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M&A Monday – Goldman’s Golden Goose

Hope springs eternal at Goldman Sachs.

This morning our favorite Banksters goosed the EU markets by upping targets on international mining operators Kazakhmys, Lonmin and BHP and that got the European markets off to a flying start out of the gate, despite the fact that UBS had just DOWNgraded the same sector on Friday.  UBS said on Friday that the sector is facing difficult times concerning potential growth with government rulings on mineral leases and the proposed supertax on mining profits in Australia set to hinder metal-based stocks.

We also have a lot of M&A activity, also courtesy of GS, who are leading the resurgence this year with 225 deals to date worth $401.6Bn, accounting for about 20% of all activity going through Goldman's sticky fingers.  In a sign of the times, however, GS only generated $961M in revenues as an M&A advisor as they cut a lot of discounts in order to land the top spot in dealmaking.  Although outdealt by GS, MS, Rothchild, JPM and DB all made more in fees than the Uncle Lloyd show.

In a sign of the end of times, GS's London Headquarters has been taken over by lenders after the owner fell into receivership.  GS's landlord, Antedon, is an offshore real estate firm that bought the building for $500M at the top of the market in 2007 and GS has locked up the building through 2026 at what seems to be not enough money to keep Antedon liquid – it would be very interesting to trace the web of deals that led to this massive default.  

Meanwhile, the consortium of Irish investors that own GS's other London building are also bailing out, this action is coinciding with what Ireland's Independent says is a campaign by Wall Street Hedge Funds to short sell Irish Government Bonds.  US hedge funds Groveland Capital and Corrientes Advisors are thought to have taken major positions against Irish debt. Giant €60bn asset-manager Pictet also revealed that it had earlier bet against Irish government bonds. JP Morgan is also thought to have taken a bearish position on Irish debt.  The International Monetary Fund estimated that up to €3bn of Ireland's debt was being targeted by speculators through the uses of derivatives.

So, plenty of reasons to be cautious this week although it will be hard to cut through the fluff as our hedge fund heroes all do their best to jam things higher into the end of quarter.  I said to Members over the weekend, as we reviewed our September's Dozen, that if I were going to make an October list – it would more likely be a list of stocks to sell short at the moment.  Still, we need to wait and see how our indexes perform into the last few days of Q3, even as we begin to get the fist hints of earnings.  The S&P is up 10% from where we flipped long and we are well-hedged (maybe over-hedged) for a downturn:  

It's been exactly a month since I blamed the MSM for engineering the last downturn (see "CNBC and the Rally Killers") and now they are back in cheer-leading mode.  On Tuesday, the 30th, I made my case for why I thought we were in "Depression" mode on our Market Mood Chart (below) but I did worry that I was only in "Denial."  It turned out I was right to be a little ahead of the curve with my "Hope" (the whole week at the bottom can be reviewed here) but now I have to wonder if my "Anxiety" is coming too soon after "just" a 10% move back up in the markets.  


With the dollar at year lows on Friday, it was easy to punch commodities back up, led by gold at the $1,300 mark with copper breaking over our $3.60 target and oil back over $76 ($77.50 is our "sweet spot" for crude) but we do not like gold to be up with the market and we don't like to see TLT over 101 as that's more of a "fear indicator" than the VIX ever could be as it shows people are willing to essentially put money under the mattress at no interest rather than risk it on the stock market.  That's leading to these pathetically low-volume moves up which, in turn, lead to these spectacular sell-offs.  

Duck season/Rabbit seasonSo our big and proximate market dangers are Irish defaults, commodity bubbles popping, resistance at 1,150 on the S&P, and income tax increases (along with the usual suspects).  Tomorrow we get the Case-Shiller Report for July and September's Consumer Confidence numbers.  Wednesday is just oil inventories but Thursday gets exciting with revised Q2 GDP, Job Losses and the Chicago PMI and Friday is a big finish this week with Personal Income and Spending, PCE Prices, Michigan Consumer Sentiment, Construction Spending, ISM AND Auto Sales – Wow, what a way to head into earnings season!  

Warm-up earnings we'll be watching this week are JBL and PAYX today, WAG and ZZ tomorrow, ATU, AM, FDO, MDRX and WOR Thursday and APP, MCK, ACN, BLUD, and MU on Friday.  Next week things get serious with AA on Thursday but, before that, we'll hear from MOS, DMND, YUM, STZ, COST, MON, MAR, RT, HELE and  PEP and THEN it's earnings season!  

Even if we pull back this week, we have accomplished what we were looking to accomplish back at the end of August.  We've established a floor at 1,070, 10,200 that looks like it may hold this time and that gives us a firmer base from which to retest those 10% lines but the low volume keeps us nervous, as do the uncertain and unresolved global issues.  

We finally saw some signs of life from the Shanghai, which jumped 1.4% this morning and was straight up all day into the close at 2,627.  The Hang Seng added 1% EXACTLY and closed right where it gapped open at 22,340 and even the Nikkei played ball with a 1.4% gain – despite the fact that they still can't get the dollar over 85 Yen.  

