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TGIF – Stop the Week, We Want to Get Off!

This week cannot end soon enough for the bulls.

While it's no shocker that we are finishing the week where we started and, in fact, finishing the options expiration period where we started last month (July 16th), it's still very disappointing that we are making no progress.  This weekend I asked if it was "Time for a New, New Deal?"  I went to DC over the weekend and I'll write about that this weekend but let's just say I'm not seeing the political will to actually do something major to put Americans back to work and, as I said last Friday, when I said "Hoping the Weekend Brings Perspective":

Weekend stance – off this disappointing two-day run I’d say as neutral as possible over the weekend.   I do think we need a good blow-off bottom now because we blew our chance to turn it around on volume yesterday. 

Trading Range – I was counting on QE2 AND a stimulus announcement by next week.  After the weekend we may have neither so it’s really going to be all about watching our levels in absence of any fundamental market forces.  Monday we have the NY Fed and NAHB Housing Index.  Tuesday is Housing Starts, Building Permits and a PPI that will also be BTE along with Industrial Prodcution (probable disappointment) and Cap Utilization (dragged down by refiners).  Thursday is Leading Economic Indicators and the Philly Fed and that’s it for the week so, once we get past housing, the newspaper is more likely to move the markets than the data points.

We got so-so Leading Indicators yesterday and a TERRIBLE Philly Fed, leading me to send out a 10:03 Alert to Members saying:

Whoa!  Philly Fed is disaster!  -7.7.  Leading indicators are up 0.1%, which is in-line but Philly was expected at +8 so this is TERRIBLE!  We should test yesterday’s lows at least on that.   

DIA $103 puts give good bang for the buck at .74 to stop the bleeding – just keep in mind thay have a ton of premium and need to be taken off quickly when momentum stops

While that play worked out very nicely, the bleeding I referred to was my 9:43 Alert to Members where I reiterated my "small gambles" on SSO, QLD, DDM and USO – but I did say at the time: "Don’t forget we get Leading Indicators and Philly Fed at 10 and that can save us or kill us so be careful!"  That's the problem with this market, danger around every corner for both bulls and bears!  It doesn't do us any good to get attached to any position, as I pointed out years ago in "Bond Investing, James Bond That Is."

We are almost certainly going to be breaking 3 of 5 of our mid-range levels this morning, which is our official signal to flip bearish until we take 3 of 5 back out of:  Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635.  It's going to be a tricky call into the weekend but I do think we can lean a little bearish if we're under so that means adding another round of DIA Dec $104 puts to our Mattress plays and even considering additional disaster hedges (our last set are doing quite nicely!) in case we drop back to the late June lows, which are the 5% lines below our mid-range at Dow 9,690, S&P 1,016, Nas 2,090, NYSE 6,460, and Russell 603

The Russell will give us a clue because they are already down at 610 and, if they break below our 5% line, then the others are very likely to follow down to at least the 2.5% line.  Even as I write this, I'm not ready to go there just yet.  Yesterday we looked at bullish plays on VLO, BWA, INTC, HOV, FAS, JNK and SQQQ (shorting it, which is bullish) because that's what we do at the bottom of a range.  It may not be THE bottom, but, just in case it is, it's nice to have some upside for a bounce.  We had a failed stick-save into the close and we knew that put us in for a rough ride this morning.  I had already commented to Members at 3:04: "I would say that HOPE is the only thing left for the bulls right now.  We did not get what we needed to move the markets higher."   

Keep in mind this all seems like a lot of drama but NONE of this affects our long-term trading.  Our long-term trade ideas are fairly conservative and our goal is to be about 35% invested in long-term trades that have a 20% downside cushion (Dow 8,150, S&P 850) with 65% cash so yes, we are very bullish off of those levels.  Unfortunately, those long-term plays, that can make 20% or better returns, are like watching paint dry so we amuse ourselves trying to find short-term trade ideas in this roller-coaster market.  Some of our Members ONLY day-trade, some are only long-term, some play both and that's all fine but when I start to see too many people worrying too much about the day to day gyrations of the market – I think it's a good time to point them back to our Buy List and our Dow Plays, which haven't been touched since early July and are doing just fine.  Just because the market is stressed, doesn't mean you have to be as well…

Meanwhile, I still just can't get behind the the bears.  We have a commodity sell-off this week and I love commodity sell-offs because they put money back in the pockets of the bottom 99% – who REALLY need it.  Gas was hitting $3 last month and now it's heading back to $2.50, which saves people $8 when they fill up the tank.  It doesn't seem like much to the investing class, who spend $8 on a latte while waiting for their tank to be filled but, to the other 270M people in America, it's a lot of money (assuming 2 cars per 100M households that fill up once a week each), $6.4Bn back in the pockets of consumers each month - so I LOVE oil sell-offs!

I don't know why people thought the BOJ would put up with the Yen falling below 85 to the Dollar.  That was never going to happen and any strengthening of the dollar is very bad for oil.  We had also expected the NYMEX crew to gnaw their own legs off to get out of the September contracts (and don't even get me started on that scam) and oil is still selling off this morning, below $74 but this should be the end of it and I still like USO to recover next month – even if it is another fake rally based on Iran or Pirates or Rent-A-Rebel because it's sure not going to be demand, which was destroyed long ago and is not likely to come back with 25% of the WORLD population unemployed or under-employed. 

Petroleum inventories rose to 1.13Bn barrels in the US last week, the highest level since the Energy Department began keeping combined weekly data in January 1990, according to a report Aug 18th.  Oil has fallen 9.9 percent since reaching a three-month high on Aug 3rd.  Demand for fuel products has declined 6 percent to 19.7 million barrels a day since the recession began in December 2007.  

Supplies may rise further as U.S. refineries shut for regular maintenance and the vacation-travel season ends, sapping demand for gasoline and jet fuel.  “Supply is rising faster than demand is recovering,” said Tim Evans, an analyst at Citi Futures Perspective in New York. “I don’t expect the bottom to just drop out here, but I think we will be asking the question: do we need OPEC to cut back?”  That's right Tim, God forbid we let oil find it's real price and give the rest of humanity a break, right?  

David Ristau's Oxen Group began a series on Alternative Fuel Investing that's certainly fuel for thought, especially if we do get some hurricane activity or something else that keeps oil over $70 despite the lack of demand because this will really be the last straw for global governments, who can't afford to send larger and larger percentages of their people's disposable income to OPEC, who have done very little to endear themselves to the rest of the World since… ever. 

The Yen tested the 85 line again last night and the Nikkei did not like that one bit as they fell 2% to 9,179 and that tugged the invisible 1,000-point band that connects the Nikkei to the Dow this morning.   The BOJ, of course, stepped in this morning and the Yen is dropping like a rock so we'll see how long they can keep that up.  We are ready for a dollar break-out but we need some positive news before that happens, one would think!  The Hang Seng dropped half a point and the Shanghai took a big, 1.7% hit, dropping 45 points to 2,642 but that's not really a worrying level and they were just catching up to yesterday's late Hang Seng drop, which I pointed out in the morning post.  India held flat (down 0.3%) at 18,401. 

Europe is all over the place with the FTSE down 0.4% and failing their 5,200 watch level, the Dax is down 0.75% and barely over their critical 6,000 line and the CAC is down 1.14% to test 3,500 so a HUGE pass or fail day for the markets – wish us luck – because we're going to need it to avoid a downturn!

Have a great weekend,

- Phil


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  1. Phil
     
    Pre-market has us right at 1070 and test of 10,200.  Are you setting up for bounce off these levels or sitting tight waiting for direction?


  2. Hi Phil  — AKAm I sold Aug 38 short put  and aug 41 short call, the putters now expired worthless, need your help to adjust the short call.  CNBC mention AKAM is poosible take over by GOOG, since high activities call option noted, not sure about this info….should I adjust to a back ratio spread or artificial buy write — thx for your help


  3. Peter D/SPY simulation:
     
    From your post last night:
     
    Sanity check: I recall someone was running simulations on short strangles last year, but it wasn’t me. If you’re saying you’d like me to look at it regardless, sure.
     
    What were your assumptions on premium sold per month, or did you look up the actual historical premiums? TOS maintains the actual historical option prices in "ThinkBack," but I don’t think they can be downloaded, so someone would have to do the grunt work of looking up 12 prices per year. Not a big deal.
     
    Whatever your assumptions were on premiums, your results seem reasonable. A covered call would do best against straight stock ownership in a flat market (2007), provide relatively diminishing downside protection in a market crash (2008) and get whipped in a bull market (2009). And increasing the strike reduces the hedge against your stock ownership, so you would’ve done better with higher strikes in the bull market of 2009.


  4. Phil / Anyone : Know anything about STX? The stock seems very very cheap. About 2.30 – 2.50 in EPS for the 2011 and 2012 years. Its trading at 11.10 now. Cash on hand just about cancels out their debt. Decent cash flow. Not growing a ton, but there seems to be potential….Interested?


  5. Phil--if one is putting on a mattress play for the 1st time how would you start?
    Tx


  6. From last night:
     
    pstas:   Ben Franklin was a great man ….
     
    revtodd:  NY Times approved "conservatives" like " David Brooks and Ross Douthat "  that you read in that rag are very marginally conservative.    go to corner.nationalreview.com and you will find many good, sensible conservatives that you may enjoy reading and learn something at the same time.
     
    exec:  Does Phil push my buttons ?  sometimes.  He and I enjoy our little sparring; plus I can’t just let him get away with spouting his political nonsense.  I hope one day to re-educate Phil politically.  He is such a smart dude and good guy that I find it hard to reconcile w/ his blindness on certain political matters.  And sometimes, I do like to provoke …
     
    Anyway; onwards into options expiration day; good luck to all !


  7. hanna/STX: Yes, it’s been discussed positively several times recently. I have a buy-write on with Jan 2012 $10 calls and puts. Phil likes it, I believe.


  8. I would have to say it seems like a ferocious bounce is in the cards somewhere.  I anticipate a strong rally at some point…


  9.  yip – it doesnt look like that bounce is coming this morning…


  10. anyone have any thoughts on cnx or nrg? thanks


  11. Hanna…probably not it could be monday/tuesday..but i feel pretty strongly it has to happen.  I think we fly through these levels on the next down stick but we need a rally back first.  I need get short again I’m only 20%….waiting for a rally to reload


  12. Good morning! 

    Big global test as we not only see ALL of our levels being tested at:  Dow 10,200, S&P 1,070, Nas 2,200, NYSE 6,800, and Russell 635, but we also look at EU levels of FTSE 5,200, DAX 6,000 and CAC 3,500. 

