hulking banks is emerging from the mess to dominate everything from mortgages to checking accounts to small-business loans. The financial-regulation law will bring new shackles and oversight, likely to cost the big banks billions in revenue. But their growing supremacy will help them absorb the blow.

The three huge banks made 57% of all home mortgages in the first quarter, up from 28% in 2008, according to Inside Mortgage Finance, an industry newsletter. In 2008 and 2009, they got $95 billion in capital from the U.S. government, all of which they have repaid.  Measured in loans and other assets, Citigroup Inc. and the three other giants had $7.7 trillion as of March 31, up 56% since the end of 2007. Their combined assets are nearly twice as big as the assets of the next 46 biggest banks, according to SNL Financial, a research firm in Charlottesville, Va.

Bank of America, J.P. Morgan and Wells Fargo "can make money beyond belief" because of their low costs and volumes of scale, and "there is no chance of anyone challenging them," says Arnold Danielson, a bank analyst in Bethesda, Md.  "You cannot compete on that level," says Mr. Wagner.

We have, of course, been buying BAC, C and JPM on the dips (I’m not too wild about WFC) as FinReg does nothing to harm these "WAY too big to fail" institutions.  What’s funny about this is how citizens don’t even understand how terrible this situation is.  Local banks make less money because they take risks in the local markets and pay higher rates of interest and charge less fees to make up for lack of advertising power.  They got hit harder in the bank crisis but were not bailed out by the government, who has been happy to shut down 250 banks in the past couple of years. 

Meanwhile, the big banks are virtually handed the failed banks as gifts AND they are given tens of Billions of funny money to spend buying out their competitors or simply undercutting them.   This then wipes out the remaiining local banks and it’s far too late by the time the local population realizes that the fees keep going up and the loan requirements get stiffer every day until small businesses are considered too risky and are driven out of business by big businesses, who get their access to capital while playing golf with the heads of the major banks.   

This is just another chapter in "Grand Theft America" a game that is so real, that you ACTUALLY lose your job and your house and your retirement savings if you don’t win (and only 30,000 people in the US ever win - and most of them inherited their winnings). 

Congrats to our man, David Ristau of The Oxen Group, who picked one of today’s few winners with his call on WHR yesterday.  The company not only knocked it out of the park with a 150% increase in earnings over last Q (rebate stimulus helped) but they also raised full-year guidance.  Not bad for a glum economy.  Redbook Chain Store Sales are out and they are up 2.7% for the year but down 0.6% in July.  This is interesting because last month they were also the opposite of ICSC’s report, when ICSC saw a drop but Redbook showed a 3.1% gain so, on the whole, let’s call retail sales flat.  

Is flat bad?  Well, it’s not good and last July we were down about 9,000 on the Dow so we certainly shouldn’t be at 11,000 but I still think 10,000 is about right - more of the low-end of our expected trading range that should be up and down about 5% from our 10,200 line (9,650-10,750).  We’ll have to slog through the rest of earnings unless the QE2 comes in although we should get an extension of unemployment benefits this afternoon and that should be a nice Russell booster so IWM or TNA will be fun plays on the morning dip – very speculative, of course.  

Be careful out there! 

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  1. Good morning, Covered a short FAS position from yesterday afternoon.  It was small but 5.78% overnight is a great way to start the day!  Sometimes even a blind squirrel gets a nut..
    TXM and IBM results are strong as expected.  Especially TXM-  The sell off was expected as well.  The market is beginning to price in a double dip or deflation. 

  2. GS dissapoints too?  I thought they were the evil bastards that controlled the market, the guys who never lost money on a single day of trading…is the game not rigged after all? We already new about the SEC charges, but why the lack of performance from them?

  3. Oil and copper are hangin’ tough…

  4. Not sure, but I think the GS earnings reflected the fine they just paid.

  5. dbarakat, they probably did still make money everyday trading.. but the daily volumes have really dropped off.  More volume, more money for them.  And of the volume that’s left, there is a higher percent of savvy day traders which manage to either make a little for themselves or hold onto what they have.  They aren’t quite the patsies that true retailers are-
    Bottomline, just because their revenue is down does nothing to dispute the allegation that the market is manipulated and gamed by them.

  6.  ARNA/Pharm – Cramer recommended it yesterday… now I am not sure of being long

  7. Goldman – It seems people are forgetting they were charged with fraud not too long ago and the effects are greater than just a dollar settlement figure.  I have to imagine the charges scared off a lot of prospective business.  Conversely, I have to believe much of that business will now be running back to them post-settlemnt.

  8. Phil -
    Do you like GS at these levels?

  9. Hello all,

    I have two new positions available for you this morning. We are buying Seagate Technology (STX), and we are short selling Hovnanian (HOV). Check out my analysis, etc. here.

    Also, we are going to exit Whirlpool this morning. The company had tremendous earnings with an EPS of 2.64 vs. the 2.13 estimate and 1.04 year ago EPS. Yet, the big giants are pulling it down a bit this morning. We are looking to get out for a small gain this morning at the open.

    Good Investing!

  10. How much is the financilal reform going to hurt gs ??
    I have not had time to follow all the ins and outs of this

  11. Sam,
    Goldman hit $140 shortly after the announcement, maybe 15-20 minutes, and met a LOT of resistance. It shot back above $141 almost instantly and hasn’t been below $141 since….

  12. Good morning,
    IWM 58.86, 60.41, 61.27, 61.90, 62.64, and 63.36

  13. I’m calling bull*%#t on this business. This is totally manufactured. I’m not saying things won’t sell down, but this action is a bunch of crap.

  14. Banks leading the turn up..

  15. ARNA/rn – well, why didn’t he bother when it was $3 where we started buying.  Go figure.  We will get the Cramer bounce, sell and then re-enter.  At 5.60, I would start to cover 1/2 or position – cause they are gonna get there!

  16. Good morning! 

    Same levels, of course but now it’s down and down with those "bottom" levels looking harder to get back:

    • Low Spikes:  Dow 9,600, S&P 1,016, Nasdaq 2,110, NYSE 6,375, Russell 587, SOX 323 and Transports 1,892. 
    • Low Closes: Dow 9,686, S&P 1,022, Nasdaq 2,081, NYSE 6,434, Russell 590, SOX 332 and Transports 1,905.

    Bottoms WERE:   Dow 10,200, S&P 1,075, Nas 2,200, NYSE 6,800 and Russell 620.  As I said yesterday, "don’t forget there’s a 5% drop to support below these levels). 

    For now, we’ll be watching the 2.5% lines at Dow 9,945, S&P 1,048, S&P 1,145, NYSE 6,630 and Russell 605.

    My working theory is RUT is weakest because they are getting killed by cut-off of unemployment checks.  That means that an upside play on the RUT could go very well in case they extend benefits today.  I like TNA $37 calls for $3.20 and IWM $63 calls at $1.25.  These are risky of course because if the extension is defeated we could go further down so take quick profits off the table on half to make a buffer and make sure you do have some disaster hedges. 

  17. Not too bad.  I think we have stabilized.  The only thing that concerns me is that the VIX does not go up much when we have these drops.  Complacency?  Perhaps we just keep treading water like we have been doing, up a few hundred points, then down.

  18. Closed long FAS.. now shorting..

  19.  IWM/Phil – Why not then go for the weekly calls? $60 is trading for 1.22, $61 is trading for 0.7. Higher chance of profit if the RUT moves up even a bit, lower loss too.

  20. In TNA at $35.08

  21. Do you see any NFLX plays you like before earnings?

  22. Volume dried up real quickly..  looks like they’re propping the markets just enough to support selling..

  23. Out of TNA at $35.61; something’s off here !!

  24. Matt what do you use to monitor volume. 
    I’ve been killing it short the last few days.  I put the 2x short disaster plays in the day before all this began and I’ve got a position trade going on FAZ, TZA, SDS, and QID and absolutely no longs.

  25. Volume is just 22M at 9:45 – very low for this kind of drop

    GOOG – The options prices on GOOG are kind of insane.  We took straight calls yesterday (so far, so good) and there’s no way I’d sell calls outside of a vertical so I guess an artificial buy/write like the Jan $420/460 bull call spread at $25, selling Jan $420 puts for $23 is net $2 on the $40 spread.  Margin on selling the $420 puts in a non-PM account is about $6K but not bad to make $4K if GOOG just holds $460 and, of course, you have to REALLY want to own GOOG at net $423

    Good job not being greedy Matt! 

    GS/Dbarak – I think they got too much heat for their 120 consecutive trading day winning streak.  Also, with these wild market swings – if they would have gotten up and said they knocked it out of the park again people would have gone crazy pushing for investigations.  So this is their "pay the fine and act human" quarter and, see, it’s working – you already feel sorry for them!  8-)

    BAC Jan $12.50 puts can be sold for $1.30.  That’s a nice way to enter the stock at net $10.20.  You can be more aggressive by adding the $12.50/15 bull call spread at $1.20 for a .10 credit on the $2.50 spread that’s already .89 in the money.

    GS/Samz – Yes, I said so in the morning post.  Jan $135 puts can be sold for $11 and I really like them at net $124 (as a first round, prepared to DD at $84 if things hit the fan and stick it out long-term)

    Selling HOV/David – That’s my favorite!   As to WHR, they were very solid and make a nice long-term hold (but I know that’s not your thing). 

    GS/Samz – Well since there are a dozen GS guys running around Congress who wrote FinReg (or "helped"), I wouldn’t worry too much about the impact.  The damn thing is 2,500 pages and will take years to set up regulation and years to impliment and GS is pretty sure they can get a Republican back in the White House by then who will wave his magic pen and make it all go away.

    Good call Goldman!

    VIX/FJd – Well think about it.  The VIX tends to respond to increases in put buying.  Are we buying puts?  No, we did that last week.  We have to assume most major funds are about as smart as we are and are already covered for a dip so unless we break resistance, I don’t think we’ll get past VIX 30. 

    Good FAS timing Matt!

    Weekly/Rn – Because I might be wrong and the monthly calls won’t suffer as much on a day move down.   If I were more positive, I’d go more aggressive. 

  26. LOL JRW – something’s off here !!  Humm…..
    I know Phil you are pounding the table for things at these levels, but I still think we are going down a bit further than we realize.  Gold is losing its luster (for now), deflation, unemployment, housing just sucks …
    ‘More fundamentally, it would seem reasonable to expect that the equity market will trade down to a valuation level that is historically commensurate with the end of secular bear markets. This would typically mean no higher than a price-earnings multiple of 10x and at least a 5% dividend yield on the S&P 500. So, we very likely have quite a long way to go on the downside.’

  27.  Phil—good morning, have a DXD AUG 31/32 call spread at .35 which has come back a bit but feel is still too far otm. I was thinking of rolling lower on the 31 but I’m already 100% into the position and have a short put position at 27. What to do here? or just hold for insurance? Thanks for your help!

  28. Added to my FAS short..

  29. Ho Hum…. Nearing bottom of channel…. I am done buying and will drop out for ther day and go to the beach. Tomorrow, AAPL will start us on a trek back up the mountain.