Japanese Foreign Minister Seiji Maehara said that Japan's government is determined to prevent further appreciation of the country's currency and raised the possibility of further government intervention to curb the yen's rise.  Mr. Maehara told The Wall Street Journal that the Japanese yen has "strengthened more than indicated by the actual strength of the Japanese economy." He said "speculative moves" had contributed to the currency's rise against the dollar. 

"Any further appreciation of the yen should be stopped," Mr. Maehara said, in an interview on the sidelines of the United Nations General Assembly meetings here. "Going forward, there may be a possibility for the Japanese government to show its very determined intent" to keep the currency from strengthening," said the foreign minister.

The EU, on the other hand, wishes their currency were stronger – as it would keep borrowing costs down and lower the price of commodities.  In general, the EU nations trade with each other so a strong currency is less of a concern for them than it is for export economies like Japan and China.  Keep in mind that the EU has a pathological fear of INflation, owing to their experiences between WW's 1 & 2.  Also, when the government is already on the hook for medical care and retirement for 500M people – they are right to be concerned about little increases in long-term costs.     

Europe is flatlining into our open which, in turn, looks flat as well.  We had such a good day on Friday, just holding most of those gains will be a win today and we really would like to see a little volume consolidation before we make another run at the 1,150 line on the S&P.  Ideally, another look at the 1,123 line that holds followed by a nice, steady move up through earnings would make us a lot more confident that we will be able to see 1,200 by the years end.  

We had plenty of short-side hedges going into the weekend and it does not look like we're going to have a big crash at the open so we'll be watching our levels with 5% lines at Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666, with all of them over the line – those are the lines we want to hold for the week to stay bullish.  7.5% lines are Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672 and that's right about where we are with the Nas leading us over so we'll see what sticks this week and whether or not I have to start putting up 10% lines!

Until then, let's be careful out there. 


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  1. Pharm – is there a position on AVNR (I know you addressed this before, my head seems to have stopped working)

  2. The solar sector has lagged this rally, but there have been some recent pops in LDK, JASO and SPWRA.
    A stock that has some value and looks ready to participate is YGE
    Trading at $12.14, you can sell the Jan12  12.5 C and P for $6.20
    Everything has gone up so much there might be some rotation into lagging sectors.
    Coal might get some action too.

  3. AVNR – OMG I cannot stop laughing, no crying….sorry, more because my Pseudobulbar Affect is effecting my writing….


    In all seriousness,  Here is an older NYT article on them.  The active ingredients are dextromethorphan (cough suppressant in many cough syrups) and quinidine (antiarrythmic).  Three trials have been done, and the latest show a positive effect for PBA.   October 30 is their FDA date, so I would do a vertical if anything…..buying the Nov 2.50s and waiting to sell the $5s could get one into a 2.50 spread for under a $0.50.  Otherwise pull it now for 65-70c.  Will they get it?  Not sure, as I don’t know if it is even classified in the CPT codes or by neurologists.  Maybe a doc on the board can answer that.

  4. Hey all,

    This morning we are looking to enter a new position in AirTran Holdings Inc. (AAI). The company is poised for some quick movement this morning after news that the company will be purchased by Southwest Airlines (LUV). In addition, to this post I will also be covering a Play of the Week and Longterm Rating on Frontier Communications (FTR).

    Check out the story here.

    Good Investing!

  5. Nice premarket move up on CERS after the release of large study positive outcome.
    Pharm/ What will you do next?

  6. Phil
    I was thinking of selling AMZN Oct 160 weeklies.  Should I be out further than this?

  7. Pharm – I personally, am avoiding all of these weight loss drugs – i think the bar is set very high and it is nearly impossible to avoid some signifigant side effects.  Major diabetes drugs have signifigant effects, but the good mostly outweights the bad (cardiac risk).  I got a new weight loss drug – eat less and exercise.  Its magic.

  8. sorry about spelling "significant"

  9. TLT- Phil- question on your early morning comment here – I am not arguing your short call one way or the other- You called for a short at 105 and now again still good at 103. I guess I was not paying attention when you made it but what prompted this call at 105 vs the prior high of 108? Technical indicator or what?

  10. CERS – may have to buy some more in here.  I like them a ton.  MDT, JNJ , and others may as well.


    Jo – not sure about the weight loss portion, but wondering if PBA is a ‘true’ disease as recognized by neuro/psychiatrists/etc.  AVNR to me is like VVUS, OREX and the like as it is two drugs that are generic, put reformulated in one pill.

  11. jomama
    new weight loss drug – eat less and exercise.  Its magic.
    My, my what a concept. Must be a new gov’t. program. :)

  12. CERS – well with that premarket move, might be worth it to buy some here and see if they can run it back up.

  13. pstas / fat government — Not possible, there is no money to be made for the government that way.