    What does it tell us when the entire globe flies down to test technical levels at the same time?   Well, for one thing it tells us our technical levels are still right on the money and for another thing it indicates that we have GLOBAL programmed trading controlling the markets so we take the whole thing with a huge grain of salt and resolve not to panic until we see those lines REALLY broken down and, since nothing that happens on an options expiration day is real anyway – I’m more inclined to take a bullish flyer or two into the weekend than go short but let’s see what holds up first. 

    Volume at the open is huge at 93M on the Dow in the first 10 minutes so, if we hold it, this is the blow-off bottom we’ve been hoping for.  Today is the last day of trading Sept oil contracts so we may get a final spike down as those contracts get dumped but then the Ocober holders will start pumping again. 

    I still like the USO Sept $34s, now .68 so a DD at .60 off the .90 entry yesterday would average 2x at .75, not too bad.

    I simply don’t like any downside plays at the moment as I think we bottom here.  DIA Sept $99 puts at $1.50 are good to play under 10,200 but very tight stops above that line – that should be  a good downside buffer while we wait to see if we turn back up today.

    Watch Europe at 11:30, that will be key as is copper $3.20 (now $3.26) and oil holding $73.50. 


  13. Phil;
    I sold pot jan 145 puts at $9.00, what is your take on pot?


  14. JAZZ compound Rekinla is currently under the gun at the FDA panel review….I hope all covered well or got out at 11 or so.  I think they get approval, but Adam F. from the street is there, and the past few times, the companies have been voted DOWN (expt ITMN).


  15. Pharm/JAZZ
    VEry good pick Pharm on this stock
    Thank you


  16. Phil/ Europe Down
    Phil this move looks fake.
    Almost all components of DAX, CAC and Eurostoxx are down at the same time by athe same amount as the index…on a very thin trading session.
    What are your upside plays to keep over the weekend as I think we have bottomed out for this session?


  17. Bought the USD/ZAR for what I hope is a nice ‘pip ride" The fear factor in the markets and money rushing into the dollar is overwhelming the commodity / interest rate strength of the rand. Buy at market – set stop loss at 7.2165, and limit stop at 7.8230. The charts are in sinc with this trade for a big ride up, as long as the dollar is strong.


  18. Thx lionel – now on to ARNA and the $7 Pin for Aug.  The Jan 5/10 C spread is 1.55 for those willing to take some profits and risk a few $$.  I am going to hold the stock until a few days b’f the review in hopes that they run it up.  Every dip below 6.5ish (if they do run it down to frighten a few out) I will buy into FYI.


  19. Bounce or no/Exec – Waiting is all we can do. 

    AKAM/Gucci – Well, on the threat of takeover, you may as well roll the caller to the 2012 $60 calls ($4.70) and sell the $35 puts for $4.70.  If they get bought between $35 and $60, both legs go worthless so not bad if you are willing to chance the upside.  Otherwise, it’s kind of dicey as a takeover would really slam you.  Another option would be to roll the callers to the Nov $47s ($4) and you take the Feb $42s for $8.35 and sell the Nov $43 puts for $3 so you are spending $1.35 more than you would to buy back the caller but you have a $5 spread plus time to roll and, if they get bought, you pick up the net $3.65 on the spread, which beats paying $4 just to get out now.  I don’t think GOOG does buy AKAM but the rumor can go on for ages anyway and can do just as much damage as the real thing. 

    STX/Hanna – I like them but the market sure doesn’t.  The problem is that disk drives are no longer big-ticket items.  They are tiny little things that might be in your pen or something (if you have one of those recorder pens) as they take less energy to run than chips with the same storage in some cases.  So STX is more like a semi company now and the people who follow them haven’t made that attitude adjustment yet.  I like them at $11.18 and you can sell the 2012 $10 puts and calls for $5.30 for net $5.88/7.94, which is a nice upside and a nice discount! 

    Mattress/Savitri - From scratch it would be the Dec $104s at $6.75 with a 1/2 sale of the Sept $102 puts at $2.50.  Keep in mind though that it is your JOB to roll the Dec $104 puts up $1 for .50 or less when possible.  Once you make 2 rolls up, then it is probably time to sell the next cover as you spend $2 of the $2.50 you collected from the putters.  It is NOT, however, a great time to enter the trade as the Dow is way down and the Dec puts are expensive.  Our $110 puts are up to $10.40 and those will stop out at $10, which leaves the trade with 1/2 x Dec $104 puts, covered with 1/2x the Sept $102 puts so not even a full position going into the weekend if we head back over 10,250 (which is about where we’d want to stop out)

    A better way to hedge at the moment is the DXD Sept $27s for $1.70.  They have a delta of .62 but can be transferred into a vertical if the Dow goes up by selling the $25 puts (now .20) for .50 and covering with the $29s (now $1) for at least .70, leaving you in a $2 spread for .50.   That would be the ESCAPE, at the moment I like the plain DXD $27s at $1.70 until we get a real move back up.


  20. Tx --Phil—I do have some sept DXD--I will leave it at that for the time being


  21. Gel my EURUSD short is working gloriously.  I’ve continued to add lots and it’s falling off a cliff!.  Love it!  I’m just nervous I’m not short the market.  I was prudent and not greedy but if I miss the ride down to 9600, past Phil’s end of world level, I’ll be bummed.  A break of 9800 comes before Sept 1st if not in the next 3 trading days.


  22. Hi all,
     
    Does anyone knows if there is a single trade in TOS that you buy back your puts ans sell 2X puts next month?
     
    Thanks.


  23. THe VXX is again telling the story… it’s down.  We are getting a bounce from this level at some point in the next 10 trading hours.


  24. Pharm--would you sell 6 and/or 7 sept puts on ARNA?


  25. STX/Chaps – LOL, I guess I do still like it!

    Utilities/Datuu – I think the high unemployment/underemployment and the 10M foreclosures and the millions of people who are behind on their rents and the millions of bankruptcies and the millions of people who are on filibuster away from having their unemployment checks cut off makes them a poor investment at the moment. 

    POT/42L – Well you’d better hope they get bought but, other than that, I think they are overpriced without a buyer.  This whole thing is the panic top of the Russian Wheat crisis but the World is not short of wheat – we still pay farmers NOT to grow it here and we ship millions of tons of it to Africa for free before it spoils here anyway.  It’s just a temporary misallocation of supply and I think things will normalize by the spring unless we get any more weather surprises.  So I don’t think it’s a bad sell but I would have gone shorter-term, rather than give a deal 5 months to fall apart.  Don’t forget, they were only offered $130 a share, the rest is all speculative frenzy…

    Fakeness/Lionel – I find it amazingly suspicious when each EU index falls a different percentatge but each one EXACTLY enough to get them to their test level – just way to convenient…  Upside plays would be the USO calls and then we could modify the ultra plays from yesterday into next month but, keep in mind, these are upside GAMBLES:

    • SSO Sept $33/35 bull call spread at $1.20, selling $32 puts for .95 is net .25 credit on $2 spread with SSO currently at $34.68.
    • QLD Sept $53/56 bull call spread at $1.75, selling $50 puts for $1,25 is net .50 on $3 spread with QLD at $55.03, starting $2 in the money there!
    • DDM Sept $39/42 bull call spread at $2, selling $39 puts for $1 is $1 on $3 spread with DDM at $42 so 100% in the money there too!

  26. Yip/Euro
    Congrats on your FX play!
    Alex Weber comments earlier today killed the Euro.
    It is funny to see how markets react to Weber’s dissenting observations but completly ignore Hoenig’s.
    At the rate at which the US Fed will need to expand its balance sheet to keep 30yr rates at the current level, USD/EUR may reach 1.50 very soon…


  27. yip – A lot of the guys I trade currencies with are selling the AUD/USD. Relative commodity weakness is weakening the Aussie, and the Dollar is getting support at the moment. Three different technical lenses ( Elliot, Head and Shoulders, Wedge ) all point to this trade as positive. I’m somewhat reluctant as I cleaned up on this one the last few days, and I do not want to get greedy.


  28. thanks phil


  29. lionel – I agree with your thoughts on the Fed balance sheet …. additionally all of the fears about Eurozone member states defaulting are a long way off in the future, as the monitary concerns are on hold for at least two years.


  30. Some looking for an IRA play might consider the VLO Dec 14/12.5 bull put spread for $.30. That’s a 20% return over four months if VLO holds $14, with a break-even at $13.70. And you can roll the short Dec 14 puts if you have to.


  31. Gel/
    Aussie elections with Saturday.
    If the right party gets elected, they will scrap the mining tax and AUD with mining stocks will fly up.
    If the left gets elected (pretty much priced in)
    If hung parliament (a possibility) AUD/USD may retreat back to 86
    For me it is too much of a gamble…


  32. lionel – are you in Singapore? I have been contemplating setting up an additional Forex account in Singapore, and need a good suggestion for a strong trading firm there that has a decent trading platform.


  33. bobhu- on the Analyze tab or Trade tab you can click a drop down menu under the Spread type heading (Vertical; Single; Strangle, etc) and click Custom which allows you to buy/sell different quantities.


  34.  With the current environment, i just cant see folks wanting to hold stocks over the weekend. So i figure we sell off through the end of the day, at which point we may have a good buy-in point for some more long term holds (which could turn into short term holds if we get a big monday bounce)…Anyone looking at anything to add?


  35. Chaps--Tx for the VLO play


  36. The bears aren’t going away easily today.


  37. Gel/
    I am in Sydney at the moment. But I am often in Singapore.
    Are you looking for a forex online broker based in Singapore?
    I know of MFGT.
    I can ask around


  38. Thanks pstas,
     
    I got the TOS from TD Amertrade and I can’t find "Custom" under the Sprade drop down menu.  Will try to get help from TOS support.
     
    Thanks again.


  39. Thanks Lionel.
    Gel I hear you. I’ve made out like a bandit.  I think I’m just going to hold my 5-10% puts and 90% in cash in those accounts.  My currency account is pretty loaded with short EURUSD but I’m comfortable there until we are back to 120.  I see the pattern on AUD/USD I like that trade but again like you staying out.  Other than that I’m going to stay out and go into the weekend enjoying a great 2 weeks.  If we rally the stock market all the better for a short at close or monday!