  30.  Are the markets insane? WHR blew past estimates and it is down 3.5% today? If it is in symphathy to the low housing #s why aren’t the HOMEBUILDERS getting decimated? In fact David’s HOV short play was stopped out at a 4% loss…

  31. Follow up question re hedging china,
    Thanks for the rationale behind the FXI hedge yesterday (below). I need some help (remedial, evidently) grasping how selling the 40 FXI calls for .78 pays for the 43/38 put spread  @ 3.43 (7/19 prices). Seems to produce an entry debit of -2.54 rather than "paying for the entire put spread.". What am I missing?
    Thanks, Ken
    July 19th, 2010 at 10:18 am | Permalink  
    FXI/8800 – If you are anticipating that much of a drop, you may as well go for the naked put.  The idea of hedging is to increase your likelihood of making a gain and decreasing the potential damage if you are wrong (which usually happens 40-50% of the time with even the best stock pickers).  I doubt I would want to do the play at all with a longer timeframe as I don’t think China will fall that much long-term and don’t forget, it is CRITICAL that you are ready to cover the short calls with a purchase of stock on that play as a big bullish move in China can kill it. " If the price of the sold call offsets the entire price of the put spread" and you buy the stock by $40 with a $43/38 bear put spread than YOU CAN NOT LOSE unless FXI gaps back below $40 so fast you can’t sell it for $39 or more.  Also, even if you are called away at $40 (even on the stock) you can still make money all the way up to $43.  THAT’s the kind of play you want to be in….

  32. Good Morning!  Phil, with all the gloom in housing, is now a good time to pick up good real estate values (residential in coastal San Diego)  I was looking closely at vacant land over the last year and prices for homes in great neighborhoods are now about what vacant land cost just two years ago. Thanks

  33. JR,
    Just curious how you typically play these gap downs at the open.

  34. Yip, when I make comments about volume I’m talking about what I’m trading which is essentially either FAS or FAZ.  So, straight volume indicator.

  35. Phil, TXN might be in a good spot now. Selling the 2012 17.5 P at $1.62 and buying the 2012 17.5/20 C vertical for $1.68 gets you the $2.50 spread for $0.06 with $1785 in margin (per TOS). 

  36. Matt, Got it thanks

  37. Phil,
     Anything doing for the APPL earnings or too risky?

  38. Phil / Doug Kass is forecasting mkt will be up for the day!

  39. .. and covered.  .10 loss.

  40. pharm, yes, but the question is ‘when’.  We can continue the theme of 10% rallies followed by 10% declines for a long time. 
    ‘More fundamentally, it would seem reasonable to expect that the equity market will trade down to a valuation level that is historically commensurate with the end of secular bear markets. This would typically mean no higher than a price-earnings multiple of 10x and at least a 5% dividend yield on the S&P 500. So, we very likely have quite a long way to go on the downside.’

  41. NFLX/Roast – You missed it, we bought puts yesterday.  Now it would be chasing, down $5 already.  I do love a good backspread though on earnings.  Premise is that premium gets wiped out (works better closer to exiration) and, if not, you can always roll the caller.  3 Dec $125 calls at $13 ($3,900) can be paid for by selling 5 Aug $115 calls for $8.80 ($4,400).  That puts $500 in your pocket and if NFLX goes down, you keep that plus whatever is left on the Dec calls.  If NFLX goes up, you use that $500 plus about another $1,000 to buy 2 more Dec calls and then you are in a calander spread – hopefully in not too bad a position

    TNA/JRW – 1.5% in 10 mins – not bad…

    P/E/Pharm – We were already there.  That was last year.  I don’t know why people don’t get this.   We had MONTHS of time to buy the S&P at p/e’s of 5 with 10% dividends.  It’s not the market’s fault if you missed it but it doesn’t have to come back there to make you happy.  PLENTY of people bought at that bottom and they are fat and happy now and that means it is doubtful you will find enough sellers to get back there again without something truly catastrophic happening.  All we have now is fear of something happening – that’s just not good enough…

    DXD/Fortep – I would not throw good money after bad.  We don’t really think the Dow is going lower but, if it does, DXD can quickly get to $31.  On the whole, that is a terrible spread – I hope it wasn’t one of mine!   Actually, your best chance of success is to roll the calls to the Sept $33s for + .30 as then you can let the caller expire and DXD is volatile enough that you have a chance of retaining .65 unless the Dow breaks over 10,200 – in which case you are screwed. 

    Good plan Gel! 

    HOV/Amatta – How dare he short my precious! 

    Copper $3!  That’s like the little snapping sound when the bear takes the bait in the bear trap.

  42.  Hi Phil,
    Do you have a long term play for IBM or not for now as there could be some downgrades in the next couple of days?

  43. Phil, the following trade was recommended to me and I would like  your opinion:
    Buy SPY Aug 103 put
    Sell SPY Aug   96 put
    Buy SPY Aug  93 put        in a 2-4-2 ratio @ at a cost of 98 or better

  44. Long  FAS at 19.56.  Stop at the low10 mins ago.  I’m gettting paranoid broadcasting my stops!

  45. exec,
    Most gaps fill, but I usually wait,; the first 10-15 min are usually wrong !!
    I’m in TNA currently off the 60.41 line at $35.03 going for I.WM 61.27, being careful around 60.75

  46. Phil/  Kinda of expected China sensitive stocks making a charge, China green green green. Market is pricing in more China stimulus to come. The underperformers last half may out perform this half Commods, energy and certain techs. US sensitive discretionary stocks will lag till year end at least. 

  47. At the open: Dow -1.15% to 10038. S&P -0.79% to 1063. Nasdaq -1.49% to 2165.
    Treasurys: 30-year +0.37%. 10-yr +0.22%. 5-yr +0.18%.
    Commodities: Crude -0.82% to $76.27. Gold +0.08% to $1182.90.
    Currencies: Euro -0.59% vs. dollar. Yen -0.24%. Pound -0.39%.

    10:00 AM On the hour: Dow -1.16%. 10-yr +0.36%. Euro -0.48% vs. dollar. Crude -0.73% to $76.34. Gold +0.1% to $1183.10.

    As expected, the Bank of Canada raises its key interest rate to 0.75%, while noting a more gradual economic recovery in the country and slightly weaker growth prospects for the global economy. It’s the second quarter-point rate increase from Canada’s central bank.

    If you strip out the $550M SEC settlement and the $600M paid for the U.K.’s tax on banker bonuses, CFO David Viniar points out that Goldman Sachs (GS -1.2%) came close to hitting the Street’s targets. But revenue was down 36%, investors are staying on the sidelines – meaning fewer deals for Goldman – and Viniar wasn’t willing to guess when business might bounce back.

    Somebody is spending moneyNokia Siemens Networks (NOK +1.4%, SI -2.1%) wins a $7B contract to install and operate a U.S. wireless broadband network for LightSquared, the telecom network company launched by Harbinger Capital. The joint venture will design and build the network, which will comprise about 40,000 cellular base stations and cover 92% of the U.S. population by 2015.

    QQQ (QQQQ) – the eighth largest U.S.-listed ETF by market cap, with more than $17B in assets – has almost a fifth of its portfolio weighting in Apple (AAPL), which reports earnings following the closing bell. If AAPL has a big reaction to its report, expect the QQQQ to follow suit.

    QQQQ $46/47 bull call spread at .25 can be paid for with a 1/2 sale of QID Sept $16 puts at .50.  QID hasn’t been below $16 since April, when the Qs were at $50 (now $44) so a nice way to play AAPL’s upside and, aside from rolling, worst case is you have QID for a hedge at $16 (now $18.67). 

    GOOG $470!

  48. Hi Phil, I Bought BAC 13 and 14 calls and getting crushed on them, any suggestions? thanx, Carlos

  49. fjd – when is a good question, but the rallies will come and go.  It comes to hedging, something that I continue to learn as well from this site.  In addition, Phil preaches that we all need to have many sets of eyes on the market….the more the better, esp. for good opportunities to enter.   My premise is that Banks are still not lending to small biz (7% contraction last month), retail is suffering (for the most part) b’c of no pricing power, paychecks are getting squeezed, bonds continue to outpace the equity market, and the mother of all housing crisis is far from over (one of the main drivers of our economy).  this is all in Phil’s posts the past few weekends and I want to make sure we keep our eyes wide open (no shut)!

  50. sorry, BAC calls are  AUGUST, bought them before earnings announcement

  51. Sold FAS long… could be a FMD.. but will wait for more verification.

  52. The GS conference call must be going well because the markets are fighting!

  53. Thinking of rotation with the the most up-to-date data for the second week of July:

    Bank credit contracted at a 7% annual rate.

    ABC consumer confidence slipped to a four-week low of -44 from -42.

    Mortgage applications for new home purchase fell 3.1%, the fourth straight decline, to a new 14-year low.

    Railway car-loadings in the U.S. (including intermodal) collapsed 13.9% to their lowest level since January 9th.

    Raw steel production slipped 1.7% and is down three weeks in a row to a three-month low.

    Motor vehicle production sagged 14.8% YoY in the steepest downtrend since November 21, 2009.

    Coal production fell 4.8% and is down to for three of the past four weeks – lowest level since January 9, 2009.

  54. Matt,
    Please explain your FMD.

  55. Matt,

  56. Fed Mkt Decsion? FMD?

  57. At 10:15 EVERYTHING headed North…

  58. FMD – free money day.  By and large higher highs & higher lows on an up day and just the opposite on a down day.

  59. I thought it meant "Free Money Day"

  60. What’s your conformation?

  61. Pharm – funny to look at those gloomy stats with a Green background.
    Hey, I’d love to hear your take on north county real estate.  Thanks Pharm.

  62. Phil,
    I’m looking to sell calls against SPWRA (avg. cost,  $14.25) and WFR (avg. cost, $12). I have 1000 shares of each. What do you recommend?

  63. 1020 – I’ve been watching houses in our neighborhood, and am still waiting.  There are a few that are just sitting, sitting, sitting.  My take is that things have a way to go, as on the coast (as you well know) we have held up rather well.  But then why are things not moving?  I am going back to Kansas next week and looking at houses in Lawrence near the KU campus….renting to college students is still my preference.

  64. JRW – There was a line at 60.97 Monday…I’m out on half there…

  65. Out of TNA at $35.92

  66. Out of TNA at $35.92; TBT failing !!

  67. Phil, are we still holding those GOOG calls?

  68. JRW – 60.97 was also the 61.8% fib for Monday…

  69. Nice response in GS price, opened at 142.18 and has now traded positive to 146.4. Hopefully it can close on the plus side….

  70. goldman,
    IWM 60.97, Pivot, 40 and 200 SMA, and I have a trend line there !! I can always reload on the other side !!

  71. dbarakat – i just closed 1/2 of my GOOG call position to protect profits. Will let the other 1/2 run ; almost 40% in 3 days (i got in at the close on friday)

  72. Still early but great ironic article title today Phil!  GOOG safely in the green and AAPL wanting to join the party.

  73. Pharm - Thanks, Thats smart. I’m thinking of inevitable family needs and making a good long term investment in North County. In Fallbrook, A new 2000 s.f. single story, large private half acre with westerly views, gated community with parks and amenities.
    And a washer/dryer   370k   ( 2.5 ac. lots in 2008 )

  74. JRW - Out on second half…no need to get greedy…

  75. JR,
    How important is the PP level in your analysis?

  76. In TNA at $36.08; TBT coming back !!

  77. Hanna,  I only bought one call yesterday and it was up around 42%.  Just sold it.  I can’t complain about that too much.