  14. Good morning! 

    They worked hard to pump us up pre-market, now we’ll see what sticks.  If this is a prop job into the end of quarter, we can expect 4 days of choppy trading with downward pressure as some smaller funds begin to cash out and bigger funds try to keep the prices up.  Big funds can’t cash out because that would tank the market so their goal is to print nice numbers for their quarterly reports – possibly while scooping up cheap puts (low VIX) and then they tank the hell out of the market, making money on the puts and buying again at the bottom (once they ratchet up the fear again by having their pet media outlets juggle the guest list).   

    A little cynical?  Sure, but it’s Monday and I haven’t had any coffee yet.   

    I am very excited to add our 7.5% lines – if we hold those then my cynicism may be misplaced but if they break, then we look for a retest of 5% and 4% is the line we dare not cross or we’re back in the low end of our range already…

    • Up 7.5%: Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 
    • Up 4%: Dow 10,608, S&P 1,112, Nas 2,288, NYSE 7,072 and Russell 660
    • Up 2.5% (MUST hold): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650

    2 of 5 is NOT bullish enough to chase us out of our hedges but let’s watch that 3 of 5 line. 

    BIDU hit our short target at $100 and I believe they are up simply because they ran out of stocks to manipulate the Nasdaq with.  Low VIX makes the Nov $95s a fun play at $5.30 for a stock that is 200% higher than it was before the markets crashed on not that much more earnings.  Nov $105 calls can be sold for $5.80 to make this a free trade and those can be rolled to the Jan $115s, now $5 so unless BIDU runs up 20% from here, not a bad trade but scale in because if a lot of people short something at the same time – "THEY" may spike it up to force covering and THAT’S the big opportunity to go short.  

    It’s going to be a fun week and then we have earnings, where we have fantastic backspread opportunities at these levels so strap in for a wild ride!  


  15. Good morning,


    IWM 64.22, 64.42, 64.94, 65.23, 65.53, 65.88, 66.36, 66.65, 67.15 and 67.87

  16. Phil / Coffee — eck gads! You are now my super hero if you do your morning posts BC (Before Coffee)!

  17. jomama/weight loss
    "the good outweighs the bad"….. LOL Everytime I read about Pharma creating another drug to satisfy the American public’s "make it easy for me to rid this problem"…. I just have to laugh.  Exercise and eat less… yes, but for most of us as we age, the metabolism quits functioning as before.  For me, I needed to lose about 30 lbs to get back to my ideal weight…. like back in college…. many years ago.  For me, i don;t believe in putting synthetic "sh*t" in your body. I adopted a protocol of an Italian doctor’s study 40 years ago and just lost 25 of my 30 lbs in the last 5 weeks…. (the medical community says it is hocus pocus…. LOL)   My twin brother keeps going to the doctor’s office to get "more blood pressure medication" etc……  

  18. Good morning Phil
    The Rig Play of some while ago holding NOV 60c long pd 3.16 now 5.00 Rolled from Sep and having now  the short Oct 57.5 sold for 4.42  now 5.05. Question shall I kill the play now before the long caller loses time or roll the Oct to 57.5 nov now trading at 6.45 Rig trading at 61.80 thks
    On the Mattress Play what Oct putters are you looking at for future sale?

  19. JR,
    What are you seeing today?

  20. Any know why NFLX price seems be running inverse of the market?  Is this irrational or is this another manipulation to get more sheep into the yard?

  21. acobra65/25lbs.  Congrats on the loss. 25 pounds in 5 weeks! Were you lost at sea? Would you mind sharing with your screen watching brothers and sisters? Thanks

  22. Funny post by Joshua Brown, T-Shirt Time for the Bulls:
    "Each week on MTV’s The Jersey Shore, we witness one of the most bizarre pre-gaming rituals in the history of Dudekind.  Of course, we are referring to T Shirt Time, the precursor to a Jerseyite Guido’s big night out clubbing.  The blatant peacockery of the whole affair has an analog in a developing trend of bullish pageantry that only this month’s 9% rally in stocks could have possibly engendered.
    What exactly is "T Shirt Time"?  Basically, the meathead male cast members sit around in their wifebeaters or bare-chested, drinking what I can only assume is some sort of Vodka and Human Growth Hormone cocktail.  They are awaiting the magical moment when it becomes "T Shirt Time".  Once the word goes out that it is, in fact, T Shirt Time, the purple, black, red and silver rhinestone-studded garments in question are put on with a reverence akin to the way Marines fold their country’s flag on the 4th of July.  And then, with T shirts lovingly adorning their orange torsos, the meatheads roll out into the night, bent on having someone’s daughter make decisions that they will surely regret – soon and forever."
    The rest of the article is very insightful.

  23. exec

    I have no idea; there;s no reason to buy, or sell, We could just hang here until Friday. It’s like Phil says, gunfight at the OK Coral (everyone waiting for someone to do something)

    But it’s Monday so I got a 1/3 position in TNA when it hit my 66.65 line

  24. JR,
    What’s the deal with Monday’s?

  25. Funny article by Joshua Brown, the Reformed Broker:
    T-Shirt Time for the Bulls

    "Each week on MTV’s The Jersey Shore, we witness one of the most bizarre pre-gaming rituals in the history of Dudekind.  Of course, we are referring to T Shirt Time, the precursor to a Jerseyite Guido’s big night out clubbing.  The blatant peacockery of the whole affair has an analog in a developing trend of bullish pageantry that only this month’s 9% rally in stocks could have possibly engendered.