  40. lionel – Thanks for the "heads up" re the elections – yes, that could be a big market changer. I am always one that likes to be on the right side of things, so I am hoping the right will win and dump the tax idea. I believe I will enter a new position on Rio Tinto today, and lay low on the currency trade.( too risky ) I will keep your thoughts in mind regarding a hung parliament, as a nice currenct play could develop when the markets open on Monday in Asia. ( Sunday evening here)


  41. 42L,
    Have been Trading POT for quite a while now. I must say I agree with Phil. What ever they say I feel they overpriced.
    In a frenzy like this it would be better to sell a caller but putters to me could be dangerous. I am holding Sep 105 p and jan12 130 caller both short against stock.  I see on a daily bases they are now already going down day by day!!!


  42. o.k. they do have a website. (duh)
    If this looks interesting to any of the VCs out there i can forward more info to you. In case you didn’t see last nights post, a friend of mine is a part of the fund raising team.
    http://www.proximusmobility.com/


  43. yip; PCLN, no need to do anything right now.  Let it expire.  Even if it closes at a bit above 301, you can cover then for the same price that you can cover for now.  May as well wait ….


  44. lionel – great!  I would like to trade on line, and need a broker that has a good trading platform. I trade on GFT here in the US, and they probably have an office there, but I would prefer to trade with a different firm, in order to get their reseach.  Some of the best traders are in Singapore, I believe, and I would like to benefit from that connection.


  45. TOS/Bob – Even if I could, I don’t think I’d want to as those imbalanced trades don’t give you a proper price quote.  Just offer what you want on the roll and try to fill the naked set a little better.

    VIX/Yip – Good catch, the VIX is not believing the dip so why should we?

    Dollar/Gel – Expect Japan to pull out all stops to support dollar next week.  They can’t let themselves slip below 9,000 as they are one step away from Depression in the local economy and if they blow exports – BIG TROUBLE.  That means flood of Yens out there raising other local currencies and those Yens used to buy Dollars when possible (big Fed auctions next week are well-timed) so dollar may slightly outpace gains.  Best trade to me is just short the Yen but they’re way up at 85.67 already.

    VLO/Chaps – Very nice!  I never look at those but you are right, it’s a nice 20% return with a lot of leeway.  To be clear, Chaps is saying you SELL the Dec $14 puts for .66 and BUY the Dec $12.50 puts for .36 is a net .30 credit and ties up $1.50 in margin and, if VLO holds $14 (now $16.39), you make 20% on the margin.  I am generally adverse to plays that have a negative risk/reward profile but it’s no worse than selling naked puts on the whole and perfect for more limited accounts where naked puts are not an option.

    Adding/Hanna – If you have cash, better to keep flexible and play the hand that’s dealt next week.  A few small gambles are OK (and EU is holding their levels just barely) but Monday we could gap to either side based on whatever silliness. 

    Dow volume coming up to 11 is 126M so say 130M which is 40M since the first 10 mins – big slowdown!

    Currencies/Gel – Always good to bookmark a newspaper from whatever countries you are investing in.  Just a quick read of the front pages to know what’s up in the morning. 


  46. Gel/
    The mining tax planned by the Left party here only affects coal and iron ore miners. Big diversified miners with operations outside of Australia wont see much of an impact if the tax gets canned.
    You should bet on junior miners with Australian only operations involved mostly in coal and iron mining.
    That was the play today during ASX trading hours…


  47. Volume:  I bought some TNA thinking the BOTs would bring it up on low volume but not happening.  Someone needs to tweak the BOTs……their not performing as usual.


  48. 42L
    I wish to drawn your attention to PCLN here again. There are only day traders operating at this price. Yesterday they got up to 301 up from some 230 I think two weeks ago. when it got up to 280 in one day some of us sold the 300 Aug caller for 300 coming off line today. Any putters short over 250 could be risky.


  49. chaps,
    Thanks for the comments.  My short memory failed me again.  May be it was balancenv who ran the simulation with actual data that he bought.  When I heard your comments that you did software programing for many years, I incorrectly linked you to the simulation.
     
    Anyhow, your comments are valid.  I did a crude estimation of the premium, starting with the actual premium reading in April 2008.  Then I modified the algorithm to have variable premium that gave a better result when adjusted for higher VIX.  I could go to Thinkback and get all the numbers, but was too lazy to do the few thousand mouse clicks to get the premium ATM, ITM and OTM.
    If we blindly sell covered calls At The Money on SPY from January 2007 to now, we would be beating the index by about 20% (excluding commission).  SPY has been down about 25% since Jan 2007, so we are still losing 5% net.  With a more intelligent build-in, we can beat SPY by 10% a year, so roughly a beat of 40% (compounding) since 2007.  Not a bad deal for IRA accounts.


  50. 08:00 AM On the hour: S&P -0.4%. 10-yr +0.07%. Euro -0.81% vs. dollar. Crude -0.92% to $74.08. Gold -0.26% to $1232.20.

    09:00 AM On the hour: S&P -0.42%. 10-yr +0.02%. Euro -0.97% vs. dollar. Crude -1.28% to $73.81. Gold -0.58% to $1228.20.

    At the open: Dow -0.17% to 10253. S&P -0.13% to 1074. Nasdaq -0.27% to 2173.
    Treasurys: 30-year +0.09%. 10-yr -0.06%. 5-yr -0.05%.
    Commodities: Crude -0.91% to $74.09. Gold -0.56% to $1228.50.
    Currencies: Euro -0.95% vs. dollar. Yen -0.38%. Pound -0.58%.

    10:00 AM On the hour: Dow -0.7%. 10-yr -0.09%. Euro -1.06% vs. dollar. Crude -0.91% to $74.09. Gold -0.8% to $1225.50.

    11:00 AM On the hour: Dow -0.84%. 10-yr -0.06%. Euro -1.11% vs. dollar. Crude -1.1% to $73.95. Gold -0.71% to $1226.60.

    July Regional and State Employment/Unemployment: Rates little changed, with 18 states and DC seeing sequential decreases in unemployment, 14 see increases, 18 unchanged. Non-farm employment up month/month in 37 states and DC, led by DC (+2.5%), Hawaii and Maine (+0.9% each) in percentage terms, and Michigan (+27,800) in jobs.

    July Mass Layoffs: 1,609 mass layoff events (at least 50 workers), resulting in 143K job losses – down 38 layoff events from June. Total mass layoff events since Dec. 2007 beginning of the recession: 63,461, resulting in 6.35M job losses.

    Mixed signals from the ECRI Weekly Leading Index, which falls to 120.8 (a three-week low) from 122, while its annualized growth rate rises to -10% – directly on the line said to forecast recession.

    It’s been a busy week for M&A, especially in the U.S. which has lagged its global peers recently on major deals. The uptick suggests U.S. execs are growing restless as they wait for the broader economy to pick up.

    Unsurprisingly, a record number of U.S. workers are tapping their retirement accounts as the economic recovery continues to lag. In a survey by Fidelity Investments, 11% of workers had taken a loan from their 401(k) plan in the past year, up from 9% last year. Many of the loans are being used to cover basic expenses.

    The ECB will likely consider in Q1 2011 the timing for withdrawing its emergency lending measures, says ECB council member Axel Weber in an interview. His comments have spooked some investors by suggesting the ECB will support banks for longer than many had expected. Euro -0.9% vs. the dollar.

    Bundesbank’s Axel Weber says the ECB will continue to provide emergency loans to euro-zone banks through the end of the year. Outgoing ECB chief Trichet had said further unwinding of extraordinary liquidity measures would be discussed at the September meeting.

    A new and perhaps growing form of outsourcing… to the U.S. The ever-rising yen means keeping manufacturing and labor in Japan is a big disadvantage for firms like Sony (SNE) and Toyota (TM) that depend on exports to the U.S. "Soon many Japanese products will be stamped with the label ‘Made in America,’" 24/7′s Doug McIntyre writes.

    The worst is yet to come: The recovery is a "cover-up," and the U.S. is headed for the "greatest depression," Gerald Celente predicts. The crux of the problem is that the middle class has been wiped out, he says – "everything is for the big guys," and the government is killing entrepreneurship.

    Hitting the Transports’ bottom line:  The FAA wants to make an example out of American Airlines (AMR) for maintenance lapses, sources say, and will likely seek a civil penalty of $25M, nearly three times larger than any fine ever levied against a U.S. airline.

    Finally we catch up to the rest of the World!  BofA (BAC) and Visa (V) will begin a test program next month that lets customers use their smartphones to make purchases. Visa plans to conduct a similar test with U.S. Bancorp (USB) as well. (But they’re not the only ones chasing the mobile payment market…)

    With Rio Tinto (RTP) mum about a possible rival bid for Potash (POT) and no word out of Vale (VALE), another potential (though unlikely) suitor, Potash is said to be exploring potential alliances with Chinese sovereign banks and global chemical and agricultural companies to fend off BHP (BHP).

    Sinochem, the Chinese-state owned chemical group, is "paying close attention" to BHP’s (BHP) hostile bid for Potash (POT), adding it’s "interested in overseas potash investment opportunities" but declining to comment on whether it’s planning a counter bid.

    McAfee (MFE) helps Intel (INTC) get semiconductors laden with security features into smartphones, cars, TVs and other devices, but some analysts say that may prove a tough sell for consumers and businesses unconvinced that mobile electronics are vulnerable to the same threats that plague computers.

    Another burst of the deal chatter around Terex (TEX +1.7%) for the past few months sees a burst in activity in Sept. $21 and $22 call options, betting on a 16% price gain in the next few weeks. Options volume is at its highest point since June.

    Research In Motion (RIMM) -2.3% premarket on rumors of an imminent downgrade from a Tier-1 firm.

    Research In Motion (RIMM) is making "good progress" with U.A.E. officials on heading off a BlackBerry ban set to take effect Oct. 11. The U.A.E. will likely be given access to encrypted messages, while creating judicial oversight to address concerns about privacy violations.

    RIMM Sept $47.50 puts can be sold for $2.40.


  51. "TOS/Bob – Even if I could, I don’t think I’d want to as those imbalanced trades don’t give you a proper price quote.  Just offer what you want on the roll and try to fill the naked set a little better."
     
    Thanks Phil, You mean just do two trades?  Coz I am not getting it on "Just offer what you want on the roll and try to fill the naked set a little better", can someone explain?


  52. Hi Phil, I think I got it, put in order and get better price.
     
    Thanks.