  78. Insanity/Amatta – Totally.  These markets are stunningly irrational – which is great for us, actually, so we shouldn’t complain…

    FXI/8800 – The original trade idea was from Friday at 3pm where I said:

    FXI/8800 – How about selling the Jan $40 calls for $2.80, which you would have to cover with stock or deep calls if FXI breaks $40 and then buying the $43/38 bear put spread for $2.80 so no cost on the $5 spread that’s $4+ in the money.  As long as you take the cover – it’s a nice hedge on China.

    Those calls are now $3 and the spread is $2.60 so a small loss but, as I said, I’m not bearish on China at this level, which is why I set up a play that has no downside as long as you reneg and buy FXI on the $40 line, which causes your caller to expire "worthless" (he gives you $40 for your stock and you keep his $3, which offsets the loss on your spread). 

    Real estate/1020 – I would treat it like put buying and not buy anything you aren’t happy to own long-term and ride out a further dip.  The problem with Real Estate is, it’s hard to hedge…  It is my opinion that I would only buy rentable property, preferably student housing so you know you will have a steady supply of tennants.  Those properties will appreciate with the market and you can always convert them into your dream home later but, for now – make sure you can cover your purchases until we really steady up. 

    IBM 2012 $105 puts can be sold for $10.10 for a net $93.90 entry.  Net margin on this one should be $1,000 to make $1,000 in 18 months if IBM holds $105! 

    TXN Jan $22.50 puts can be sold for $1.55.  A little more margin intensive than IBM (about $3K net) but you make $1,550 in 6 months if all goes well.

    TXN/Stjean – I would wait for the downgrade police before making a full commitment.  For now, a short put like the one above is a nice way to start an entry or you can go with the longer puts.  Worst case is they go up sharply and you end up buying at $25ish and collecting much more money on the call sale. 

    AAPL/Amatta – See above Q play.  AAPL just too crazy but, maybe – A BACKSPREAD!   Someone is willing to pay $3.60 for the Aug $220 puts and who are we do deny their dreams of AAPL’s downfall?  We can sell 5 of those for $1,800 and buy 3 Oct $210 puts for $6.75 ($2,025) to cover.  If AAPL does crash, we would have to roll it out for the long haul but, if not, you make whatever is left above $255.

    Kass/Tusca – What, is he calling days now?

    IBM/Jdub – I like the put sale at the moment but that’s about it.  I’m not a fan of owning IBM at this price as they are kind of stuck and there are easier ways to make money unless you have millions, in which case they are a fairly safe place to draw an income from by selling calls. 

    Butterspy/Stock – I am not a huge fan of those in an active market.  First of all, you lose money unless the S&P is under 1,020 and you can just buy the $102 puts for $1.50 and not be trapped in the spread.  Obviously, I don’t think we’re going down 5% by August so I don’t like the trade anyway.  Butterflies work best in range-bound markets where you play for the middle target but if you don’t nail your range, they can be very frustrating and this market hasn’t been very kind to target bettors. 

    Copper $3.01!   Nat gas back at $4.58, oil at $77.50 (no surprise) and gold ripped back to $1,192.  Lookin’ good for Mr. Kass.   

    China/Chyer – They don’t need stimulus.  If they just decide to stop putting the brakes on their economy accelerates. 

    BAC/Cmsosa – Patience is always my first suggestion.  Also, don’t own $13 and $14 calls.  If you bought $14s first then you adjust those – don’t just buy more calls to try to make up for an entry mistake.  I’d roll the $14s down to the $13s for .55 and sell the $14s to some other sucker for .44 so then you spent .11 to gain $1 in position.   Or, you can just spend .23 to roll out to the Sept $14s and buy some time.

  79. exec / Pivot
    Not very; but some people pay attention to it so I have to !!

  80. R.E./Phil Thanks :)

  81. JRW,  fyi. the way SS and I have been looking at it — TBT’s CCI bounce off of 0 at about 10:55 is usually a pretty good bullish indicator, as was its -200 upward cross at about 10:10, especially when it is coming off one of your IWM lines.  Got to run, but I hope to catch up with you later.

  82.  Trading AAPL….Someone asked me yesterday for an AAPL earnings play.  Here it is.  Actually, 3 of them:
    1.  July 270 calls     This is a gamble.  No more than 1% of your portfolio should go to this.
    2.  Deep ITM calls at least 6 months out.   You choose.
    3.  Buy GOOG.
    Good Luck!

  83. Judah - what period are you using for TBT?  I’ve got a 200 cross at 11:18 on the 1 min.

  84. JRW…..Quick Question
    When you mentioned resistance using the 40 and 200 SMA, what time frame are you referring too?  Obviously every time frame shows the MA’s at a different level..

  85. Thought you all might find this interesting…since I know some of you have kids around the college age and some of you are college age…


    The Daily Discourse: The Cost and Benefit of College Education
    Can we look at college education like an investment? In some ways…yes. College education, on average, for public education costs $10,000 per year. For private education, college costs per year, on average, about $27,000. That would be $40,000 or $108,000 for four years…a hefty investment. 
    The reward, though, is that an average college degree gains a person on average $53,000 in earnings versus $32,500 for just a high school diploma. In a forty year career, if one just earns the average, a person with a college degree will earn over $2,100,000 in a forty year career. With a high school diploma, the person will earn $1.3 million. A Bachelor’s Degree can help one gain an extra $800,000 in their life for a $100,000 investment. A 700% gain in forty years is a solid 17% annual return. That is an investment that no one should want to resist.
    Yet, that number could possibly be an even better return in the future. College tuition has increased at 1,000% since costs in 1978. That rise is well above the rise in CPI and home prices, which have increased at 250% and 300% since that time. When home prices started to break away from CPI, home prices created an awful bubble that popped. Will college education’s bubble pop sometime soon? 
    As of recent, we have seen a lot of signs that this bubble is starting to pop. First, loans are starting to dry up for the private market. Further, the decline in home values is making home equity loans less possible. Leveraging, further, is not something many want to take on, and endowments are drying up as well. This has been the reason why community colleges, public institutions, and for-profit associate programs are rising in applications…40% in 2009. 
    Can this break the private bubble? 
    Another sign that the bubble may decline is that the baby boomer’s baby boom of college-aged students is set to decline. The number of college-aged students is set to decline after 2010. Vermont is set to lose 20% of high school seniors. The Great Plains are set to lose 10%. The decline in demand should also reduce prices. 
    Yet, institutions continue to increase prices. At some point, the trend has to break. College education, especially on the private side, has always been for the well-heeled, but it may start to lose some of its allure to middle-class. My college, Lake Forest College, a small, private liberal arts institution north of Chicago just increased its base tuition from $40,000 to $42,000 this year. I’m glad I am done there.
    We will have to wait and see when this bubble does finally burst…
    Good Investing!

  86. JRW - my long term idicators are looking negative…but I might just sit on my hands here…are you looking at TZA soon?

  87. yip – 3 min

  88. gold thanks…tricky market for me today.  1 trade 7 cent profit sold to early as usual… damn I can’t let winners run unless I risk holding overnight..

  89. Goldman…one more question….
    exponential or Simple?

  90. yip / SMA’s
    3 min chart

  91. thanks!!

  92.  Phil – no hurry but when you get a chance can you let me know what you think of these 2 positions and my plans?
    1.  UCO:  I own UCO stock – and let the July $10 calls I sold in late May expire OTM of course, on Friday.  I still own the stock though – what do you suggest I do… sell another round of $10 calls for $0.50 -OR- wait (I think oil will go up in the near future – so I was thinking of waiting and trying to sell ATM (or a bit ITM) $10 calls for $0.75 instead) … but of course that risks the stock value going down in the meantime if I am wrong.  Long-term, I definitely think oil will grind upwards though.  What do you think?

        2.  TZA:    I added a bunch of TZA stock to what I already own (I believe the market will continue going down) – so I want to cover this by selling calls.  What looks most attractive to you?  For this one – again, my gut says I should wait for the stock price to increase, but this time sell OTM calls at the higher strike price on this one… but again, the risk of TZA going down is there to keep me up at night!

    Anyway – your advice is always appreciated and valued here!

  93. David:
    Thanks for the tip: Stx In @ 13.75 / Out @ 14.31
    Also, My own FCX: In 7/19 @ 1.05 / Out Today @ 1.80
    Wheeeeeeeee !!!

  94. Out of TNA at $36.23; in TZA at $39.41
    TBT failing again !!

  95. Yip - tricky market for everyone!  I’ve just starting to get the hang of JRW’s method trading larger volumes as of this week…11 weeks studying with over 500 smaller volume trades later.  I think it would take years to get anywhere close to JRW’s level of trading!

  96. Out of TZA at $39.54; in TNA at $36.04

  97.  Hi Phil,
    Thanks on your IBM thoughts.  I think I will hold off to see what the big cahuna of tech does tomorrow.  If AAPL gets hit, I don’t think IBM will be spared.
    Speaking of AAPL, I’ve been selling volatility whenever there’s a big name that reports a day before or on OpEx and have used this type of strategy when I’m not confident in the direction of the play.  I wanted to get your thoughts on it as this will be the first time I’ll be using it on the weeklies.  The premise of selling volatility appears to be the same albeit this time, there are 3 more days before the weeklies expire.  
    Basically it’s a double calendar so here goes:
    Sell July weeklies-260 C , 230 P (IV points to a 6.5% implied move in either direction). 
    Buy Aug. 260 C, 230 P  
    I’ve used this unwinding strategy:

    -Buy back the short call on a move higher, or buy back the short put on a move lower
    -Sell the calendar spread that is left
    -Sell the long august option to fully close out

  98.  Thanks for the TNA call.  In at 3.20 and out at 3.70 in less than 90 minutes – 15%!  I’m relatively new to your site,  but am learning not to be greedy!! Looks like I can buy in again in a few minutes at 3.20…

  99. Phil   Great piece on college tuition.  I just spent 297k putting two kids thru private school.  I saved for years to be able to do it.  The moral of the story is save,save save!!!   The private college sector is over priced but the investment is worth every dime!!

  100. Goldman it definitely would, day in and day out the guy is on it.  Some days I just don’t have the mental acumen.
    IWM bounced strongly right off the 40 and 200 MA on the 3m chart.  MA’s always have confused me.  It would be like a  Fib level changing depending on the time frame.  I don’t understand how it works if the price the MA relates too is different depending on the time frame.
    I understand what a moving average is of course just not how it can be used as support or resistance when on every time frame the MA is at a different price.

  101. Anyone & Everyone,
    Is there anyway to setup notifications/alerts on the think or swim platform? I need to do some busy work today and can’t stare at some of my positions.  I would like to set it up so my computer ‘dings’ or has an alarm when a stock reaches a certain price.  Any help would be much appreciated, thanks!

  102. Phil, yur thoughts on MU, as to their movement compared to and in relationship (sympathy) with TXN, SNDK etc

  103. When we get to the point that we prognosticate bullish market moves based on unfunded unemployment extensions, surely one must stop and rethink the concepts of real markets or reality of direction? There is no question you are aware of the many illusions, so why continue with the ideological bent? There are criminals on both sides and additional unfunded spending can do nothing but make bad matters worse. This administrtion has put us in an impossible situation, so why not admit it and lets start cuittiong spending at every turn and reign in the banksters as you suggest. The FINREG did little if anything in that regard, so why keep supporting and administration that isn’t performing? At least lets call a spade a spade.   

  104. Cobra -

    Great job my friend.