    Stock bulls, who had been stunned by the springtime euro shock that threatened to derail the rally, spent the bulk of the summer with their heads down.  They may have been buying, but they certainly weren’t bragging about it.  In fact, some of the most-respected market commentators and traders I follow wore their large cash positions and their admissions of uncertainty like badges of honor.  Until two weeks ago, it was hip to be scared."

  26. exec

    Of course TBT is telling me I’m on the wrong side of that trade !!  And it’s getting worse; true manipulation.

  27. exec

    Taka a look at the average gain on Monday since March of ’09

  28. JRW – Would you consider a video tutorial on your set-up and trade methodology? You have provided the tools and it would be great to look over your shoulder to see how they’re used. Thanks

  29.  Solar/Ben – Keep in mind that they need $75 oil to look good long-term and that’s one of the reasons for poor performance as well as concerns that various government subsidies – both here and in Europe, will terminate under budget concerns.  LONG-term, I love solar – solar is the future because the Sun’s energy is the the only trade import this planet gets but that’s a very long-term perspective.  SPWRA is still resonalble at $13.69 and WFR is still my favorite at $11.70 but both will be cheaper if we break down so waiting for those would be my solar plan.  

    AAI/David – Don’t you think $7.30 is about it?  I kind of doubt they’ll get a better offer.  FTR is one we’ve always liked.  They are good at $8.05 and you can sell the Jan $7.50 calls for .70 and the May $8 puts for $80 and that’s net $6.55/7.27 so a 10% discount if put to you and 14% if called away in 3 months (assuming the puts stay even above $7.50).  

    AMZN/DD – My attitude is that you are taking just as much risk selling $160 weeklies for $2.35 as you are by selling the Oct $160s for $4.60.  The Delta difference is just .05 so pretty much you are letting the weekly guy soak you for a 2x ROI to the upside vs the longer caller and, if AMZN goes down to $150, the Oct $160 caller will no longer offer you $4.60, will he?  It’s not about what you buy but what you can roll to.  Are you comfortable getting net short on AMZN at $162.35 or $164.60?  If not, what’s the roll?  The Nov $175 calls are $4.50 so are you comfortable being net short at $179.50 and waiting until Nov to determine your fate?

    TLT/Pstas – No real change other than the same $3 hedge takes you to $108 from $105, right?  Now that we’ve had a better look at it, $105 does seem to be the proper top and I really do believe Japan even though no one else seems to think they will pull the trigger.  Heck, they even announce $55Bn in stimulus this weekend and nobody cared.  If I were Japan and I wanted to trash my currency, I’d go back to America and buy some REIT assets – that sure did the trick for them in the 80s!  

    BIDU – See I told you to scale in!  Huge punch up to $101.50

    Coffee/Rain – Actually I’m not much of a coffee achiever, more of a green tea guy but I do like lattes for variety.  Tina’s a real coffee snob with all gourmet beans and a grinding machine so sometimes, like this morning, it smells so good I can’t resist.

    Laughing/Acobra – My family has this joke that we turn up the volume on the drug commercials at the disclaimers and react to the list of horrible side effects that they rush through at the end.  It is really insane what risks they will take to ease symptoms rather than, as you guys have been saying "just eating less and exercising more."  

    RIG/Yodi –  You have the Nov $60/Oct $57.50 spread at net credit of $1.26 and now it would cost you .35 to kill it.  That’s a pretty nice gain and I think shorting RIG is a big mistake now that they’ve cleared the BP issue (more or less) so I’d pay the .35 and keep the .91 and be happy to get out.  If you want to play more risky, just roll your $60s up to the Jan $65s and take a buck off the table and hope RIG moves back down, otherwise you’ll then have to consider a 1.5x roll up to the Nov $62.50s (now $3.70).

    Mattress/Yodi – I am very stubborn at the moment about just sticking with the Jan $108 puts naked at $4.90.  I think we are certainly going to pull back to 10,700 and, if that holds, then we can sell $107 puts but they are only $1.15 now so hardly any point (we want at least $1.50 with 3 weeks to go).  

    NFLX/DD – Crazy Cramer stock now.  He’s banging the table on it at the top of an 800% run since they bottomed out at $20 on ’08.  They are still on the top of my short list. 

    FSLR getting interesting as a short.  

    Woops, Oil and Gold just got smacked down.  Copper testing $3.60 – BEWARE THE MIGHTY DOLLAR FOR IT HAS BEEN WOKEN!!!

  30.  See here is where weeklies are fun – BUYING the DIA $107 weekly puts at .32.

  31. good morning Phil
    any thoughts about GROW?