  53. bought some HAL down here …


  54. Phil / Newspaper
    That is a terriic idea. Thanks!


  55. I guess GS and JPM are up today due to all their revenue coming in from POMO"s


  56. yip , lionel
    With The euro having dipped below its resistance line, I have taken a long position in the USD/HUF. The forint usually follows the Euro. I entered at market, set stop loss at 214.00 and will take profit at 234.00


  57. Here’s a bunch of facts about wealth disparity in the US everyone who reads this blog already knows


  58. Hi Phil, The question is on AGNC trading now at 27.04 paying a div of 20% looks to good to be true. Today I am getting assigned 300 stk or I can roll the putter to Mar 11 27p for 3.30 which would be more or less the same as the div over the next two quarters. Which one would you take ? The Mar caller by the way brings an other 1.00


  59. Phil: On VLO $14/$12.50 put spread advocate by Chaps,why not just sell the VLO $12.50 puts for $.36 ? Is the advantange of the spread less margin required?


  60. This is starting to look like Matt calls a free money day.


  61. dflam/VLO: The trade was specifically for IRAs where there’s no margin. If you sell VLO $12.50 puts for $.36 in an IRA account, you tie up $12.14 ($12.50 – $.36) in the trade, because you have to cash cover your max loss.


  62. Chaps- what is your thoughts on short strangles on AAPL for Oct 280/210 and Jan 310/190?


  63. Phil--I will be assigned UNG at 8--what is the best way to handle this
    Tx


  64. pstas/AAPL short strangles: That’s precisely what I currently have on AAPL short strangles, so I guess I like it. :)
     
    If you look at the P/L graph of these under TOS/Analyze, perhaps you can see why I like them. To be more conservative, one would tilt the mix towards more of the Jan short strangles.


  65. UNG/Sav – I am in the same boat, and am rolling to the Oct 8 P for a 20c credit.  I think UNG moves back up after a bounce in the 6.7 area.


  66. Man……this board really clams up when the markets off.


  67. Phil,
     
    What are you thinking.  Possible we bounce up to the 10,200 level for a close?


  68. today’s end of world trade

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    if Mkt takes SPY down to 105……

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    SPY August 106 PUTS here at .07 cents.

    7 cents to make 1.00 if it happens.  I’m not doing it just looking.  Im still waiting for a bounce


  69. Might even move to Jan11 for 43c or so.  Gonna see where they settle it on the day.


  70. Pharm--could you post when you are ready to roll
    Tx


  71.  exec / clam up : Some of us are still here! Still thinking we drift closer to 10100 by close, or if a big seller comes out maybe 10k….either way i will be lightening up on some shorts by the end of the day, as i agree with phil that in many places we are starting to see value and may be near the bottom of the range. If wrong, we can always add shorts back on monday…


  72. Chaps – AAPL strangles – yes, look good. Orders not filling this AM- THEY must be on to me.


  73. Proximus/Morx – I’ve been raising capital for my real estate data biz and it’s slow going.  The people who used to be happy to fund start-ups don’t want to touch them, even for something like ours, where we’ve done the same thing before.  You need to be creative in this environment, perhaps think in terms of small rounds that show progress before moving forward to ease investors into it…

    FTSE failing into the close.  Money flying into bonds over there and it looks like FTSE 5,194, DAX 6,013 and CAC 6,529 so have to wait for the settle but looks like FTSE is lost.  CAC worst performer as they cut growth forecast in plan to bring deficit in-line (and they also threw out the Gypsies).  Greece is still a mess as austerity does nothing to grow jobs (what a shocker).

    Dollar still going up but copper holding firm. 

    Guy on CNBC proposes "Hug a Wealthy Person Day" because they are being treated so badly by society…

    2 Trades/Bob – Yes, I’m saying fill the roll and while you are doing that, make an offer on the 1x extra that you are looking to add.  Sometimes you may surprise yourself and get a better deal that way. 

    POMOs/Jthom – That’s very likley.  I do wonder if all this selling is just perfectly timed for them to load up on calls (explaining the lack of VIX movement on the dip) ahead of some big buys next week.  They force all levels down to blow technicals, let the market dip low enough for the government to appreciate their help when they finally turn it on and then they wait for all the retailers to panic so they can begin buying at the bottom of the range.  This is pretty much what we do except we don’t have our hand on the switch so we’re only guessing where the turn is but that’s the point of following our rules – it helps us mirror the "smart-money" buy and sell points…

    Wow BDC – Nice collection.  The link at the end to How the Middle Class is Being Wiped Out is good too.  I’d like to take those charts and retitle as Chinese data and call them "Wealth Disparity and the Chinese Lie" and put it up on some Conservative web sites and collect all the comments.  They would probably say this proves we should invade China or something….  8-)

    AGNC/Yodi – I don’t like these trades because you can’t really protect them.  As you say, the naked put sale pays as much as the dividend and they have been rock-steady paying $1.40 per quarter, which is great on the $27 stock.  My mindset here is that you can do the March $23/26 bull call spread for $2.50 and sell the $23 puts for $1.40 and that pays you the same $2.80 you would collect as a dividend in Sept and Dec but you have $1 leeway on the stock dropping and your worst case is it’s put to you at net $24.30, which is about 15% built-in protection to go with your upside and, of course, you tie up significantly less cash

    VLO/Dflam – That play is in the new IRA Plots concept that RevTodd and the others have started for people who have to trade in restricted IRA accounts that don’t allow naked put selling (I know – barbaric!). 

    FMD/Exec – Getting freer by the minute!

    UNG/Savit – I’d sit tight.  It was a hurricane play and the season hasn’t really started yet.  The VIX is not very high so the covers are very dull and oil and Nat gas are testing lows so you’d be selling into a perfect storm.  I take it you sold the $8 puts?  If so you could just roll them out to the Oct $8 puts for +.20 because if we don’t get a hurricane by then – THEN I’d be worried. 

    And what Pharmboy said!

    Clams/Exec – I am very pleased when things are calm on an options expiration day.  It means we were well-positioned for the month… As to the close, I think leaving us below our  technicals raises the possiblility of an Asia crash, which can spin out of control and Mr. Stick probably does not want that so I’m looking to close back at our test levels.  If not, I’ll be a lot more worried over the weekend.

    Good attitude Hannah!


  74. Just sold aug 250 aapl puts for $1
    figuring market selling is about over and they are going to pin it at 250


  75. Spealing of short strangles – I just did one on RTP – January 50′s


  76. Sorry Phil, I am not gonna give you a hug.


  77. Phil/anyone--what do you think of selling XOM, 2012 $57.50 puts for $8.20? thanks



  78. 12:00 PM On the hour: Dow -1.16%. 10-yr -0.04%. Euro -1.09% vs. dollar. Crude -1.69% to $73.51. Gold -0.54% to $1228.70.

    Stocks head a for new leg down as the Dow drops 100 points; conglomerates are showing weakness (GE -1.8%; MMM -1.8%; EMR -2.3%), with Tyco (TYC +4.4%) a notable exception as it’s set to return to the S&P 500. The dollar still surging: +1.1% against euro, +0.6% against pound, +0.6% against yen, +0.5% against Swiss franc.

    August M&A Augurs Revival as Companies Tap $3 Trillion of Cash. Companies sitting on almost $3 trillion in cash are starting to spend it, putting what is typically the slowest month for mergers and acquisitions on course to be the busiest this year. Intel Corp.’s purchase of security-software maker McAfee Inc. yesterday brings the total value of announced takeovers to $174.7 billion, setting the pace for August to surpass March as the biggest month for deals this year, according to data compiled by Bloomberg.

    Interesting article as copper is holding up very well at the moment:  And like that, enough indicators pile up suggesting weak demand that there’s a copper sell-off. Tighter policy in China is expected to hold down growth; Deutsche Bank: "If inflationary pressures in the East become sufficiently high, this could have a negative impact on physical metal demand." Futures currently -1.1%.

    Housing Double Dip Is Not Just Tax Credit Hangover. You need only look at a report today from California-based MDA Data Quick, headlined, "Bay Area July Home Sales Down Sharply." Sales in San Francisco in July fell to the lowest level in 15 years, down 19 percent from June and down nearly 23 percent from July of 2009. It was also one of the largest monthly drops recorded. Blame it on the end of the tax credit? I don’t think so.

    More Tough Economic Times Forecast by CBO. The U.S. economy faces difficult times ahead with chronic unemployment and slow manufacturing hurting the pace of recovery, the head of Congress’ budget agency said on Thursday. The warning from the non-partisan Congressional Budget Office came on top of more bad U.S. economic data that heightened concerns about a return to recession, roiling markets. The gloomy outlook could also spell trouble for Democrats facing November congressional elections.

    Speaking of which: Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 26% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).

    Emerging-Market Hedge Funds Saw $1.5 Billion in 2Q Outflows – Research Firm. Hedge funds that invest in emerging markets recorded net outflows of $1.5 billion during the second quarter of this year, marking the seventh quarter of net redemptions the group has seen in the last eight quarters, an industry research firm said Thursday.

    Greek Crisis Refuses To Go Away. Together with Ireland and Spain they have borrowed €387bn from the ECB," he said. Spreads on 10-year Greek debt rose to 835 basis points over German debt. They are trading once again at the crisis levels of early May, before the EU launched its "shock and awe" rescue and the ECB began purchasing Greek bonds. Stephen Lewis, of Monument Securities, said investors doubt whether the EU/IMF plan is workable without debt restructuring and devaluation, the usual IMF cure for countries with such problems. IMF documents show that Greece’s public debt will rise to 150pc of GDP after three years, even if the government complies fully. "The markets suspect that Greece will have to restructure its debt sooner or later, and bondholders will be the losers. They don’t believe that Greece’s euro membership on present terms is economically viable..  

    Wild Trading in Metals Puts Fund Manager in Cross Hairs. Story involves allegations of a kind of improper trading that regulators worry is becoming more widespread. The Commodity Futures Trading Commission is investigating whether Pia’s trading at Moore involved market manipulation, according to a person close to the situation. Specifically, CFTC investigators are looking into whether Pia improperly tried to push up prices of platinum and palladium, possibly to boost Moore’s returns and his own compensation, this person says.

    100 Fastest Growing Companies.


  79. lol, jomama….that’s very nice………


  80. peter D, chaps
    If you want I can send you  Excel file with TOS data for every expiration day since 2007 (as far back, as TOS has it) , or Monday following Exp day, if you tell me TOS columns,and time of the day


  81. LOL Jo! 

    XOM/Datuu – I think that’s a very good net entry on them. 