  105. Phil,

  106. Rstuart.
    Rt click the symbol on TOS positions page and scroll down to symbol (whatever symbol it is) and select alert.

  107. yip,
    Awesome! Thanks!

  108. Out of TNA at $36.03; I think I’ll sit back and regroup for a while. Seems like no one is in charge today !!

  109. 4201….Sure.

  110. IBM trade from TOS which still seems to be good:  Double, Double Advisory in IBM, we are buying the September 120 puts and 135 calls and Selling the August 120 puts and 135 calls for a debit of $1.80.  We are selling the August options at a 26 Volatility and Buying the September options which are a 22.5 volatility.  This volatility skew is over three points in our favor on this trade.  We expect the August options to contract immediately after earnings are released, which will possibly allow us to adjust or close the trade immediately.  This volatility decrease will allow our double calendar to expand if the underlying shares of IBM stay in the anticipated range of our strikes.  The ideal scenario is for IBM to trade between our strikes of 120 on the downside and 135 on the upside.

  111. CNBC/Goldman "lost money on purpose" Conspiracy – stating that they might have lost money on purpose via trading this last quarter to look more "human".  Can’t say the thought didn’t cross my mind, but way to clever and costly!   IMO, more likely resulted from the "God-syndrome" of too much confidence, and less "help" from govt insiders…

  112. JRW - don’t break out the scotch yet…we need you this afternoon buddy!  JRW buzzing on scotch—>***hickup***… "100k shares of TKO at $1000"…***hickup***

  113. Rotation/Pharm – Sounds good but to what?  If that data bears (oops, don’t say bear!) out, then we’re rotating down a drain. 

    SPWRA/Ac – I would have sold at $15.  Greed kills, you know…  They are very choppy, of course so I’d sell the Jan $12.50s for $2.40 for a net $11.85 with a nice, dull, 5.5% gain in 6 months (beats the $1 you are down now) and, if you want to, then sell the $11 puts for $1.45, which is net $10.55 and would DCA you down to an average of $11.20 for the long-run.  On WFR, I would just sell the 2012 $10 puts and calls for $5.15 to drop your net to $6.85/8.43.  Worst case is you end up with 2,000 shares at $16,860 vs your current 1,000 shares at $12,000 so what are you really doing?  You are agreeing to DD at $4.86….

    Meanwhile, I still like WFR at $10.24 and if you sell the 2012 $10 puts and calls for $5.15 it drops the net on a new entry to net $5.09/7.55 with a nice double in 18 months if they hold $10.

    GOOG/Dbarak – No way – they just popped 50% and pulled back – that’s a stop on AT LEAST 1/2 with a trailing stop at $17 (up 25%) to lock in 37.5%

    Good job Hannah!

    Irony/Jdub – Still a huge gap to fill.

    I guess our buyers were from Europe….  They made a nice bounce into the close with FTSE down 0.2% and DAX and CAC down 0.6%. 

    WSJ Online Page One Headline for our lunch crowd is "Goldman Profit Drops 82% in Second Quarter"  with this picture/video.


    So Uncle Rupert must not be done using his Billions to crush the life out of his competitors and wants to keep the old economy on the ropes for another quarter if he can because that’s the worst possible interpretation of GS earnings and look at how the Hub crew has NOTHING good to say about them so editorial "balance" seems to go out the window in order to meet Rupert’s agenda (not surprising, just pointing it out)…

    Much more importantly is this news: "Jobless Rates Drop in 39 States."

    College/David – Ah but if you put $100,000 in a 40-year TBill at 4%, your kids get $500,000 in cash, which is a 50% bonus to their $1.3M lifestyle and you would be like a God to them while if you spend $100,000 on their education (not counting living expenses and extras that will double it), you will just be that broke-ass parent that they can’t wait to distance themselves from as they move on with their $2.1M carreers.  8-)

    UCO/SrF – I’m not wild about betting on $80 oil, which is pretty much what you are doing with UCO.  Also, betting an ultra on something as choppy as oil gives you a tremendous decay rate, not to mention the normal churn for this type of ETF.  I would never hold this position without selling calls.  At $9.91, you can collect $1.70 for the Oct $9s, which is about 10% ROI in 3 months with a free 10% downside hedge.  If that’s not good enough for you – I would suggest taking the next bus to Atlantic City becuase your risk appetite is too great to be satisfied by mere stock market gains. 

    TZA/SrF is also a problem as a long-term hold due to the extreme volatility of the RUT these days (caused by JRW, I’m sure!).  I would not own this stock as there are no calls you can sell that adequately cover the risk.  A share of TZA is $39.50 but the Sept $31 calls are $10.70 and you can sell the $44 calls for $5.10 and that’s net $5.60 on the $13 spread so you lay out 1/7th as much money, have a break-even at $36.60 with zero cost to cover a 10% drop and your upside is $7.40 so TZA would have to climb to $47 to give you the same payoff on the $39.40 stock and there is no call at all that you can sell that will give you that return on the stock. 

    Consider, using TZA above, WHY we use the artificial buy/write spreads as disaster hedges.  You have what would be the "alternative" cover used by the suckers.  You buy the ETF and let them churn your value to death and collect fees every day as they rebalance you to death.  It’s like trying to stay on a treadmill that’s at a steep angle…  Our typical buy/write would be selling the Sept $30 puts for $1.70 and then spending $2 on the 34/39 bull call spread so we spend .30 on a $5 spread with 1,566% of potential upside if TZA simply holds $39.  What is our worst case?   Our worst case is we have TZA put to us at net $30, down 25% from where it is now.  On the straight stock play with a cover or the stock substitute bull call spread above, your break-even is 20% higher and your payoff isn’t much more.  That’s why I love these plays for hedges but you should not over-lever with them.  Just do the same with them as you would if you were buying the stock.  Just because the entry is cheap - doesn’t mean your losses will be if it goes against you….

    Good stop discipline Acrobra!  It is fun when you take that money and run, isn’t it?

    Great flip-flop timing JRW!

  114. Selling 1/2 strangle on ARNA against my stock for 70c (6/5 C/P).  I expect it to be called, but things are heating up and we can have more fun with a few verticals.
    For those interested in playing ARNA we have the Safety meeting Sept 15 and OPEX Sept 17.  FDA date is Oct 28, and OPEX is Oct 15.  So, we need to use August as our reduction month.  I want to wait until after the Cramer bounce, so we have a little time but watching the Dec 2.5/7.5 bull call spread for 1.95, selling the Aug 5 P for 45c (or better if we go down a bit) to get us in the spread at 1.50.  The problem with going out more is if ARNA does NOT get approval, they are $1 stock, and I don’t want to be caught in them for a long term hold.

  115. Phil – Rotation to bonds, Bonds, BONDS – from UR post above: Treasurys: 30-year +0.37%. 10-yr +0.22%. 5-yr +0.18%.  Baby boomers ain’t going back in the market anytime soon….at least they get their money back from bonds (not thinking of the inflationary component – but why worry about inflation?).
    ..oh, and utilities (SO – up nice since our pick), cigs (MO, PM), healthcare (MRK, GSK, dare I say PFE?) and any thing yielding 5% or better. 

  116.  Hi Phil, what do you think about going short on HPQ in the form of puts?  Perhaps a Nov Put spread.  I think their earnings should be pretty weak.  

  117. Who said illegal drugs are not good for something!
    Researchers believe they have found the next step in PTSD therapy: MDMA--commonly known as ecstacy--usage in therapeutic environments. In a recent Phase II study published in Journal of Psychopharmacology, psychologists found using MDMA during PTSD therapy sessions allowed patients to better manage and understand their emotions than with traditional therapy methods alone.

  118. Back in TNA at $35.76

  119. ONTY – remember them from the spring…..Roth Capital initiated with a buy.  Buying some stock here, selling Nov 4 C for a $3 net entry.  Then sell the Nov 2.50 P for 25c or better to maximize profits.  ONTY has a cancer vaccine that was stopped in clinical trials due to adverse events…although no one thought to ask that the AEs were from the other drug the patients were taking!!

  120. JRW,
    I see a massive head and shoulders pattern for most of the bull ETFs.  I’ve been noticing lately that the ETFs roll over and die for a couple of hours once this intraday pattern appears…

  121. Pharm, MDMA…. The problem is that the only way to make money on the stuff involves considerable downside risk.

  122. Wow is PFE’s pipeline a train wreck:  Tanezumab is an infused biologic which is designed to block pain by inhibiting nerve growth factor. If approved, it would be the first biotech therapy for pain.  PFE has been forced to halt two more trials of tanezumab, an experimental biologic for pain. The FDA requested that Pfizer suspend two late-stage trials of the drug in patients with chronic low back pain and painful diabetic peripheral neuropathy. The move comes after the drug giant suspended another trial of the biologic in June. In that study, patients taking the therapy for osteoarthritis saw their condition worsen to the point they required joint replacement surgery.
    Lots of Pharma/Biotech data coming out today.  I am done, I promise!

  123. Resistance at IWM 61.03 (descending trend line) , 61.27, 61.82; support at 60.97 (I hope)

  124. 4201
    Which chart? IWM? 1 day, 10 day?

  125. JRW,
    I was looking at 1 day charts of TNA, FAS, IWM.  They’re all battling to break the pattern around your IWM resistance of 61.03…

  126. Phil, your AAPL play is rockin’

  127. Has anyone put together a writeup of JRW’s trading technique? I’ve watched bits and pieces flow by in discussions but haven’t been paying close enough attention to put it all together. I’d like to give it some study in my down time. If someone has, can you email me at ? Thanks in advance.

  128. 1/2 out of TNA at $36.19; TBT may be failing again ($ going back into Treasuries)

  129. All the way out at $36.12

  130. AAPL/Jdub – I like it other than the pain in the ass of managing it.  Curious to know how it works for you but anytime you are selling 1 week of decaying premium against 4 weeks, you have a huge advantage.  Just be aware of your own decay as we move closer to Aug expirations. 

    Welcome ETDance!  Looks like you are getting into the swing of things right away!  That’s all there is to it.  JRW does it day after day after day.  Buy at the bottom of a channel, sell at the top of a channel.  Don’t try to get rich in a single day and you can "accidenally" end up rich over time.  The first guy who noticed this was Charles Dow himself, who said 150 years ago:

    "The man who begins to speculate in stocks with the intention to make a fortune, usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes get rich."

    College/Willsons – You are a good Dad, that’s for sure!

    Alerts/Rstu – If you usually get that little bell noise when you trade, you can set up your trades to sell 1 contract or share if they hit X price and that will alert you.  I always buy in even blocks so whenever I see a 9 somewhere I can immediately see that a stop triggered.  It’s also useful because, if I see a 9 in my quantity, I know that trade hasn’t been adjusted. 

    MU/B1 – I haven’t liked them up here but mainly because we got in about $4 and got out in last Q3′s run to $9.  They haven’t gone anywhere since and just don’t excite me.  TXN seems better now and WFR is going to be right in the sweet spot for solar stimulus so I like them better in that space. 