  32. Phil,
    We are back to ‘ feel good’ levels for me with AAPL.
    I DON’t like this feeling, so much so that even my very faithful weight loss drugs of ‘exercise and sensible eating for the past 20 years, are not making me feel good.
    How can I protect my AAPL interest, without dishing out a fortune in insurance?
    What do you think of
    AAPL: sell 2x Jan $240 puts for $4.70 and sell 1x Jan $340c for $6.30 to finance the buy 1x Jan $280 puts for $15??
    As always, would appreciate your thoughts.

  33. Phil – DIA does not have weeklies (I dont see them) – are you looking at the weeklies or the Sept Quaterlies?

  34. Phil--
    i have a RIG Jan 2012 45/60 bull call spread--now that BP is pretty much over any thoughts on how to handle the short $60 call? (i think they will go higher from here--my guess is quite a bit higher by 2012)

  35. TNA/TZA boring. SKX exciting.  :)

  36. rn273-I sent you an email last week. Did you get a chance to look at it. Thanks.

  37. Phil,
    Low VIX makes the Nov $95s a fun play at $5.30 for a stock that is 200% higher than it was before the markets crashed on not that much more earnings.  Nov $105 calls can be sold for $5.80 to make this a free trade and those can be rolled to the Jan $115s,
    Am I correct in that you want to buy the Nov $95 CALLS?

  38. Phil, sorry, the last question was on BIDU

  39. nicha – sorry, yes, I did get it and I have a half drafted reply that I neglected to complete. I’ll reply today.

  40. acobra,
    Would you mind sharing that protocol with me? I’m into fitness and also about to get my personal training cert. for some fun, side-job income. If that’s OK, email is

  41.  Hello,
    Newbie here and have been reading alot but still have difficulty with the concept of rolling when short strike are threatened.  For example, I am curious about Phil’s comments on AMZN today, particularly interested in the comment "it’s not about what you buy but what you can roll to".  Can someone please expand on this concept, using the AMZN example above.  If one sells any of the three calls above (either the 160 weekly, the Oct 160, or the Nov 175)  what would one roll to if the strike goes into the money.  How can the roll be profitable?  Many thanks.

  42. Phil, DIA  are we still in the OCT 105 long putters, which I still hold ?

  43.  Maya/BIDU:  I think Phil is talking about buying the 95 puts.

  44. This market blows.  Completely untradeable.

  45. Lflan,
    Thanks for that article on aapl
    I could not figure out how they are projecting increases in RVENUE growth, and yet DECREASE in earnings growth, even accounting for the hit to margins and android/google competition.
    Your thoughts?
    Would you add to your folio at these levels?
    Hope you had a good wend…

  46. Fortep
    Should you OWN e stock with that strategy or is it simply a directional play?
    If so, and if BIDU takes off, it’s a double hit from both sides, even rolling to the Jan calls., No?
    What am I missing?

  47. entered a 1/4 position into Oct DIA 105 puts for 0.66 – will add on if it falls by another 20%, or else an aggressive entry into Nov puts (makes me less nervous) and hold till a ride down to dow 10500-10200.

  48. Thoughts on BIDU  the stock is very high as Phil says 200% so with the low VIX you buy the 95 putter and sell the Nov 105 caller

  49.  Maya1
    On AAPL, because I`m learning, why would`nt you just sell the Jan 300 C for $18, take  a 7% upside  or roll, and use the profits from the call to cover the stock loss if the price moves down?

  50. Phil
    Your Quote "BUYING the DIA $107 weekly puts at .32."
    I was just talking to an options trader at TD Ameritrade because I could not find these listed.  He told me there are no weeklies (weeklys?sp) on DIA.  How can this be the case?
    Many Thanks

  51. DIA 107s--I think Phil is talking about the Sept 30s--

  52. 1020/Weight Loss
    Okay.. you asked for it LOL.  In 1954 a doctor A.T.W. Simeons published a study on obesity called "pounds and inches".  It basically is contrary to the popular thinking for the causes of obesity.  I would suggest if you are serious about weight loss, you read this study to fully understand the uses of HCG (Human Chorionic Gonadotropin). In a nut shell, this normally produced hormone by pregnant women alters the body’s mechanism (hypothalumus gland) to provide nutrition from (bad) fat accumulation in the body during pregnancy…. NOT from muscle tissue. Read the Study-it made sense to me. As with any "unknown method" there is much controversy about it… just Google it, especially on You Tube.  Every medical related person (doctor or pharmacist or nutitionist) I have discussed this with is totally against the HCG protocol ( I did drops not injection – cost $147.00), but none of them have read the study… but of course have plenty of generic opinions regarding it.  For me, it is a real simple rule in life…. "if it works keep doing it…. if it doesn’t work, quit doing it.’ As I said, my twin brother struggles with his weight and his doctor gladly increases his blood pressure and cholestral medication. Then …. 3 months ago, he was doing the tread mill and eating very well…. but little results to show for his efforts……….. I told him what I was going to do and it was very humorous to him….. SKEPTICISM….. All I know is….. he is still at 215 lbs and I went from 220 to 195 lbs…. now, it is humorous to me……. LOL I will take off the remaining 10 lbs over the next 30 days. My waist went from 36/37 to 34.  "Life is separating Fact from Fiction…. AND he/she who get’s it the quickest wins"…….  LOL Hope this info is beneficial.  