    Risk/Mattl – It’s a good point.  The funny thing is that bond-holders don’t have a clue how risky their holdings are for the most part because inflation is just not a thing people think about but, if rates move up from 3% to 4% on notes, they will drop 20% in current value immediately.   Most people buying notes don’t understand that can happen to them.  Sure, they’ll still get their 3% interest and get their money back in 20 years but they also get trapped in the notes and if inflation keeps going higher, it’s not even a matter of having worthless money in 20 years because the adjustment is front-loaded to the cash value.   Once a few people get burned on these, equities will suddenly look attractive again but let’s not hold our breath for rising rates… 

    That’s another issue I had with Geithner, I said that the implied government backing of corporate/financial/municiapl bonds is one of the primary causes of artificial low rates and a misallocation of capital to low-rate savings, but his round-about answer reminded me that he’s the guy who is borrowing $1.5Tn a year at those low rates and he’s really not going to be the guy who seeks to reverse that process.


  82. hi Phil your comment from Savitri — so going into weekend -  only 1/2 cover for dec 104 put??? I still have Sept 100 putter full cover with December 110 put — now should change to 1/2 position sept 102 putters and 1/2 position of december 104 put and 1/2 december 110 put — thx


  83. Risk/bonds- a real cynic (not me of course) may point out the irony of Mr Geithner selling low rate bonds to unsuspecting dupes whom will awaken one day to the horror of declining principal and meager income in a likely much more inflationary environment. Of course, these folks should know better unlike the poor folks who were manipulated into buying over priced homes on the assumption that prices would never decline.
    Just sayin’.


  84. DC / Phil – you didn’t by any chance bring up VAT with those guys did you? Bet that would’ve brought interesting reactions.


  85. ed352/TOS data: Do you mean on SPY specifically? How did you get it, if you don’t mind me asking?


  86. DIA/Gucci – We were aiming to work out of those Dec $110s because they are almost a double and no sense in risking them.  The $110 puts have a .75 delta vs .56 for the $104 puts.  On the other hand, the DIA Dec $110 puts are still $10.70 and have not triggered the trailing stop of .50, now at $10.30 so the official position is still 1/2x DIA Dec $110 puts (now $10.70) and 1/2x Dec $105 puts (roll, kicked in, now $7.45) and short 1/2x the Sept $102 puts, now $2.60.  A full cover of Sept $100s ($1.85) can be converted to a 1/2 cover of $102 puts for about .90 (.45 per long) and you can roll down 1/2 the Dec $110 puts to the $105 puts and take $3.25 off the table, which is always nice to do.  I would sell 1/2 the $110 puts now and wait on re-covering though as maybe you want to finish the day with just the 1/2x $105 puts, which would be well-covered by the Sept $102 puts

    Cynicism/Pstas – In this case, very healthy cynicism!

    VAT/Snow – No, didn’t have chance to broach that that I remember (and I’m fairly sure I would).  VAT is being discusses by others who I spoke to but I don’t think it’s on T’s radar yet.  Also, it’s hard to bring up subject of reigning in tax evaders with Tim, who’s had his own issues, right?  If I knew him before, I would have gone for it but, at a first meeting, I think that might have given him the impression I was trying to do a "gotcha" or something. 

    What is this not going down thing the market is doing?


  87. Can we sell puts vs the BWA Sept45/47 bull call trade of yesterday? Sep 43P paying $1.10. Thoughts?


  88. Bonds/Phil – yeah, and when Nortel, GM, Enron, etc. all go belly up, bonds losing 20% of UR cash ain’t such a bad ROI.  Diversify, diversify diversify.  Treasury bonds have generated a total return of 13% from Jan 2008 – Jun ’10 versus -21% for equities….i repeat, diversify.


  89. Phil,
    good evening,
    If you can , please suggest me :
    I have bought   XOM  11Jan  55/60 bull call spread for 3.70. now 3.0
                                INTC 11Jan 17.5/19 bull call spread for 1.03 now 0.86
    those positions especially XOM are starting to hurt me. Should I worry? There is still enough time left , but… you know.
    thank you.


  90. pstas / bonds
    yes… you have it right – just another bubble, but with different players.


  91. UNG/salv – well, not worth waiting for and the VIX is retreating. Time to roll.  I am going for more premium, Dec 8 P.


  92. Gel- just another shining example of how putting faith in government to protect the little people’s interests is such a sound philosophy. 


  93. chaps/ TOS 
    look at the top third line under "onDemand" next to "Prodigio" there is a printer symbol. left click, click on "export to Excel", left click again (it’s equivalent to ‘control-C’ = Copy, go to excel spreadsheet, "control --V" (paste).
    more, cell values are really  TOS macros macros =TOS!……you can use these macros  to import real time data into your spreadsheet.


  94. The Hedge funds closing, seems to be quite a few happening, If they are returning cash may start seeing the 09 Jan to Mar kind of last hr liquidations in the nest few weeks, may push the market even lower  


  95. Tx--Pharm--very much appreciated


  96. Back in 1980/81 I had a client who used to carry a cost basis $500.000 portfolio of municipal bonds at about 4.75% average rate in a "suitcase" and once a month he would drive to the city to cash the coupons……… he did’t trust anybody….  The portfolio was worth about $350,000. After many months he agreed to sell and purchase $350,000 of telephone AAA bonds with an average rate of 15.62%…. Several years later we sold the portfolio (prior to the companys calling in the bonds) for a 40% profit. All these people entering these safe bonds… will not know what hits them………. and the will be stuck with no place to move…. another learning lesson.   


  97. Hey Phil – I entered the SDS 35/38 on July 21st, selling half the Sept 31s for $.95. Today i bought back the puts, up 80% and the calls will expire. The puts about half covered the loss on the calls.
    Should i have exited this earlier in the month? If that’s true, my excuse is that i have been traveling. Or is it that it’s a disaster hedge that fortunately we havent had to use? Help me understand, please.
    Been profiting on other hedges so thanks a bunch.


  98. Phil / All:
    I really appreciate the conversation on bonds, and I agree, it’s another bubble, people are going to get hurt. I’m doing my best to stay out of the way of trouble.  But the question I would pose is, where do we park money, park it safely and with SOME kind of return.  Tens of a % don’t really carry the freight. If we are talking 50 to 75% cash in our portfolios, this can be substantial. Comments anyone?


  99.  Phil,  some time ago I ended up being assigned 2000 TBT at 42 and I’m looking at repairing the trade.  Would you recommend a close in buy-write like Sep 34′s and rolling forward, or a further out date like Jan11?  I don’t mind taking a put assignment and getting my basis down over time (before getting out profitably).


  100. acobra65    Former broker? I am an old grey haired broker myself trying to understand all the new paradigms!


  101. Jbur:  Phil’s strategy of Buy-writing Dividend Yielders seems like a good way to make a return every couple of months, with a disaster hedge tacked on to mitigate a market crash, it seems safer than bonds at this point.    Especially now that the blue chips are kind of cheap again.


  102. Phil:

    re: I am generally adverse to plays that have a negative risk/reward profile but it’s no worse than selling naked puts on the whole and perfect for more limited accounts where naked puts are not an option.
     
    A somewhat mellower version (I think) of this versus VLO is with XLF, since it’s an index. As you say, the characters may change in the bankster drama, but somebody will be there. (Of course, VLO’s not going anywhere.) You can do Dec 10/11 bull put spread for $.12, which is 36% annualized. XLF has held $13 for over a year.
     
    Obviously there are more risky XLF plays with higher strikes or shorter time frames.


  103. ed3524/TOS: Wow. Thanks! I haven’t entered the OnDemand world in TOS yet. Like I was saying yesterday, I’m in awe of these guys technically.


  104. SD – has anyone researched this one lately?  I recall that EricL was loading up on it back at 8, and down here  at 4 it seems like a pretty good buy. 


  105. Exec … Free Money Day is my trademarked term, not Matt’s !
    lol


  106. Once again NFLX and PCLN are just about the only 2 stocks that are green.  Too funny.
    Yip; they cannot make me sweat this one out …


  107. SD … my research indicates that it goes down 5% every day !


  108. kinki:
    Thanks for the post.  The buy/writes are great for income production, but in my mind, it’s still not the cash part of my holdings. I don’t think that even AAA rated municipal bonds are a safe bet at this time, especially with the state and municipal shortfalls were are witnessing today.  Perhaps there is no good answer except to accept depressed returns on cash until / if things heat up.


  109. Cap- SD- yeah, what is with that? I am in a Jan spread now under water and looking to bail. Still some insider buying. Any insight?


  110. Pstas… the unfortunate thing is – the "little guy" is blinded by HOPE and keeps voting these folks into power. The little guy is duped into thinking the ones who have destroyed their future are the upper class for being so greedy. Those in power are fomenting the "class warfare rhetoric", therefore convincing them their resources are being taken from from them.  In reality the successful are maybe working harder and taking more risk, and exercising more prudence in how they handle their money. The rhetoric is without merit, as it is motivated through political motivations. Solutions are needed to rebalance the income disparity in our country, but the current disingenuousness by our politicians is the worst way to address the problem.( editorial for today  )


  111. Jbur- short strangles for cash yield- but very conservative plays can work with manageable risk.


  112. Strangles/yield – I seem to recall that Peter D expounded on this very subject but quite a while back. Perhaps he will comment again?


  113. SD…. a lot of debt; low NG prices; that’s the big problem.  The recent acquisition they did is good. 
    May not be much downside from here and possible takeover target.
     
    I own some at about $6   :<(


  114. Lol, the ask for next weeks GE $8 and $9 calls is $200K


  115.  I. HATE. FIXED. INCOME.


  116. jthoma – Broker??? – You surely can become "broker" in this difficult market – many are. ( even hedge fund guys )


  117.  Cap/too green:  CTXS has also been up all week much to my chagrin


  118. Phil – I know you’re not a big fan of Chinese ADRs and if the market tanks this stock will crash even further but *if* you were bullish on APWR going into earnings next week how would you play them? I was debating the Sept 7.5-9 call spread and selling Sept 7.50 puts for .55  or going with the Dec 7-9 call spread and selling the 7$ puts for .90…… Both


  119. Phil--in general would you cut back on some hedges with sept strikes ITM--or keep thru weekend?
    Tx


  120. gel1- have been for 35 years- far different game than I used to play- love to trade personally and actually spend about 50% of my time doing that now and the other 50% keeping my clients from losing their money


  121. BDC – fixed income has beaten this market by a wide margin the past few years.  F bonds, Merril Bonds, etc during the crash were a phenomenal investment, as were Treasuries (PIMCO). 


  122. Cash/Jbur: Thats my situation as well, as I am holding about 90% of my portfolio in cash.  But at least I can kind of have the peace of mind knowing that in the current disinflationary environment, the purchasing power of my money is not going down, and if we truly are in a deflationary environment, might even be going up.