    Spades/Goober – The solution to bad government is not to give up on the concept of government but to make government better.  FinReg is a START and everyone involved knows it’s a start.  Until now, there has been NoReg so FinReg is better than NoReg but then we need BetterReg and MoreReg.  Hang Paulson himself said "Don’t let the perfect be the enemy of the good" and if you want to wait for the perfect plan or the perfect law before making changes to the obvious mess we are in now – it can easily be far too little, far too late.  The time for apathetic naysayers to sit on the sidelines and deride all participants from the sidelines is over.  Bush did succeed in one thing – he reignited the left and forced them to take back the country and I’m sure the Conservatives in the Great Depression thought the takeover of Congress by the Dems was also a passing phase that would pass as soon as the people remembered how much fun Republicans can be when they are in power.  Thanks to Newt and GWB – we were all reminded for a decade of all the wonders Republicans can achieve when they are in control… 

    GS/Dbar – I was just kidding…

    IBM/Pharm – I like that one.

    Goldman/Goldman – I don’t think they so much as lost money on purpose as avoided cheating while under investigation, causing them to make much less money than they usually do.  Therefore, they are happy to pay $550M in fines to get the SEC out of their office and out of their books so they can fire up the machines again and get back to making $100M a day.  Meanwhile, they still earned $2.75 per $147 share in a quarter so a p/e below 14 – hardly catastrophic…

    Rotation/Pharm – Oh bonds!  Bond yields going up is money going out of bonds, not into them.  I’m all about the dividend stocks – maybe time for a new post on them…

    HPQ/Jomama – I don’t think they’ll be weak at all.  Drive makers and chip makers are doing well so they must be putting their stuff into something.  IBM was not "weak" per se so I don’t think I’d pay a premium to short HPQ.  If yo9u don’t think they are going up, then a backspread is a little safer.  You can sell 5 Aug $48s for .75 and buy 3 Sept $49s for $.85 for a $120 credit per set and, if you are right, you make at least $120 per and, if you are wrong, the calls are $2 out of the money and then you can roll to a vertical anyway so HPQ would have to jump about 10% before you get in real trouble.  Still I don’t like the play enough to bold it as I think HPQ is fairly priced down here. 

    PFE/Pharm – They are paying now for years of cutting back R&D. 

    Gotta love that $77.50 line on oil!  Copper also hanging right on $3 – doesn’t look like resistance so much as consolidating for break back up. 

    Thanks Jomp!

  131. If SNY is going to pounce for $20B, then now would be a good time.  Phil – do you treat the leaps the same as the DIA plays, where you pay 50c/$1 (in general).  Trying to decide b’w the BIIB Jan12 45 C are $12.80 and the 50s for  $9.80 or so.  Thx.

  132. rainman- JRW – I sent you a cut and past file I have of comments/questions re: his system. Hardly comprehensive but a starting point- you can go back to the  original posts for more info.

  133.  Phil,
    Those NFLX puts you recommended yday can be had for a better price today.  Looks like it might at least want to fill the gap.  Still have the same view on this being a short?

  134. rain,
    I use a propriatary 1 min main chart with my morning lines, a 14,3,3 Stoch, 14 RSI 14 Momentum, and volume.
    I confirm on a 3 min StreetSmart Pro chart with 40 and 200 SMA, 8EMA, Bollingers, Pivots, and trendlines.
    I play between my R/S lines; in TNA at $36.17 !!

  135. Pre-Recession Unemployment Rates May Not be Reached for a Decade

    Washington, D.C.- As recent calls for additional stimulus and the extension of unemployment benefits meet with stiff opposition, Congress appears to have underestimated the profound effect of the current recession on the labor market. A new report from the Center for Economic and Policy Research (CEPR) shows that with a job growth path comparable to the last recovery, the economy will not recover all of the jobs lost in the recession until March 2014. Assuming the trend rate of growth in the labor force, the unemployment rate will not fall back to the pre-recession level until April 2021.

    "The economy desperately needs action on job creation," says John Schmitt, a senior economist at CEPR and a co-author of the report. "At current and projected job creation rates, we will still be suffering from the effects of the downturn well into the next presidential term."

    The study, "The Urgent Need for Job Creation," compares various job growth scenarios with the job loss seen in the recession and projects when the lost jobs will be regained and when the unemployment rate will return to pre-recession levels in each case.

    Considering more rapid periods of growth, the analysis shows that using the fastest period of growth of the 1990s expansion, the economy does not reach the December 2007 level until September 2012 and does not create enough new jobs to return to the pre-recession unemployment level until September 2014. If the even faster growth rates of the mid-1970s and early-1980s are applied, the economy returns to December 2007 employment levels in November 2011 and pre-recession unemployment rates by October of 2012.

    Current CBO projections indicate that future job growth will fall somewhere between the rates of the two most recent expansions. This means that absent serious job creation policies, the economy will not reach pre-recession levels until well after the 2012 election cycle (June 2013), and not return to an unemployment rate near the pre-recession level until August of 2015.

    The full analysis can be found here.

  136.  Sorry for the many posts.  Was away for a while after the ID4 holiday and have over 80% in cash and looking to put more to to work.  After looking at IBM’s lower service contracts, is ACN a short on any bounce?

  137. 61.10 was the etrade pivot line from this morning. Whatever it is it looks like it is something.

  138. Thanks pstas! That’s a great start.

  139. rain,
    And I overlay TBT on the 3 min IWM chart for early (2-10 min) indicator.

  140. Phil/TZA from above:
    What is our worst case?   Our worst case is we have TZA put to us at net $30, down 25% from where it is now.
    So I would take it that if TZA is assigned to you (as a result of the disaster hedge going bust,) then, based on what you said about bull call spreads being better then selling call covers on the stock, you would sell your stock and buy a bull call spread. We used to talk about selling calls against TZA and other 3x ETFs if put to you.

  141. pstas or rainman- would you be so kind as to send that paste and cut file to me at I haven’t had time yet to study JRW’s technique in depth. Thanks.

  142. JRW and co…. I’m pretty amazed at my entries based on S/R etc… they are getting better and better but I can’t hold my position long enough!  My gosh I’ve been making from 3-10 per day for the last 2 weeks with 80% success at entry but I sell 99% with 20% of the gain I should be getting.  I’m anti greedy I guess maybe I need a little more greed??
    I sold TNA at 34.39…look at it.. URG..

  143. you too???…lol

  144.  From Doug Kass:
    "the market is rallying on rumor that fed is eliminating 25 bps paid on banking industrys excess reserves"

  145. thanks jrw   that was fun :)

  146. Phil / Doug Kass    He must be Lloyd’s cousin?

  147. Cmsosa – BAC Aug calls
    Here is how to adjust them in more detail – the idea is to improve your position without spending much more money, preferably none.
    Suppose you bought 10 AugBAC14 calls at 1.00 now worth 0.40
    1) Sell 20, 2x AugBAC14 calls at 0.40.  This puts you short 10 AugBAC14Cs.  This gives you 8.00 to use.
    2) Buy whatever SepBAC calls you can for 0.80.  I picked the SepBAC14C for 0.61
    3) This adjustment was a net credit of 0.16 which lowers my basis from 1.00 to 0.84
    4) Watch the premium on the shorts – when it gets close to zero then roll the short AugBAC14 to SepBAC somethings at the strike price.  Since the premium which was 0.40 on the shorts is now close to zero, I use 0.05, you have made an additional 0.35 which lowers your basis to 0.51.
    5) Use whatever you got from the roll plus the 0.35 premium you just made to roll your long SepBAC14C to a couple of strikes below your new Sep shorts – this roll should be very close to even.
    At this point you will probably be in a $2-$3 vertical spread that is mostly in the money.
    The only tricky part will be what to do if BAC takes off because your August shorts will have a higher delta than your September longs – I suggest you cover half your shorts if they increase 50% in value over what you sold them for.
    Do this now while your August longs still have value
    If you get into trouble – ask again

  148. NWBO from gel is moving back down after the initial run up.   Buying a 1/4 entry here for 97c or better.

  149. Out of TNA at $36.80; stalling, but reversal NOT confirmed !!

  150. Pharmboy-
    Do you have a feel for SNSS?  Lots of insider buying and in big amounts.

  151. Hoping we test IWM 61.27 as a floor, then reload !!

  152. 11:00 AM On the hour: Dow -0.91%. 10-yr +0.23%. Euro -0.43% vs. dollar. Crude +0.34% to $77.16. Gold +0.77% to $1191.00.

    12: 00 PM On the hour: Dow -0.79%. 10-yr +0.18%. Euro -0.29% vs. dollar. Crude +0.74% to $77.47. Gold +0.7% to $1190.20.

    1:00 PM On the hour: Dow -0.69%. 10-yr +0.17%. Euro -0.36% vs. dollar. Crude +0.7% to $77.44. Gold +0.89% to $1192.40.

    The jobless rate fell in 39 states and rose in only five, the Labor Department reports – though payroll employment dropped in 27 states, vs. 21 where it rose. Nevada still has the top unemployment rate (14.2%) and Michigan (13.2%) drops again; sixteen states and D.C. still have double-digit unemployment.

    Jeremy Grantham throws in the towel, switching to the deflation side of the punditry. "Even if we get intermittently rising commodity prices," he says, "the downward pressure on prices from weak wages and weak demand seems to me now to be much the larger factor." Yet surprisingly, he says "fixed-income is desperately unappealing" – his favorite asset class is "U.S. high-quality stocks."

    As soon as Friday, paymaster Kenneth Feinberg may demand a clawback of bonuses big banks (C, JPM, GS, MS, BAC) paid during 2008 – though his power is limited to politically shaming them, as the biggest banks in TARP have repaid the program.

    The 2009 rally boosted global assets under management 12% to $52.6T, vs. a 17% tumble the prior year, Boston Consulting Group reports. But the outlook is still cloudy, as net revenues declined 11% and operating margins dropped 19%.

    China says its high growth in exports in the first half would give way to slow growth in the second half, warning that European belt-tightening would dampen demand for the country’s goods. The Ministry of Commerce says it will retain policies aimed at supporting external demand for Chinese goods, including issuing export tax rebates.

    Significant drops in copper inventories are continuing to lift prices, but data that’s "gone a bit sour" – including housing starts – has some investors cautious about demand. Copper fell 17% in the second quarter; futures now +2.1%.

    On TI’s earnings call last night, CFO Kevin March did his best to embrace a drop in the chipmaker’s closely-watched book-to-bill rate (to 1.07 from 1.14), saying that with TI’s (TXN) improved lead times, customers are less nervous, and aren’t placing orders as far out in the future as they had in previous quarters.

    Another big Boeing (BA -1.4%) order at Farnborough Airshow, as Air Lease Corp. says it will buy 60 737-800 jetliners in a deal that could be worth $4.6B.

    BP (BP -2.1%) would love to be selling assets in order to pay for Gulf spill liabilities, but Gordian Group restructuring chief Peter Kaufman notes that it’s anything but simple, as buyers are nervous future creditors could unwind purchases as "fraudulent conveyances." Updated 1:18 p.m: BP is putting upstream assets in Pakistan and Vietnam up for sale.

    Workers of the World still uniting: Cabin crews for British Airways (BAIRY.PK) say they’re seeking talks with the airline after only about 14% of their union voted for BA’s most recent pay offer. The union says 22 days of walkouts have cost BA £154M ($234M).

    Another victim of AAPL: R.I.P. Nexus One (GOOG).