  53. newbie,maya…..I generally agree that AAPL is "neutral" right now.  That is , I think it’s fairly priced.   Would I buy it for a long-term hold right now?   No, not all I wanted.  I might scale in, because I think it’s bound to pull back and give us a better entry than 293.   If it never again falls below 290 I would be astounded.  Meantime, I daytrade it, looking for movement one way or the other where profits can be made. 

  54.   JRW- I posted this over the weekend, maybe you didn’t see it. Since we’re having a boring day, maybe you will have time to weigh in here. I was wondering if you might be willing to give an idea of the framework you use every morning to approach calculation of confluence lines. I’d like to try applying your technique to other issues. I know you take fibonacci retracements off of multiple trend lines and compare them to swing high/lows, gaps, and moving averages, but how do you organize the process? What do you start with? For example, do you first look at projections from a particular current moving average, then move on to others, then swings, gaps, etc? If so, which ones? Also, how do you calculate your fibonacci levels? I understand how to do it given a range (from a low to a high), but how do you do it from a trend, moving average, or gap? I’d like to use your method as a jumping off point for my own calculations because your technique is so accurate. 

  55. aclend/Protocol
    See above post regarding the HCG Study.  For me, I ordered it through Of course, there are several clinics (physcians) whereby you can do this under a doctor’s care with injections. 

  56. doubled,
    The guy you talked to in TD Ameritrade is not correct.  Just type DIA in the small quote table, click option chian and you will see Sep 30 option quotation(that’s weekly).

  57. NFLX Oct $175 call is $4.10 and you can sell 2x the $170 weeklies for $2.25 and those can be rolled to the Oct $185 calls (now $2.05) which would put you in a $10 vertical that can’t hurt you until NFLX is over $187.50 so I kind of like that play.

    Notice a theme that stocks with weekly options are kind of nuts?  

    VZ quietly making new 52-week highs.  

    GROW/Datuu – I thought we did that already.  I have little thought for a $99M company with an average volume of 10,000 shares traded per day.  The price is whatever the guy who trades it says it is.  They may be a nice company but there’s no way to really tell and you can’t hedge because the options are more illiquid than the stock so it’s certainly not something I’m interested in when I can buy C for $3.91 or HOV for $3.82 or INTC for $19.25.  

    AAPL/Maya – I’m not sure where you are.  Do you have the stock?  If so, what basis?  The spread you put up is interesting but is a gamble unto itself and doesn’t really protect anything as you make $9 worth of bets that AAPL holds $240, then bet $6.30 that it won’t go over $340 and then spend $15 betting it will go down to $265.  So a wipeout of all 3 of the sold positions still gives you noting if AAPL holds $280 because you lose the $15 on your puts.  Below $280 you get paid and under $340 you are neutral so I suppose you must have the stock and you’ll be happy enough to be effectively called away over $350.  Still, you can get protection down to $280 and, in fact, down to $265 for free by selling the Jan $280 calls for $28.50.  You are effectively selling AAPL at $308.50 and you make that much anywhere over $265.  Of course, if you had sold the Oct $250s for $28 some time ago, they are now $43 with AAPL at $293 but they can still be rolled up to the 2012 $300s ($44.50) or you could spread them to the Apr $310s ($22) and the 2012 $200 puts ($22.50) so even selling a call that ends up deep in the money is not the end of the world but don’t go BUYING premium to protect yourself – if you are that worried – just get out.  

    AAPL/Newbie – I agree, I’ve been saying $330 is my top target for AAPL with a range around $270-$330.  

    BIDU – Turns out Pacific Crest upped their target from $80 to $140 and rather than thinking the guy from Pacific Crest is on crack – investors are jumping in at the "bargain" price of $100 – INSANITY!  

    DIA/RN – Sorry, that was September Quarterlies, not the weekly.  The $107 puts are now .28.  

    Volume at 10:45 is 33M on the Dow – not too impressive.  

    RIG/Datuu – There’s not much to "handle."  I know it’s annoying not to make money yet but the $60s are $12.50 and they protect you until they run out of premium.  The spread is actually $13 now so hardly worth keeping for another $2.  If you want to get more bullish, rather than spending $3 to roll the $60 caller higher, you can cash out $13 and take $3 of it and buy the 2012 $65/75 bull call spread for $3.70 and that gives you $6.30 more upside if RIG keeps going.  You can offset that by selling the $40 puts, now $3.35 and that’s net .35 for the $10 spread and worst case is you own RIG for $40.35.

    BIDU/Maya – Nope, sorry that was the Nov $95 puts, still $5.15 despite BIDU going up $2.  The calls are much more than that

    JRW – Watch those image sizes.  You can adjust them with image properties (right click or use icon) but a big image slows down the refreshes.   Thanks.