  123. $7 for ARNA…go ahead, make my day….


  124. jthoma:
    Broker ?? For about 2 1/2 years for Shearson and because I didn;t like the environment (manager was a "sly crook" and top producing brokers were given all the cream), I left and started my own firm in 6/80.  I was doing financial planning with monitoring and tracking before it was in vogue when E.F. Hutton entered the business.  All the brokers back then, "fliiped" their name place over from "broker" to "financial consultant"… WALA…. a financial planner.  Soooo….. in my opinion, the mutual fund and partnership business of years ago, so much a part of the business in the 1980′s and 1990′s his history.  The only way to make money is learning how to trade… I have been swing trading since about 2000… but, even though I have done very well last year and this year, so far …. I needed to learn the option strategies………. So, that’s why I am with PSW…..Lot’s of very knowledgeable traders on this board.


  125. gel1:
    I am starting to feel sorry for the "hedge funds" with several of them "throwing in the  towel"… guess it’s pretty difficult turning that "titanic ship" around in the ocean…….. nothing like being nimble….. LOL


  126. Waiting for IWM break resistance and buy TNA!! Damn it’s time let’s rally for a few days.


  127. DCTH – I’ve been playing this one with Pharmboy and having lots of fun. The 1 year trendline on the lows says it should bounce off of $6.25 and head up from here so selling some more JAN 10 puts.


  128. Pharmboy/
    Totally agreed and I still think they are the right investment to protect your wealth.
    Bonds are the primary form of investments in Europe and in Japan.
    Japan 30Yr is at 1.60% and 10Y is at 94bp
    US 30Yr is at 3.63% and 2.58%
    Germany 30Yr is at 2.89% and 2.27%
    Pimco is channelling stocks savings into bonds.
    In my opinion the bond bull rally has just begun…


  129. BWA/Sunil – Sure, they are holding up pretty well but, on the other hand, not much harm in waiting for the weekend, just in case…

    Diversity/Pharm – I’d rather diversify with shorts, especially on GM! 

    XOM,INTC/Slaimonas – January is a long way away and you are right to want to take action with a 20% loss but bull call spreads, as I often say, are traps and are not very easy to adjust so you need to have A LOT of faith in your targets.   We generally pair them with naked put sales because it lowers our risk (as long as we REALLY want to own the stock at the net price, and if you don’t REALLY believe in a stock enought to want to own a stock at a net price – why the hell would you be buying a bull call spread in the first place?).  Both XOM and INTC are currently right aty the top of your spreads so any "loss" you have is an illusion caused by Premium and any action you take based on this temporary loss will only lock in a worst-case scenario.  The real lesson here is don’t make these trades if counter-moves bother you.  You have a net purchase of XOM at $58.60 and a net purchase of INTC at $18.53, unless they fall below that price AND you no longer feel they will recover – then there’s not much to worry about. 

    SDS/Morx – Yes, at the point at which you were down 50%, you could have used your remaining value to roll to longer-term coverage.  Since the trades play 5:1 generally, you can roll 3 times and still do well if you ever get a pop and, if not, then hopefully you made some money on the upside.  Always keep in mind it’s insurance.  It keeps good value until the last couple of weeks but then fades very fast.  Let’s say, for example, you had salvaged .40, that would have gone towards the Dec $31/36 bull call spread at $2, so net $2.50 (your loss) on the $5 spread, less the .42 you picked up off the put sale (net $2.08) and you can sell the Sept $32 puts for .66 to begin working the basis lower. 

    Money/Jbur – Good weekend question.  That’s one of the few times you may hear me talk about commodities as a sound investment.  Also, keep in mind that we often discuss usuing the cash (margin) of your account to sell puts to pick up a little interest.  It’s 2pm and right now I can sell TNA $32 puts for .25.  Selling 50 of those pays $1,250 which is 1.4% IN ONE DAY (in 2 hours actually) on the $86,441 TOS wants to hold.  I’m not saying that’s the best pick but you get the idea – it’s EASY to make a very nice rate of return leveraging the cash in your account and it leaves you flexible to take advantage of opportunities when they arise.  

    TBT/Lv – Madness, right?  You are down $21,000 with $62,940 tied up in TBT.  When you get behind you look to get even, not ahead.  March $27/33 bull call spread is $3.10 and you can sell $28 puts for $2 for net $1.10 on the $6 spread so just 40 of those gets you back $19,600 and the worst thing that can happen is you get re-assigned 4,000 at net $29.10.  TOS says net margin on the put sale is $22,200 plus the $12,400 in cash for the spread still leaves you plenty of money to adjust with if TBT takes off but this way, all it needs to do is get back to $33 by March and you are about even off your original set. 

    Bullputs/Chaps – That’s another fine play but a little boring.  Tying up .88 for 4 months to make .12 just seems nasty to me but I guess we’ll have to look at comparisons and see what’s available and give more thought to the overall risk/rewards but it’s an excellent track.

    Nas coming on strong!

    APWR/Jrom – Thank you for that excellent qualification which allows me to say that a bullish way to play earnings would be to sell the Dec $8 calls for $1.05 against the March $9 calls at the same $1.05.  If earnings go well, you can buy a few more March calls or you can start out with a 5/4 advantage if you are more bullish.  That takes the risk out of earnings and if they head higher, you can add just 2 more March calls and you gain a 3.29 to 2.65 delta advantage plus the time premium and then you can sell puts and, if the earnings disappoint but you want to stick with them, you will have free March calls and THEN you can sell some puts. 

    Hedges/Savi – Depends on the hedge but if you are well ahead, then yes becasue you can always use cash to make a new decision with better data on Monday. 


  130. Hi Cap I see you still put to much fertilizer on PCLN but I am still waiting for an hour or so possible they finally will crack.


  131. ed3524/TOS: Oh, I see. It doesn’t have anything to do with "On Demand." It’s just that all data currently available on the screen, whether hidden or not, can be put into a spreadsheet.
     
    I do this all the time with historical trades to track complex positions through time. Didn’t realize you could do it with any screen. Duh.


  132. I don’t know how volume has been but stocks have somewhat clawed back today.  Market internals have improved throughout the day, though not by a lot.  NASD almost even now.  The Dow still weakest, I guess reflecting the weak dollar and how it will hurt the big Dow companies. 


  133. acobra65- could not agree more- it is certainly helpful to have more than one head to listen to!


  134. Phil – what are your thoughts on selling the Dec 40 Puts on RIMM for ~2.15 as a conservative play on them ? Thanks


  135. 01:00 PM On the hour: Dow -0.87%. 10-yr -0.12%. Euro -0.87% vs. dollar. Crude -1.48% to $73.66. Gold -0.47% to $1229.60.

    02:00 PM On the hour: Dow -0.9%. 10-yr -0.12%. Euro -0.86% vs. dollar. Crude -1.48% to $73.66. Gold -0.53% to $1228.90.

    Lots of critical stocks touching 52-week lows today, as double-dip fears escalate and risk is pulled off the table. Banks bearing much of the brunt – WFC +0.2%, BAC -1.3%, BBT -1.4% – but pain is spread across sectors: BBY -1.3%, CME -0.9%, CSC -0.6%, GPS -3.2%, HPQ -2.6%, MHS -0.8%, MDT -2.8%, MWW -1.9%, RTN -1.1%.

    Useful per our conversation:  Credit Suisse draws up a roster of dividend-paying stocks to consider, with payouts yielding more than bonds. Verizon (VZ) tops the list with a 6.5% yield, followed by tobacco giants Reynolds (RAI) and Altria (MO), with Eli Lilly (LLY), Duke Energy (DUK) and Southern Co. (SO) in the next tier.

    So the U.S. is inevitably headed for a Japanese liquidity trap? Not so fast, says Credit Suisse, which has nine reasons why America isn’t turning Japanese.   And not one link to the video?   What kind of report is that???

    Considering the housing and consumer-debt nature of the financial crisis, the biggest mystery may be that so few bankruptcies have been filed.

    We keep lurching from crisis to crisis, but John Curran says the weird thing is that it’s the same story with a new headline: the global debt crisis. Greece isn’t topping headlines this week, but it hasn’t gone anywhere close to away.

    Finally, someone says something about these jag-offs (besides me)Matt Taibbi was off a bit, David Stockman says: The real "vampire squid" isn’t Goldman Sachs (GS), but Pimco as it attempts to run a "raid" on the Treasury with its mortgage-nationalization call: Pimco generates billions in effortless profits from Treasurys and guaranteed housing paper, and "wants to swell Uncle Sam’s supply of this no-brainer paper even further."

    Three lunchtime reads:
    1) Shrinking quant funds struggle to revive boom
    2) How much debt does the S&P 500 have?
    3) Krugman: Appeasing the bond gods

    Do you ever get the feeling that Krugman reads our chat before picking a topic? 


  136. Phil:
    re: That’s another fine play but a little boring.
     
    Right. I often go for about $.12 on a $1 spread  in a month (e.g., currently XLF Sept 13/12) in IRA accounts, but I know I have to be willing to stay on top of it and roll in an emergency.
     


  137. DCTH/mrm – ahh, music to my ears.  They need to float here for part of next week and then I will be buying calls.  They are bouncing off the 5d MA which is serving as OH resistance.  With that Sept $6 P for 55c – selling ‘em.  Now I have the Sept 6 and 7.5 P, along with the stock.

     

    For a 1 mo play, buying DCTH here, selling the Sept 7.5 C/ 6 P strangle for 95c is 15%.


  138. Damn I have a disease, I cannot go long.  Fook.


  139. TBT is taking off -  someone is selling his LT bonds.


  140. Yip, let me help you.
    Today s bottom was 60.25 on IWM and now we are just 61.05, still a long way to go :)


  141. JAZZ getting the shakedown at the FDA.


  142. RETS is the new 2x short retail ETF if anyone is looking for a longer term short retail trade


  143. PCLN – as Phil says ‘a trend is only a trend until it isn’t', but from a quick chart glimpse it appears that you could have bought PCLN every day for the last 10 days at 10:30am and sold it later in the day for a profit.  I think I’ll try this on Monday because I really enjoy breaking trends!