    Three lunchtime reads:
    1) Hugh Hendry’s contrarian views (and volatile results)
    2) Do sovereign debt ratios matter?
    3) Kass: My Q&A with Roubini

  153. In TNA at $36.85; not retesting 61.27 !!

  154. GREEN!

  155. Phil   Would you hold the tna calls overnight?  Thank You

  156. Any idea why this market is going up?

  157. GS’s proprietary HAL9000 definately had it’s UP switch flipped today.  This is more of the same nonesense.  Of course, going down is often nonsense, too.  It’s really hard to tell what is real in this market.  You have to step way back to get a handle on that.

  158. Volume is crazy low for all this action – just coming up on 100M on the Dow at 2pm and you know what that means Matt?  VERY STICKABLE!!!

    2nd day in a row money is flying out of bonds.

  159. Phil,
    Another great call today – I sold my shorts on FAZ and DXD yesterday and today for nice gains (not being greedy)

  160. They’re working on an engulfing green candle for FAS today.  Looking at the volume that got us here.. there is no reason why they can’t do it.  Unless the program simply says not to do it.  I think we will.  But if we don’t.  Just another example of why this market is a sham.
    Looks like we did it.  See, yesterday was nothing to worry about!  We’re all good again-

  161. SNSS – from what I can tell from the insiders buying big lots, much may be from an offering in March at 28c.  They have 220M shares outstanding and insiders hold a substancial amount at 28c or so.  Lead compound is Voreloxin and it arrests cells in their dividing cycle.  Some efficiacy data in PII, but the pivotal PIII should start in late 2010.  I would wait, but if one must start a position, start small for DDs. They will run up when the data is ready to come out in a few years, but not worth binding up the cash IMHO.

  162. Out of TNA at $37.33; S/R at IWM 61.72

  163. Green — we should peter out here since we are near our 200pt swing. Anyone have a way to lookup how many days we’ve had 200 pt swings? There seems to be trend but I can’t veify.

  164. Call me crazy but I’m short FAS.  Stop above HOD.

  165. rainman – since April 27, it is almost all trading days except 3 that I see.  We had a string of 31 days in a row where >100 pt moves (intraday as well) were the norm.

  166. Matt you may have explained this but why do you short FAS and not just buy FAZ?

  167. Phil / Re Levels   Re your morning post, if we fail to take back your levels, eg Dow10,200, at the close today did you mean we flip bearish expecting another 2.5% down.

  168. Thanks for nudging me back into GOOG Phil.

  169. Thank you PB!!

  170. NFLX/Jdub – Sure.  They are a momentum stock that will move up with the market but it’s earnings that we are shoring into.  If they miss, they should fall hard. 

    ACN/Jdub – I thought IBM’s earnings were fine.  You have to look at currency exchanges as well as municipal contracts that got held over on budget issues that are still likely to get funded in Q3.  Check the Buy List and the 9 Dow Compnents post, I think they are both under Portfolio Tab.  Plenty still playable there. 

    TZA/Chaps – Well, first of all you can just roll the obligation down (in strike) and out (in time) so you don’t actually have to take the assignment and, when you do, the RUT is up at least 10% from where you started, which may be a place where you want to go aggressively short anyway.  So if you think about the arc of the play – you buy a $5,000 TZA hedge to protect $25,000 worth of losses on $125,000 worth of buy/writes that fall further than 20%.  If the market does fall over 10%, you have $25,000 to use to roll and DD your long positions and you take a new hedge.  If the market is flat – you win at both ends and if the market goes up more than 10%, then you make $25,000 on the long side and you have $50,000 (example) of TZA put to you at $30 and even if it’s at $20, you can DD with the $25,000 you made and now you have a bearish portfolio with the market testing new highs and you can cash out the bull plays and get ready to buy aggressively if we break on over with a whole lot of cheap protection.

    Damn that 10,200 line is tought to get through!

    Very nice on BAC Edro!

    TNA/Wilsons – I would not hold them overnight on money I didn’t want to lose.

    Up/Exec – The same reason it went down the last two days.

    Good job Yshen!  Much more fun to have cash the next day. 

    200 points/Rain - Yes, you are right, that does seem to be the max.  BUT, don’t forget we’re still expecting that Senate vote on unemployment.  We need some catalyst to pop our levels at this point.  

    Levels/Tusca – If we stop dead here, then I would be more neutral but anything not green on indexes is going to be highly suspect. 

    GOOG/Dbar – Yep, that was just too cheap to ignore. 

  171. Yip, I like looking at the FAS chart better.  FAZ is more erratic.  But if I can’t get shares to short, I’ll use FAZ.  Haven’t had a problem getting them though the last few days which is very strange..  looking for 20.17.

  172. Pharm / CBST  Do you have a view?  They seem to be investing heavily in next generations of Cubicin.  Could be a takeover target?

  173. matt
    got it… nice trade.  i’ve made 6 trades and im up 21 cents lolol

  174. Took 20.19.  Prolly leaving some on the table but oh well.

  175. Phil – Now I know you ignore me sometimes (LOL)!!  ;) C my ? above.

  176. Talk about a "Rumor Stick"…CNBC said the fed interest rate cut rumor is false now.  I kept thinking wow, stick before 2pm!?!?  The lone sticky note on my screen says "Buy Stick 2-4pm!!!"…time remove the time range limits! 8-) 6-)

  177. Fed rate cut?  It can’t go any lower…..glad I don’t waste my time on them.  Tom and Jerry are much more fun!

  178. Fed Funds rate…interest rate banks charge each other…would have "somehow" forced more lending to Americans who don’t want to borrow, yada, yada, yada.  Good for an amazing head fake at least…

  179. Gel – you do currencies, what are your thoughts on going long the Australian $?

  180. Any value in looking at option volume the day of earnings?
    AAPL calls between 200 and 300 strikes have traded some 90,000 contracts today and puts between the same strikes about 60,000?
    Any significance to that bias esp since most of the calls are OTMs?
    Smart money ie funds  selling calls to protect their positions?

  181. Microsoft "Kinect" is going to be a hot item this Christmas…kids, adults, everyone will want this video game changing technology.

  182. 2:00 PM On the hour: Dow +0.19%. 10-yr +0.14%. Euro -0.29% vs. dollar. Crude +1.22% to $77.84. Gold +0.9% to $1192.50.

    BIIB/Pharm – Wow, talk about the sqeeky wheel!  I did miss that one, that seems to happen with comments right before or after my posts – maybe the way I refresh…  Anyway, with leaps, it’s all about my expected 2012 price and how much I expect to recoup and whether I am more worried about a downside surprise than upside.  In the case of BIIB, rather than spend $9.80 for the $50s or $12.80 for the $45s, I’d rather spend $7.40 for 1.5x the $55s and sell .75x the Sept $55s for $2.20 so you are in 1.5x (to what you were planning on buying) for net $6.30 (say 15 contracts at $9,450)  and collecting (8x$2.20 or $1,760).  So, once you clear your first 60 days, you are netting about 10% a month going forward on a 1/2 cover.  Hard to lose that way.  If they head up, you roll your callers to 2x whatever and you are in a proper calendar spread in good position and if they go down, you have plenty of cash on the sidelines to take advantage of cheap rolls

    Rumor stick/Goldman – This is a great trick.  Drive the market up on rumors, then clear the suckers out by saying it’s not true and then, once they sell out, ramp the market up really fast so the retail suckers all freak out and try to jump back in so you double your stick power – BRILLIANT!

    It wasn’t a rate cut rumor, it was a rumor that the Fed would stop paying banks 0.25% for overnight funds (making their unused money FREE) and forcing them to ACTUALLY LEND IT TO SOMEONE.  HA – like that would ever happen….

    AAPL nice over $250 now…

    Bernanke has doubled down on the same mistakes Greenspan made, thus making a double-dip highly likely, Robert Murphy writes: "The alleged economic recovery is unfortunately just as illusory as the prosperity of the housing-bubble years. It is disturbing to consider that if this is the calm before the storm, then the pending crash will be painful indeed."

    More than 50 months since the peak of residential building in 2006, the housing industry is building only about 30% of the homes it was building during the boom – 30 points worse than a similar stage of the recovery after the S&L crisis and the 1970s oil crisis. In fact, housing activity is at its lowest level since WW II.

    Clever way to shut up all the people who might contradict themBP is signing scientists from Louisiana State University and other Gulf-area colleges to $205-an-hour research contracts that come with non-disclosure agreements. Generally, universities allow professors to work as outside consultants for up to eight hours per week.

  183. CBST/Tusc – interesting that you mention them.  I have been watching them for a while and they appear to be channel bound.  As for takeover, possibly, but they need something else that makes them compelling.  They are in bed with AZ, so that would be a likely candidate depending upon the agreement signed.  I like them b’c antibiotics need to be revived in the pharma industry.  I am sure the doctors on the board can attest to that the ‘bugs’ are getting more difficult to treat, and the arsenal is getting smaller and smaller to use.  IF a superbug does catch hold in a hospital, I am afraid of what could happen. This is a doom scenario, but sometimes we need to light a fire under our asses to get something going.
    Trend is down on them for now, so maybe the stock here, selling the Jan12 20 C/Ps for 9.75 or better.  Options are thin, so may have to be patient.  That is a nice ‘lil 40%.  Let’s see if we can get it…..1/4 entry.

  184. Muchas Gracias Phil on BIIB!  Away we go.

  185. Hey all,

    I have a new Overnight Trade I am entering in Eaton Inc. (ETN). We are looking for Eaton to improve significantly tomorrow morning on a solid earnings report.

    Check it out here!

    Good Investing!

  186.  Any thoughts about holding APPL overnight? I’m up quite a bit.  I expect the report to be very good, but given what happened to IBM its hard to know…

  187. In TNA at $37.18

  188. Pharm/all but 3 — thanks. That’s one of those data points that make me say "hmmmm…."

  189. oakd – i have been in the AAPL August 250s since aapl 240, and am also up. I just sold 1/2 the august 280s against it. Will consider selling the rest by the close, to make a $8 cost on the $30 call spread as an earnings play/gamble….

  190. Phil—regarding the QQQQ/QID play from this morning, are you looking at this as a quick play into AAPL earnings and then out or holding further and maybe into expiration? That was the QQQQ AUG 46/47 CALLS.

  191. And out of TNA at $37.68 at IWM 61.90 !!

  192. GILD- Pharm/Phil earnings tonight- any play?

  193. GILD/pstas – they have given me a stomach ache……and it ain’t from Theraflu!  I am staying away until they can show some strength.

  194. FAS just made a 1/3 retracement of it’s drop on Friday the 16th.  Taking another shot short.  Just can’t stomach going long for long on this thing!

  195. PHil : I have an IRA account which requires 100% cash to cover any puts sold. I need a hedge for this acount which has mostly DOW stocks .thank you. 

  196. Back in TNA at $37.64

  197. Volume/Gil – It’s really just like watching which horse gets more bets at the track – just the opinion of the betters but doesn’t mean they know anything. 

    AAPL/Oakd – If you hold it overnight you are taking a gamble on their earnings – don’t think you are not.  IBM had good earnings and look what happened to them…   Also, AAPL could have good earnings and someone else could miss so very dangerous play.

    QQQQ/Fortep – Because it’s a spread, it’s an Aug expiration play.  It’s based on AAPL being good enough news to take us higher but you won’t get more than .80 until right before earnings. 

    GILD/Pstas – No clue.

    IRA/Dflam – Remind me after hours, I have to think about that one.

    Wheeeeee – big squeeze! 