    Rolls/Ongba – I know there are whole posts on that subject somewhere.  Hopefully someone has the link.  The roll is not profitable (usually) the roll is a way not to lose money on something you already sold .  If I sold the AMZN Oct $160s, now $5.50 then when do I begin to lose money?  $165.50.  Up until that point, all I’m doing is giving him back the money he gave me, right?   Now, if AMZN finishes expiration at $170, then I have to give back his $5.50 AND take another $4.50 out of pocket to pay the caller.  At that point though, I can ROLL the caller (which is just shorthand for buying him out and initiating another position) to a longer position, probably the Nov $175 calls as they are currently $5.05 and I have no reason to think they would be less than that if AMZN is at $170 (up $10) on Oct 15th (expiration day).  So that is our CONSERVATIVE escape strategy as we look at this trade.  It is very likely we can roll up to the Nov $180 calls (now $3.85) or even the $185 calls and all we need is for AMZN to expire on Nov 19th below $185 on Nov 19th and we don’t lose money (Warren Buffett’s Rule #1).  So your risk is being forced to be net short on AMZN at $185 on Nov 19th and your reward is a possible $5.50 if AMZN fails to hold $160 by Oct 15th.  If you are worried that AMZN will be over $185 on Nov 19th then why the hell would you be shorting them at $159.85 on Sept 27th?   See how that works?

    DIA/Yodi – I still think the move up is forced so I still like the Oct $105 puts, now .66 as we have 3 weeks and we don’t think this prop job will last past Thursday but, since you are naked on the mattress play, you may want to lean towards selling a few puts to cover a possible loss on the more aggressive put play if you are worried.  

    Unreadable/Cap – I don’t know, if the market crashes next week then all we can say is "that was totally obvious".  Only unreadable if this move up is legitimate.  Actually, I take that back as we expected a move up, it’s just the manner in which we moved up that bothered me as I was looking for consolidation at 10,200 for more than a day or 10,700 for more than a week so it’s the speed and lack of volume that makes me think we fall back but, value-wise, I’m still looking for earnings to justify 10,700 as the middle of a range rather than the top.  I just think we jumped the gun and that’s always dangerous.  

  58. bobhu/savitri – Thanks!

  59. jvest / JRW / SKX — If SKX makes a move to 260, that would indeed be exciting! Unfortunately, I’ll sell at $23. I entered into SKX after it defied the market being up 2% at 11am while the markets were flat. Friday’s volume was around the 90 day so I’m assuming the bleeding has stopped: SKX @ 22.54, Nov 19 putters @ .80, Nov 23 calls @ 1.82 for entries of 19.92/19.46. A call generates 11.6% in 7 wks (ignoring margin).

  60.  Phil/ hedges
    have couple of hedges which need to be adjusted:
    EDZ  Oct 29/31 call spread and short  Oct 29 Put
    and DXD Oct 27/30 call spread and short 1/2 Jan24 put
    any advice?? thanks

  61. Hi Phil, … I am a new member. I have spent a good deal of time reviewing the information on your site. The articles and information are excellent. Thanks.  Phil, I am interested in shorting the bond market. What is the best instrument, security or option position that you feel is best to use to short the bond market? I believe that bonds are overbought and when interest rates rise, the bond market will be a short. I plan to scale into the trade and hopefully catch the top of the bond market, then patiently wait for the market to decline and then sell my position near the end of the cycle. Please advise. Thanks.

  62. DIA/DD – that was the Sept quarterly, still .29 boy are those guys picky…  8-)

    In my defense, it’s priced like a weekly as it expires Thursday so you can see where the confusion comes from…

    HCG/Acorbra – Sounds great.  How’s the milk production?  Seriously, where do you buy it – in a health food store?  I was under the impression that HCG was a starvation diet, is that not what you did?

    EDZ/Tcha – Same as my overall market outlook – I’d give it to next week and maybe pick up a long to cover if we break 3 of 5 over the 7.5% lines.  DXD is a different issue as they are getting way out of the money and the bull call spread is essentially worthless.  No point to adjusting it, just hope we drop or hope we don’t if your call side is doing well.  You need to make adjustments BEFORE you lose 50%, not after you lose 95%.  The puts are fine and rollable and those paid for the vertical so no major harm as long as those don’t burn you in the end. 

    Welcome CMan!  (although not your first comment)  We did the bond market thing in the previous post.  The entries are better now than they were when I looked over the weekend. 

  63. Europe closing down about 0.3%, no reason we should expect to do any better.  
    At the open: Dow -0.06% to 10853. S&P -0.05% to 1148. Nasdaq -0.11% to 2379.

    Treasurys: 30-year +0.62%. 10-yr +0.3%. 5-yr +0.16%.

    Commodities: Crude +0.6% to $76.95. Gold +0.14% to $1299.90.

    Currencies: Euro -0.1% vs. dollar. Yen +0.11%. Pound +0.24%.
    10: 00 AM On the hour: Dow -0.21%. 10-yr +0.42%. Euro -0.24% vs. dollar. Crude -0.72% to $75.94. Gold +0.03% to $1298.50.
    11:00 AM On the hour: Dow -0.04%. 10-yr +0.39%. Euro -0.16% vs. dollar. Crude -0.5% to $76.11. Gold -0.08% to $1297.10.
    Aug. Chicago Fed National Activity Index: -0.53 vs. -0.11 in July. Three-month moving avg. -0.42 vs. -0.27 prior.
     Sept. Dallas Fed Manufacturing OutlookBusiness Activity Index -17.7 vs. previous -13.5. Mfg. Production Index 4.0 vs. previous -0.1New Orders -3.0 vs. previous -9.3. Shipments -1.0 vs. previous -3.4.  Strange conflicts.