  144. All about the Trends in PSW.  Nice chart and if SPX holds here, may be in for a swing up early next week. (?)


  145. I would say that this is a good trade and a bit more conservative than Phil’s suggestion in that it reduces the risk of assignment to a greater degree.
    DKGuy
    August 20th, 2010 at 2:41 pm | Permalink  
    Phil – what are your thoughts on selling the Dec 40 Puts on RIMM for ~2.15 as a conservative play on them ? Thanks


  146. chaps/ tos IB as I understood from previous chats, you are using TOS, and IB.  IB has a big problem with TWS: the prices in TWS are average prices (if I buy an option first time for $1, and second time for $3, and then sell the same contract for $1, TWS will display average price as $2, and if I’m using FIFO, the real price should be $3),  so if I have many positions in the same expiration (and some positions are traded several times)  I can’t rely on TWS, and I don’t know my P/L unless I have to run their FLEX report after their batch run after midnight ET.
    how do you reconcile your real P/Ll with TWS?   (if it was Jordan  or somebody else, not you, sorry)


  147. Welcome back MrM….on OPEX no doubt!


  148. yip;  gotta luv manipulation; its gone higher than I would prefer; but there is still time … no need to do anything right now, after 3:30 I will start thinking about it….


  149. FJD – Thanks for the feedback. I had missed Phil’s pick earlier. Thanks again


  150. Thanks Pharmboy, I took a long vacation and actually made more money ignoring the market than I have been making day trading, so clearly I need to stop over-trading.


  151. Ah this is quite amusing, isn’t it? 

    Good observation on internals at 2:34 FJD!

    Dow volume at 2:55 is 188M but don’t forget 90M came in first 10 mins of trading so it’s actually been a slow and stickable day since then

    Interesting background Acorbra – it’s great to have you here.

    RIMM/DK – At 11 I liked the Sept $47.50 puts as a short sell at $2.40, they are still $2.30.  You can start there and roll if you have to…

    Bullpust/Chaps – I look forward to hunting for those!

    POT still going up!

    Trends/Pharm – Man that stochastic is low!

    Welcome back Mr. M and a valuable lesson for all (one I was trying to convey in the morning post).


  152. yeah, I am with you there on the day trading.  Vacation is a good thing for many reasons.


  153. fjd, i like buying the rimm 50/55 bull call spread.


  154. Phil – Thanks. For some reason I had missed your earlier post.  


  155. Hey all,

    We have a new Long Term Investment in Ford (F).

    Check out my valuation and thesis.

    Good Investing,

    David Ristau


  156. Well, JAZZ (even though the drug is already approved just had the knife stuck in them by one FDA memeber….’no doubt this drug will end up on the street. he strongly opposes approval. REMS can’t be strengthened enough. we will have more date rapes and deaths.’  That was what I was worried about!


  157. revtodd
    would you put me on the IRA idea list?
    lori@schweickhardt.info
    Thanks,
    Lori


  158. ed3524:
     
    You’re right, it was me using both TOS and IB. As you say, you can’t track complex trades through time easily with IB. I simply don’t do complex trades there. In fact, the only reason I have accounts at IB is for risk diversification in case TOS’s clearing firm blows up. It sucks that you have to worry about such things, but that’s reality.
     
    Since I trade a lot of SPX short strangles hedged with put verticals, I’m constantly maintaining spreadsheets created from TOS exports so that I know exactly where I stand at any time. I don’t think you can do this with IB.
     
    This is why, if you take advantage of the TOS analytics, you realize that what they’ve done (which nobody else has done) was not cheap or riskless to build and can make you money. So there’s some rationale to their commission structure. Said another way, if you’re not taking advantage of that stuff, go to IB and save on commissions.
     
    So, I only do long-range buy-writes and short puts in IB. The buy-writes are real "watch the paint dry" stuff, but that should be the foundation of your portfolio anyway. Speaking of which, 2013 Leaps will be out soon!


  159. Yip; just rolled for a 3.80 credit to the Sep 320′s.
    Aug 300 closed at 2.00.  I had sold it for 7.20 when I entered the trade.
    Now short the Sep 320 at 5.80.
     
    34 minutes to go ….


  160. Well, coming right down to the wire whether or not we hold up. 

    Right now it’s Dow 10,200, S&P 1,070, Nas 2,178, NYSE 6,803 and RUT 609.  SOX are green and up half a point (go USD!) so that’s the index we expected to lead a recovery

    Oil may have found a bottom at $73.50 and copper on breifly considered going below $3.25 but flew right off that and is back to $3.289 so how weak can things really be?

    Certainly no pickup in volume here.  30 minutes after my last check and just 10M more shares traded with 35 mins left.


  161. Phil, I’ve been a member for almost 6 months now.. and it’s funny how OFTEN you repeat things over and over and over again.. I mean, most of the stuff is repeated for new members, but others not quite.. it’d be great if there would be a way for you to quickly pull out the answer from some database in your system to an old question and just paste the response.. similar to a Knowledge Base but more efficient. you should look into this with your programmers, it’d definitely save you significant time. Then you can devote the rest of the time to other similarly important things.. you need to have a bit more time to be on top of your analysis of the markets and not only catching up with members in their questions.. I"m amazed though on your bandwith.. impressive. What would happen when you REALLY need to take a one week vacation? …


  162. Lionel glad you’re so sure, can you tell me the top? :)  
    Cap, I’m staying away, I’ve killed it the last 2 weeks no point in chasing.  I thought it was going up but man it’s struggling to do so I couldn’t hop on and I’m not hopping on and holding long over the weekend… hells no even if it’s likely to gap higher monday.  I am convinced the downtrend will resume after so rally, lionel? 
    Cap wow your confident even this rally fades?  I’m half feel we can get another ferocious upswing before we really break down toward 9800…this seems like the pattern to me.  Either dow 10450 or somewhere toward 10600.  If that happens I’ll be so happy because I’ll get SOOO short. 


  163. Phil- would like to send you a small token of appreciation for your help- no not a bomb or white powder- could you please give me a physical daytime delivery address- if you prefer you obviously can find my email address- thanks and great weekend to you- Jim


  164. Vacations/Rav – What are those?  Actually I prefer to take several long weekends as opposed to one vacations but I do owe my kids a cruise next year so we shall see if the markets can survive without me next summer for 10 days.  Meanwhile, Kwan and I (mostly Kwan) have been working on a Wiki project which hopefully will do a lot to address FAQs.   On the other hand, I think, like good college professors, that I do actually get better at answering things over time and I don’t want to stop practicing my explanations until I really do feel I couldn’t possibly explain something any more plainly or succinctly. 

    Token/Jthom – Thanks! 

    3:00 PM On the hour: Dow -0.57%. 10-yr -0.33%. Euro -0.84% vs. dollar. Crude -1.24% to $73.84. Gold -0.45% to $1229.80.

    Only a "pathetic" 37K received home modifications in August and 48% of the 1.3M homeowners who started a mortgage modification have dropped out, according to the latest HAMP report. With month after month of dismal reports, it’s getting harder for the government to spin the results, Diana Olick writes.

    This was the busiest M&A week since December, with nearly $85B in announced transactions – and right in the middle of it all is Goldman Sachs (GS). According to Dealogic, Goldman has been listed as an adviser on five deals valued at $60.1B.


  165. I have to say this has been the most relaxed OpEx days I’ve ever had… probably b/c all of the fireworks and fire fighting happened earlier in the week! Or maybe it’s just starting to make more sense for me. Have a great day all.


  166. Phil…Love the last quote you have…..The Obama housing program is a joke of a failure can you admit that?  No I don’t like George Bush.


  167. Phil,
    As a lecturer at a university, I can tell you that you’re absolutely right about getting gradually better at explaining things (and generally becoming a better writer) the more you do it.  After ten years, I’ve soured on teaching, but that’s mostly to do with the need for more income and the encroachment of my "day job" (the one that pays the bills) making the teaching be something I have to do in my free time rather than having it be my primary job.  But I’ve never gotten tired of finding a way to get someone’s light bulb to turn on.
    Kudos to you for being a great teacher!


  168. Yip/
    I wish I knew!
    My only conviction is that we are ranging at the moment SPY 105-112.
    So we are close to the bottom of the range. With all the fake moves, my only conviction was that we wouldnt close lower than 1070.
    Next week looks good on the macro front until Thursday.
    We need a panick to break lower and I dont see it coming next week, so by elimination I will bet on a mild bounce.


  169. I was looking at the daily candlesticks for SPY.  The Friday June 25 bar and period up to it look a lot like today.  Anyone think next week will look like the week of June 28?


  170. Money is Bugs Bunnying out of bonds again as the market looks interesting – possibly staging for a little stock buying next week.  As it’s so late, I’d look for TBT to move up on Monday to confirm a souring of demand on the bond side and that would mean cash is moving back to the sidelines looking for some deals.

    Since it’s the kind of cash tha scurries into bonds, I’d be looking closely at those dividend payers so remind me over the weekend and we’ll see who looks the most interesting. 

    Nice JBur – That’s what I like to hear. 

    HAMP/Yip – That was a strong point of contention we had with the Jr. T-People before Timmy came in the room.  Of all the things we talked about, that was the program that we (the writers) felt was the biggest, most usueless mistake they were making.  Essentially, they said they were just happy with the delaying factor, that put off the foreclosures for 6 months and gave the economy a little bit of breathing room so, in part, the whole thing was a sham to buy some time.  This is one of the reasons I haven’t written up the meeting yet – I have that whole bill to read before I can even pretend to pass judgment on what they were saying but my gut felling was – BS! 

    Thanks BBD!  I love that too, someone said before how quiet it is today and to me, that’s a success – to have Members who are in control of their portfolios on an option expiration day at the end of a wild week like we just had…. 


  171. boobearsdad  –  the best teachers are those that have students that are motivated to learn.  Some of the best teachers are not recognized, because their words and skills are targeted toward uninterested minds.


  172. How can you not like George Bush……he cried on TV for god sakes!!!


  173.  Phil, 
    As I mentioned I was off to Europe for a couple weeks… and with your help tried to position to be as neutral as possible. It would have been OK, however I had -10 AUG TBT 35′s Puts sold for .70 (and 300 shares of TBT) and they have obviously been hammered. Do you recommend rolling them (I am going to be assigned the 1000 today and I have the 300 that I have held already for 8 months now down over $4K) so I took a bloodbath on these…To make it back would you recommend selling the shares at a loss and selling new puts? Which exp and strike would you recommend? 
    Thanks


  174. Interesting IWM closed about same place as last OE…


  175. I reiterate what BBD said--Tx for repeating and please keep repeating--the more I learn,  the more  I realize I have so much to learn--Tx again for helping out us newbies
    Savi


  176. Also the range for SPY is similar:  June 25 108.42-106.77, Today 107.94-106.75.  Not that I put that much into it, it is just staring at me and got me thinking.