  198. Covered.  Out for the day.  This is just a short squeeze.  Not stepping up to the plate anymore for them!

  199. Buy program pulling money out of the bond market !!

  200. Wow a 227 point intraday swing. WFR took off!  I had a limit order at 10.19 waiting for a dip and it never looked back.  Shoulda set it at 10.20. ARG!

  201. And out at $38.04 for 40 more cents !!

  202. QCOR starting to move back into neutral range.  September is there FDA date, and I still like them.   Adding here.

  203. IRA/Dflam – No verticals? 

    Check out oour levels – right across the board: Dow 10,200, S&P 1,075, Nas 2,200, NYSE 6,800 and Russell 620.  Ignore that 5% rule at your peril!  

    We made 620 on RUT finally, I care more about that than the others – hopefully we hold it. 

    So it turns out IWMs performed better than the TNA – that’s a lesson for us!  IWM $63s from morning alert went from $1.25 to $1.80 (44%) and TNA $37s went from $3.20 to $4.50 (40%).  Meanwhile, the IWMs are more liquid, have less of a spread and are easier to roll and adjust! 

  204. TNA $38.09

  205. Pharm- delfaltion- you have been beating this drum lately.Don’t disagree with you per se, but what indicators are you watching for a turn, if any?

  206. All out at $38.48 for another 40 cents !!
    Don’t know what all the trades added up to as not all positions were full, but the portfolio is up over 10% on the whole for the day !!

  207. Deflation/pstas – I watch the treasury yield from a macro scale, not day to day.  I also am interested in unemployment, pricing power, money supply (of which I am still trying to come to grips with), commodity prices, etc.  This is not a daily thing, but a monthly, quarterly, yearly thing.  I am still learning on this one and try not to trade day to day on movements like this….too frustrating esp when the jack the markets AH.
    My original home builder short was on the lumber prices falling considerably over a MoM period (made some good $$ on that one)…..Steel is also falling, so things built with steel should also have a drop off in the coming months.  These are all things I am watching, I just don’t have the resources to jump on all of them.

  208. Great day on TNA, thank you JRW for the posts…I’m understanding a little more every day. 

  209. JRW- Thanks for listing your entry/exits today…didn’t make 10%, but I did well with no losing trades!

  210. JRW – I will give you my accounts to trade in…I am done!  Just give me 1/2 of what you make, I keep the principle.
    Those weekly SPYs are very nice to sell positions into on days like this…Protected my long Ps….

  211. Couldn’t help myself.  Short FAS at 20.85.  Might wipe out my overnight gains from last night but this just seems too ridiculous.

  212. Wow, what a day!!!   Good job keeping cool under pressure guys!

    Now comes the fun part – Apple earnings.  But first we have to get past YHOO….

    3:00 PM On the hour: Dow +0.2%. 10-yr +0.15%. Euro -0.38% vs. dollar. Crude +0.78% to $77.50. Gold +0.86% to $1192.10.

    The Senate votes to overcome a key hurdle to extending U.S. jobless benefits, renewing the 99-week period that long-term unemployed people in most parts of the country can qualify for assistance.

    Is it the end for what RBS is calling the cult of equity investing?

    The price tag for Johnson & Johnson’s (JNJ -2.1%) various product recalls: an estimated $600M off 2010 sales. The cost to the company’s reputation and thus sales of other products not affected by the recall? "It is too early for us to comment," CFO Dominic Caruso says on this morning’s earnings call.

    Two possibilities why pressure readings on BP’s (BP -1.8%) experimentally capped well are lower than expected: 1) The reservoir the oil is gushing from is dwindling. Or 2) there is an undiscovered leak somewhere down in the well. The later possibility has scientists worried.

  213. At the close: Dow +0.75% to 10230. S&P +1.14% to 1083. Nasdaq +1.1% to 2222.
    Treasurys: 30-year +0.1%. 10-yr +0.05%. 5-yr +0.1%.
    Commodities: Crude +1.08% to $77.73. Gold +0.87% to $1192.20.
    Currencies: Euro -0.37% vs. dollar. Yen -0.81%. Pound +0.31%.

  214. Phil, what a great call that was on  the Google 480 calls on monday.  Got out of that with great profits.  Hopefully we can reload it sometime in the near future depending on the market.

  215. matt,
    Though I have no over-night position, I think you are right about a lower point tomorrow, good luck !!

  216. (1) thanks Phil; good work on IWM, Goog, Aapl for me and I hope yourself.  I had also sold IWM 56 Ps – hadn’t been there in months.  Was gonna hang on but up 40% in one day…
    (2) I really want to focus on some BRICish plays for B/W.  I did some EWZ a while back.  And I’m long a lot of VWO since forever.  This is just my macro view.  I’m a patriotic american, and all.  I think I accidentally voted twice one year.  But more growth seems to be happening elsewhere.
    So what, in particular do you like?  I can’t stomach  japan or the  "old europe".  EWY looks nice. And FXI, but you seem to hate it.

  217.  Flipped from full mattress to half mattress

  218.  JRW-  I told myself I was waiting 90 days before starting any day trading. But watching you and that IWM chart is really trying my patience.  Are the past two months an anomaly with you or are you always this good?

  219. Taking a chance on Apple’s earnings overnight. 67% of the time they gap up, and usually about 6%. Almost invariably they flatline the next day, or lose a little. Plan to sell at the open. 

  220. I hope your right JRW,
    I bought a little TZA at the close.

  221. redlog
    I don’t think I’m all that great, I could have played today better than I did, or made as much just buying near the open and holding all day; that said, my system has been working fairly well since last fall. However, Phil will tell you that a system works until it doesn’t; and just for the record, I completely missed the Great Rally of  ’09, so follow me at your peril !! (After your 90 days)

  222.  Winner winner… what am I having for dinner?

  223. AAPL 3.51/shr vs 3.11 est
    15.7B revs vs 14.5 est
    Guides higher

  224. Go AAPL!
    CUPERTINO, Calif., July 20 /PRNewswire-FirstCall/ — Apple® today announced financial results for its fiscal 2010 third quarter ended June 26, 2010. The Company posted record revenue of $15.7 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share. These results compare to revenue of $9.73 billion and net quarterly profit of $1.83 billion, or $2.01 per diluted share, in the year-ago quarter. Gross margin was 39.1 percent compared to 40.9 percent in the year-ago quarter. International sales accounted for 52 percent of the quarter’s revenue.
    Apple sold 3.47 million Macs during the quarter, representing a new quarterly record and a 33 percent unit increase over the year-ago quarter. The Company sold 8.4 million iPhones in the quarter, representing 61 percent unit growth over the year-ago quarter. Apple sold 9.41 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter.  The Company began selling iPads during the quarter, with total sales of 3.27 million.

  225. AAPL crushes the ball out of the park once again – yawn

    8.4M IPhones sold, $15.7Bn in revenues, 3.27M IPads, 3.47M Macs – WOW!!!! 

    $15.7Bn in sales (up 61%) and $3.51 in earnings ($3.11 expected), guides UP ($18Bn and $3.44 earnings)!  These earning are up from $2.01 last year… 

    Nas up 2% now. 

  226. JRW, thanks.  We’ll see..

  227.  BP…..Government reports ‘seepage’ detected 1 to 2 miles from cap is ‘probably from another old capped well’.  Also, deal to sell 7 billion worth of holdings to ‘cover cost of spill’ is going through.     Look for BP to move up tomorrow. 
    AAPL…   Yawn (me too).  AAPL  up to 260 after hours and should move higher tomorrow.  Watch for GOOG to go up in concert.   Phil’s call on GOOG was dead on the money.  Hold some of those Sept 480s for more profits.  GOOG isn’t near done.  

  228. GOOG/Fjd – Congrats! 

    Thanks Rexx!  I am just not liking BRIC’s and emerging markets until we settle down on the Global financial picture.  I haven’t been short on China – just not willing to go long but Brazil and Russia are too commodity driven and India was my favorite market for the year but they are up 100% now so no point in chasing them.  USA is the number one emerging market with a well-educated work-force that needs jobs and a government willing to pour money into infrastructure.  

    AAPL is masking yet another unexciting earnings day:

    • Fulton Financial (FULT): Q2 EPS of $0.14 misses by $0.01. (PR)
    • Apple (AAPL): Q3 EPS of $3.51 beats by $0.40. Revenue of $15.7B (+61.3%) vs. $14.8B. Shares +4.2% AH. (PR)
    • VMware (VMW): Q2 EPS of $0.34 beats by $0.02. Revenue of $674M (+47.9%) vs. $656M. Shares +4.4% AH. (PR)
    • Altera (ALTR): Q2 EPS of $0.58 beats by $0.05. Revenue of $469M (+68.1%) vs. $447M. Shares +0.6% AH. (PR
    • Cintas (CTAS): Q4 EPS of $0.35 beats by $0.02. Revenue of $909M (+3.5%) vs. $884M. (PR)
    • Tempur-pedic International (TPX): Q2 EPS of $0.46 beats by $0.04. Revenue of $263M (+42.1%) vs. $248M. Shares +0.7% AH. (PR
    • Stryker (SYK): Q2 EPS of $0.80 in-line. Revenue of $1.8B (+7.6%) in-line. Shares -2.5% AH. (PR
    • Seagate Technology (STX): Q4 EPS of $0.71 misses by $0.06. Revenue of $2.7B (+12.9%) vs. $2.9B. Shares +0.5% AH. (PR)
    • Yahoo (YHOO): Q2 EPS of $0.15 beats by $0.01. Revenue of $1.1B (-0.07%) vs. $1.2B. Shares -4.4% AH. (PR
    • Juniper Networks (JNPR): Q2 EPS of $0.30 beats by $0.01. Revenue of $978M (+24.4%) vs. $954M. Shares -0.3% AH. (PR)
    • Gilead Sciences (GILD): Q2 EPS of $0.85 misses by $0.02. Revenue of $1.9B (+17%) vs. $2B. Shares -1.8% AH. (PR
    • Fidelity National Information Services (FIS): Q2 EPS of $0.46 in-line. Revenue of $1.3B (+2.1%) in-line. (PR
    • Allscripts-Misys Healthcare Solutions (MDRX): Q4 EPS of $0.18 beats by $0.01. Revenue of $191M (+13.9%) vs. $185M. Shares -1.2% AH. (PR)

  229.  Peter D / Strangles
    I read your articles about strangles and I want to learn more about this strategy. Can it work for a $20K portfolio? Which underlying would you recommend to use?
    I looked at IWM, selling +- 13% puts and calls 1 month out (August) and the return looks very good.  How would you recommend to get started?

  230. Phil/ IRA: No verticals. All buy/ writes with paired puts on mostly DOW 30 stocks.Thanks

  231. Phil / You nailed it again today!   IBM and TXN results looked ok to me, (as did GOOG) so hard to understand early trading?
    I’m still 50% long and 50% cash and that’s worked better for me than my earlier sceptical 90% cash!  The housing and unemployment disaster will continue (and jobs ain’t coming back from China and Mexico until we become selfish mercantilists again), so I still see a nasty DD, with neg GNP, without major new QE (extended unemployment helps maintain some spending but doesn’t kick start growth).  RUT profits can’t grow without significant GNP growth.  The problem is that handing out money, like UI, just sends more money to China via WMT.    Hard to see a bullish catalyst after earnings in July, other than a major QE initiative.  Even record low mortgage rates are making no difference to housing.  So, it may now be about you timing the move to going back to cash or net short sometime in July?
    I’m thinking money to be made going short again at some point, then going long when things look grim enough to support China style QE and infrastructure push in both US and Europe to exit depression / deflation?  However, you’re the timing expert.  Thoughts?

  232.  BSX--Up 5% in the AH!
    I’m glad for the move up today!  I was able to get into NFLX P for much less than yday’s post.  But with AAPL lifting the Nas, it could prob. be had for much cheaper tomorrow AM before IV starts to pick up.  
    Was also able to get into the mattress play that Phil posted yday at a better entry.  So should be all set up.
    One regret I had was getting off TNA a tad too early and leaving about .60 on the table.  Tsk tsk tsk.

  233. matt JRW
    I also believe the market will go down tomorrow. I expected AAPL to beat expectations as no losses on problems yet but also don’t expect they run to $280 tomorrow effecting NAS and the RUT. Problem future expectations, ATT issues.
    Sorry about Seagate, I was at the doctor or would have told you their hard drives are not at the top of the list and their management costs are out of line, it shows by rev ^ earnings miss.

  234. VIX is pretty low right now and at its 200 MA and a big support area. If it stays true to the recent channel, it should bounce.

  235. Phil/Wednesday - What is your outlook for Wednesday…perhaps hit 1100 on SP500, then pull back from there?  Can APPL move all the markets up…having beat every single quarter since 2003, perhaps it is baked in somewhat?  I think Jobs need to design an "I-Job" and sell them to the consumers to get this economy really moving again.  Speaking of Jobs, have you ever seen the Steve Jobs "Irack" MadTv parady back in 2007, with the Iraq war "hidden" message that was the hot topic of the day.  Check it out @

  236. Phil,
    I’ve been seriously thinking about limiting my day trading because it is such a distraction from work and doing covered calls. 
    What is your opinion  on covered calls in this market environment? 
    I’ve been reluctant for the last year because I somewhat buy into the BS that we may see a major correction in the market, and from my understanding, that’s about the only way you can get burned doing covered calls.

  237.  Hi Phil,
    On the heels of HAL & WFT earnings, should I position myself for a long on SLB into earnings? It has run up as those other 2 names reported positive results so I’m not sure if good earnings are built into the price already.

  238. yshenhar- Strangles- very, very dangerous in an account with out PM. With TOS, you need $125K minimum I believe plus pass the "test". Position sizing is critical- I have said this before but it bears repeating that being overextended on short strangles on a fat finger day is a thrill not to be missed!

  239. exec/distraction – agreed! Signing up for phil’s newsletter has hurt my productivity at my day job. It’s hard to do well at a knowledge job when your head is somewhere else. Covered calls aren’t all that different from Phil’s buy-write strategy. The only difference is you buy half as much stock, sell covered calls on that, then add in the sale of naked puts. When the writes are based on LEAPS options, you not only don’t have to babysit them, you shouldn’t babysit them. I’ve gotten myself in trouble with a couple of my early buy-writes by making adjustments at the wrong time, only to find out later that I would’ve been better off if I’d just let them do their thing.

  240. jvest,
    Have you been using the buy-write strategy?  Have you ever been hurt with the naked puts?  Why is his stategy better or safer than simple covered calls?

  241. GILD- Ugh- coming back a bit. Seems this is one that the market loves to hate. Pharm, now I have a headache too.
    Guess I will roll and DD this time. Can anyone direct me to any research on this? I entered after GILD took a substantial haircut looking at it as a value play. Still looks that way to me. Any thoughts?

  242. yshenha/strangles,
    OK, let’s get started.  Our favorite underlying symbol for short strangles is SPX.  With small portfolios, we can do SPY.  You are correct that the return for a +13%/-13% IWM short strangles (54 putters and 70 callers) is quite good for August. The Reg-T Initial Margin is 10% as the shorts are more than 10% out of the money, which is $6,300 per contract for IWM, increasing to 20% ($12,600).  So if we reserved $15k per IWM contract, it’s a neat $500 return for $15k basis for about 3% potential profit a month. 
    As usual, there are more to the short strangles strategy and there are lots of background reading on this site.  Check these out:
    There are many tricks and rule of thumbs that you’d need to master overtime.  Paper trading is one ways to improve the feel for the market.  Usually, we try to sell short strangles when VIX reading is high so that we get more credit.  Anyway, $20k is definitely on a low side for short strangles.  You’d need over $150,000 to be comfortable with the scheme.  There is also Portfolio Margining (PM) for accounts over $125k that allows more leveraging.  Dangerous, but very useful to have PM. 
    This should be enough to get you started and do ask questions as you go along.

  243. Exec: I’ve been with Phil now about 6 months and have learned a lot. I don’t have the temperent for day trading, so I’m just doing buy/writes with paired puts. What I learned is:
    1. Buy stocks  you really want to own . I’m only interested in dividend paying stocks since I’ll get paid to wait for the options to expire.
    2. Never sell Puts on a stock you don’t really want to own at THE STRIKE PRICE YOU SOLD. I tend to sell Puts at a strike price 20% less than the market price. My profit is less buy this approach gives me a cushion in  the event it/the market drops.
    3.IRA account require 100 % cash margin against the puts so it may not pay to sell puts because your ROI is too low.
    4. Watch the VIX.& sell option premium when it goes up.
    5. Roll the options out when appropriate but don’t over trade. Let time work in your favor. This was hard for me to learn since I’m impatient.
    6. start with selling option that are not Leaps. It gives you a feel as to what you are doing and if your position goes against you you have alternatives to look at ( roll the option out in time,roll up or down etc).
    I am far from being an expert. Phil & some of the other guys  are mind boggling,but I paid a price for my education & hopes it helps you avoid my mistakes.

  244. hi peter — when is the best time to switch back from short call to short put, last friday I closed out putter when down to $2 and sell more call or as you suggested to convert to caller, we are up last two days, not sure it is the right time to scale in short put.  Would you raised the strike to 900 or 910 for august ??? thx

  245. dflam,
    I’m out the door to a surprise birthday party but would like to chat more about this.  Are you typically on during the day?

  246. Oh, my, my my… spent most of the day at the beach… upon returning, I checked my portfolio and was blown away – I had a JRW day (100K) and was not even near a computer. AAPL was the lead dog in this one. Patience and perseverence really pays off!  I am still bewildered as to how JRW does it almost every day.

  247. beach/gel – lol! wouldn’t it be great if you’ve discovered a new investment tactic?

  248. gel,
    Congratulations on a great day in the market and at the beach at the same time !! BTW, I wasn’t in on Monday, so I’m only averaging 5% so far this week.

  249. exec:
    Normally I am.

  250. Hi Gucci,
    I think your question is whether we flip some short calls back to short puts, right?  We don’t usually switch side all together as that would be betting on the direction of the market.  We try to maintain a portfolio with balanced Delta (slightly negative Delta).  We would flip putters to callers so that our Delta doesn’t go too positive and the portfolio get killed on a drop.  Similarly, we flip from callers to putters so that the Delta doesn’t go too negative and hurting the portfolio on the way up. 
    So it’s all depending on your Delta reading.  Is it lower than -150 for every 10 SPX contracts (I just pick -150 Delta as a threshold and it does vary depending on your tolerance)?  If so, you can either a) wait for a dip, then Delta would be back to zero, or b) flip 1 or 2 contracts out of 10 from callers to putters if you think the market keeps going up.
    Last week, we flipped from putters to callers while the market were topping and falling, and we were worried that the market could drop 5% on us, so having callers were safer than putters.  By Monday afternoon, those callers got killed and we should buy back a bunch of callers that went below $1.5 so that they don’t hurt us on the way back up.  As there has been a stealth volatility crush in the past 3 trading days since Friday, our account balance should have gone up.  Both the putters and callers lost quite a bit of their values quickly due to the evaporation of the earning premiums.  We (well at least myself) have less number of contracts now than last Thursday, and my available margin went way back up. 
    It’s now cruise control for the next two weeks, when the 7%-15% out of the money options would have lost most of their values.  Since I have plenty of margin left, I can roll putters or callers 2x or 4x away from the money if needed.

  251.  Phil – I forgot to mention I’m making those trades (the UCO and TZA) from an IRA account.  No margin – and I can only trade "Level 2" options from this account… that’s writing covered calls, cash-secured puts and outright purchasing options.  I don’t think I can create the vertical call spread since you need Level 3 for that (which is what my regular brokerage acct has).  Also, I can’t sell those Sept TZA puts for $1.70 … unless I leave the cash to cover the share purchase at $30 in my acct.  That is why I was considering the Buy / Writes.  Now that you know more background of the account I’m working with – do you have any other suggestions?  Keep in mind I’m still picking up things from the site and message board – so – doing’ some Buy / Writes seems like a good start.  I already have long dated XOM buy/write… and was successful w/ the 1 month buy/write on UCO last month (wrote the Jul $10 calls).

  252.  sorry – I’ve been doing covered calls… not buy/writes

  253.  pstas, GILD makes a ridonkulous amount of money.  The sentiment is exceedingly negative on them – they should give out a special dividend instead of buying back stock – that would make the shorts really scramble.   The patent cliff concerns seem overdone and premature to me – but i have been on the wrong side of this trade for a while.  People are still getting AIDS and are living longer.  It is becoming a chronic disease similiar to diabetes except the later is not sexually transmitted (thank god)

  254.  anyone know where the ABC consumer confidence index is?  wasn’t that supposed to be out 5pm?

  255. Just reviewed the posts for today…. Gosh, I missed a fun day.
    Pharm – NWBO is at this time,  just a paun in the hands of those that hype it from time to time. I believe wholheartedly in the potential they are accumulating, but their day in the sun is a ways off. I think the end game is a buy-out, and the rewards will be big. In the meantime, I do believe, our exposed sentiment can run this one up and down. Just to keep my efforts above board, I will be buying more this week if the price stays at this level for a few days.

  256. Jromeha
    The charts on the AUD/USD are a mess. I would stay away until a direction firms up.  At the moment I am in only one FX play – short USD/SGD – it has been a roller-coaster ride, but I am making some headway, albeit very slowly.  If I see a good entry on AUD, I’ll post.

  257. JRW
    Sometime I do far better if I am not watching the markets…. AAPL has saved me many times in the past, but I would feel much better if I could work the market like you. You are the master, and it is the slave!

  258. Interesting day; anyone could have made a killing going long before 10 am and letting it fly into the close.
    Me; not a bad day; first, got long some AAPL early.  Good move.  BUT, for some reason, took the quick gains instead of the ride into earnings.  Bad judgement and small profits.
    Then got out of my TNA from last Friday; and then in and out a few times for nice gains.  BUT then, expecting a pull back into the close instead of a jam job, got long TZA and gave most of that back.  We’ll see what tomorrow brings.
    Portfolio otherwise had a good day; frustrating, should have banked more $$ than I did.
    JRW wins again !

  259. Shadowfax,
    Could you please clarify your post on AAPL this afternoon? As it pertains with next quarter issues with ATT?
    The company is selling products faster then they can make them, and yet I hear bearish sentiment all over, or lets say, even higher expectations!
    So, please explain your thoughts if you can.

  260. What’s with the GE "we’re invested in" commercials? I thought at first that they were pumping for a dump but Talor Guitars isn’t public. Who are those commercials geared toward?

  261. testing…i’m not getting any pulse

  262. oops wrong day

  263. JR,
    I see why you don’t like to hold overnight.