  177. Phil, would love to have you weigh in on SD over the weekend. Thx.


  178. Wow, what a crazy way to hold our levels! 

    Dow 10,213, S&P 1,071, Nas 2,179, NYSE 6,813 and RUT 610.  The same reds we had all week (and last week) so not much happened in the grand scheme of things. 

    Not a clue what will happen next week but I’m sure it will be interesting.

    Have a great weekend,

    - Phil


  179. USO/Phil – I decided to hold the USO calls over the weekend. Was that unnecessarily risky in your opinion? It felt like we held up down here pretty well and are setting up for a rally next week.


  180. JAZZ just got the big NO vote…..wow oh wow.  Wish those puts filled the other day….


  181. Lionel…I like the logic…I’m not sure if the market is still digesting and pricing in the crappy news we just had or it has and it’s waiting for more.  Obviously I should have done what I set out to do this morning after covering all my shorts…GO LONG… Hey i’m not complaining I’ve killed it lately. 


  182. ed3524 & chaps,
    Sorry that I’m just checking back in.  Thanks, Ed, for explaining how to download the data.  I need to run now, but will take you up on the offer of grabbing historical data from TOS.  Let me look at my spreadsheets and let you know what historical data that would make the most sense.  Thanks in advance!



  183. CHAPS: short strangles
    Yesterday.I asked you, and Peter D, and other guys about short strangles, but nobody answered.
    Does it make sense to sell straddles, or strangles ATM, not OTM as you guys do?
    In addition,  to mitigate the risk I will buy  OTM puts (or put backspreads) , and OTM calls (calls backspreads). these transactions result in a credit, and don’t require big margin (margin is really fixed), assuming that all short ITM options are covered by long OTM options.  Of course it may be combined with verticals, but in this case the margin will be different.
    You guys probably tried it, and decided that probability of profit, and P/L itself, favor your strategy.
    SO: what’s wrong with selling ITM strangles/straddles?
    IF any of you is willing to do CRAY PLAY again—-you’ll have many followers.
    thank you
    If you guys decide to do one more time CRAZY PLAY—-I’m sure you would have a lot of followers


  184. Pharm,
    I’m only holding one Jazz 2012 call. Should I double down on Monday/Tuesday weakness? Will they recover?


  185. ed/short strangles: What you’re outlining (with the long OTM puts/calls) is a special case of a  short iron condor. If you relax the restriction that your shorts are sold at the same strike, that’s a short iron condor.
     
    Short iron condors are a strategy several of us, me included, have employed. I’ve used them only in IRA accounts where there’s no margin. In non-IRA accounts, many of us who do short straddles have portfolio margin, which in many ways mitigates the margin problem – but at a risk – portfolio margin tends to hide your real risk exposure. So you have to be careful.
     
    If your shorts are a straddle, as you’ve outlined, you tend to get into trouble quickly when the price moves away from your strike – meaning you’ve got to roll frequently, which is generally not good. That’s because you’re going into the money somewhere as soon as the underlying moves.
     
    Also, one quickly learns that when you sell options on indexes (e.g., SPX), your risk is much greater on the put side than the call side. The market knows this, which is why premiums are higher on puts than calls when you move equidistantly any amount from the current money. You’ll generally find it’s easier to roll out of trouble in an up market versus a down market. Markets generally crash down, not up.
     
    The crazy plays consist of investing some of your premiums in put verticals as insurance against a crash. I think of it as a booster rocket in the 3-stage rockets they used to send guys to the moon. In a crash, you cash out your put verticals and use the money (the boost) to roll your short verticals lower.
     
    The short strangle/crazy play with portfolio margin is from Peter D. If you take the time to read his posts starting last fall, you’ll learn a lot.


  186. ed3524,
     
    Sorry that we missed your question.  Sometimes we forgot to search for questions to our names!
     
    I did a crude analysis on Short Strangle Profit/Loss Expectancy last year and found that At The Money Short Strangle profitability is much less than OTM spreads.  Again, it wasn’t a purely scientific analysis, but we can see that the cushion ATM is much less than OTM and the extra credit we get with higher premium ATM is not usually enough to compensate for the possible large moves in the underlying.
     
     
    Are you talking about Iron Condor with buying OTM Puts and Calls to cover the short strangles?  I personally don’t like Iron Condor as you can get wiped out on big moves, and trying to adjust Iron Condors is very difficult.  Some folks on this board play Iron Condors well by getting rid of the losing leg, and getting out way before expiration, but it’s not for me right now.  I also wrote a comment on how Short Strangles are the most profitable among the strategies of Covered Calls, Iron Condors, Buy/Write (with a short put).  Anyway, depending on the account types, investment goals, and how much time committed to trading, each strategy has its own pros and cons.
     
    For the Crazy plays of nesting long Put verticals within short strangles, I’ve been doing it every month, just not posted here as the interest went to the more exciting day trading tactics (which I also learned a lot from it).  Now I’m really off on the road.  Have a good weekend!


  187. Yip – I am short those calls on PCLN, not long.


  188. Cap.. I saw that you said you were short calls.  I was just saying you are bearish in that you decided to go short today on that bounce.  I was saying I was waiting for a higher entry, a further rally.  Who knows I’ll be thrilled if were up monday and bummed watching opportunity slip away if it goes lower… we shall see! –


  189. Phil and others, ZeroHedge posted a note that today represented the second confirmation of the spooooky Hindenberg Omen.  Any thoughts on whether this kind of technical "indicator" should be taken seriously?  It seems that these sometimes start as a side show and end up becoming a self-fulfilling prophecy.
    http://www.zerohedge.com/article/second-hindenburg-omen-confirmation-many-days-third-ho-event-one-week


  190. JAZZ/ace – probably sell a few P against the C you have and roll that baby down if you wish. Yes, they will recover, as they need to do a few more studies and also get REMS on the drug for the panel to give it the ok.

     

    The panels have been very, very harsh on companies the past few times I have ‘watched’ them (via thestreet.com), and it gives me a sinking feeling for ARNA.  Efficacy is minimal, and safety is fine (I think), but we need to be aware that the FDA panels are very harsh on things right now in light of Meridia, Avandia, etc.  The public is on a high right now, lashing out at companies, so these drugs better be as safe as water.  Strap on UR boots, cause this is gonna be a wild ride.  I am going to keep tight reigns on this one. WE WILL BE BUYING PROTECTIVE PUTS A DAY OR SO B"F THE FDA PANEL!  I just want the stock to move up a bit for us to enter.


  191. yip; didn’t you have a short Aug 300 call ?  What did you do ?


  192. Matt – if you are here – going to be in N.VA (Tysons) Sat/Sun.  Leave email or phone # if you see this.


  193. Phil/Cap
    Politics:
    Be glad we can afford to have politics in this country. It’s a luxury, not available to most in most countries where people are too busy trying to survive day to day.
    Recognizing this, there are some ‘truisms’ that we have to acknowledge as human beings….democrat, republican, socialist, right wing, left wing or wingless.
    Most ‘ humans’ would agree that we all have a right to live, obey the laws of the country and in return, we are afforded some freedoms.
    If you have a few taking repeated advantage of the majority ALL the time, you HAVE to know that cannot last and eventually will end badly, whether you believe in laws of economics, social structure or cosmic law.
    Yes, we need to take care of our less fortunate in society, their health, basic human needs, etc. To that end, I totally agree with Phil.
    And yes, the 90% cannot live JUST to support the 1%. It has to change, especially in the US, IF WE TRULY BELIEVE WE ARE BETTER HUMAN BEINGS.
    Its very simple.
    However, I have also seen socialism destroy the very fabric its supposed to support, with human nature taking advantage of the benefits provided free of charge.
    There HAS to be accountability, incentives to work hard, and INNOVATE and be PRODUCTIVE. That is what will get us ahead and our future generations will be better off, hopefully.
    So, let’s take care of our poorest 1%, incentivize the 90% middle class to innovate, work hard without being ripped off by the top 1% and without being given new entitlements every month.
    And no, the politicos will not get you there….they want to get elected and re-elected….
    So, you are both right and both wrong….Just draw up a list of principles which you would like us to live by as humans, and it is not complicated, folks(to use Phil’s investment phrase
    Sorry, I am not very political, but reading this site’s daily posts, I could not help but say something after 4 months of following you guys.
    Great investment advice, thought provoking and potentially financially enriching!


  194. Mays… Very thought provoking post. I agree with much of what you have said, in particular the comment addressing the failure of Socialism. Your solution, for the most part, follows along with my beliefs. I believe in incentives in order to energize behavior, however, out system as it exists today, disincentiveizes responsible behavior – just the opposite of what is needed.  To wit – we have a family structure that is in decay, encouraging a disrespect for discipline and the normal standard for character benchmarks.  Our constant implimentation of endless entitlement programs by our government, characterized as "rights" is the worst that is being  done in our society to build individual responsibility and pride of accomplishment.  Our society is "rotting" because of our own behavior and values, as we now have generations that have  been raised on over consumption and under achievment, and it is now the accepted way of life. Those that have become successful monitarily, for the most part, did not accept this mind set that prevails today, wherein they believe the world owes me what I desire.  The successful, for the most part, are hardworking, motivated achievers that wanted a better lifestyle, and were willing to make the sacrifice in order to achieve their success.  If we want more of these productive folks in our society, then we should back off on the free stuff, and teach the young to put forth effort if they desire life’s perks. It will have to start there – not bashing the successful as "greedy bastards" that we so often hear.  A successful society is a "competitive" society, that teaches one to be better than the guy you envy, if you want what he has. We encourage the opposite –  Instead of participating in competitive activities, our young are sitting in front of a computer screen or watching TV for six hours a day.  In prior times when our society was far more successful. our young had part time jobs delivering newspapers or mowing yards etc, and learning the work ethic. Not today – the parents, if they are still around, are handing everything to the kids without suggesting the kid participate in the cost of the stuff. This commentary is not about politics, but is targeted toward the decay of values in our country, which is having an effect on our overall wealth distribution. – Politics will never "fix" this problem. 


  195. gel1
    Agreed!
    The problem is our leaders do not start off with basic principles that can be used to solve problems efficiently.
    If they did, and did not worry about elections, party politics etc, we would be well on our way to a higher standard of living for a much larger population in this country.


  196. on the BWLD sell Sept 35 Puts buy 40/45 call spread, I bought back puts for .05.  Not much upside left in that leg.
    Thanks