    [ABREAST_C1]Many people have been surprised by the strong stock rally this month, because the underlying economic data remain mixed. Analysts who follow election-year behavior have seen this before, with the overall pattern similar to the average performance in past congressional election years when market conditions were similar to today’s.
    Paul Krugman takes exception to the notion that today’s high unemployment is mainly structural – that “people don’t have the job skills for the jobs that are open.” If that were true, he says, there would be significant labor shortages in certain industries, locations or groups of uniquely skilled workers. But that’s not what is happening. 
    The Fed will boost its balance sheet by half a trillion dollars over the next half year, economists say. In a new survey crafted to gauge sentiment on the Fed’s QE policies, 70% of the respondents believed the Fed will restart QE; of those 80% think it will happen before year-end. "The trigger for the resumption of quantitative easing late this year will be an increase in unemployment back into double-digits," Moody’s Mark Zandi said.
    Would you believe the Dow at 38,820? Stock Trader’s Almanac foresees an eight-year “super boom” beginning in 2017, sparked by the withdrawal of U.S. troops from Iraq and Afghanistan, inflation from the wars, and crisis spending to push the Dow higher; advances in energy technology or biotech also offer a possible boost. 
    Last week, GMAC Mortgage’s evictions were called into question. Now, JPMorgan (JPM) faces a challenge to thousands of foreclosures after a Chase Mortgage executive admitted (transcript) she didn’t verify documents used to justify home seizures. This could get messy, particularly for homes that have already been resold.
    The latest evidence of rating agencies’ (MCOMHP)irresponsible behavior comes from the Financial Crisis Inquiry Commission: An analyst charged with assessing mortgage pools saysalmost half the mortgages he sampled in 2006-2007 failed to meet the quality benchmarks banks were promising to investors. Far from poor execution,this was reckless pursuit of profit by design.
    Conference Board’s leading indicator for the euro area rose another 0.4% in August to 112.5,weaker than July’s 0.8% increase and June’s 0.5% increase. "The initial impetus of the recovery has been fading and the broad based cooling down of leading indicators is a reminder of the fragility of the recovery," the report said, predicting greater volatility in 2011 as governments phase in deficit reduction measures. 
    Sources say the ECB mulled activating rescue funds for Ireland, but decided against it – for now. Dealers say the report drove German government debt – a refuge from concerns about other sovereign borrowers – higher this morning. 
    European central banks have all but stopped selling gold. Through September, eurozone banks (plus Sweden and Switzerland) sold just 6.2 tons from their reserves, down 96%. Until recently, central banks had been swapping bullion for sovereign debt, which yields a steady annual return. But now, they seem to be happier with the security of gold.
    Spain’s budget deficit narrowed 42% in the eight months leading to August, thanks to spending cuts and a July tax increase. The deficit of €34.85B was 3.3% of GDP; the central government accounts for less than a third of spending in Spain. The country has approved one of itsmost austere budgets in decades.
    Japan export growth slowed for the sixth straight month in August, underscoring Japan’s recent moves to weaken the yen, and prompting speculation that the BOJ will ease already ultra-loose monetary policy next week. Exports rose 15.8% Y/Y, short of the 19% gain economists expected, and well below 2010’s peak of 45.3% in February. 
    China calls the House’s approval of a bill that would allow the U.S. to apply import duties on goods from countries with undervalued currencies "redundant," saying it will allow the yuan to rise according to its own economic assessment and not due to U.S. pressure. Meanwhile, on Sunday, China said it would impose import tariffs of up to 105% on U.S. poultry. 
    To me, this indicates we are reaching the very end of global expansion.  WMT in Africa reminds me of that quote: "When Alexander saw the breadth of his domain, he wept – for there were no more Worlds to conquer.": (WMTis in negotiations to buy South Africa’s Massmart for $4.2B. The move would bolster Wal-Mart’s emerging markets strategy as it seeks to reduce its dependency on U.S. sales. "By Wal-Mart standards this is a pretty chunky deal, and shows our commitment to the market," a Wal-Mart executive said. 
    Transports holding things up this morning:  It’s a busy morning for airline stocks (ETF: FAA) after Southwest’s (LUV +4.6%announced acquisition of AirTran (AAI+59.1%). Delta (DAL -2%) shares slip on fears the airline will see more of its domestic market chipped away. JetBlue (JBLU +6.1%) rallies on merger speculation and a glowing profile from Barron’s. Also: LCC +4.8%,CAL +2.3%UAUA +2.1%AMR +1.7%.
    LDK Solar (LDKup 8.6% after an overnight announcement of aloan deal with China Development Bank for 60B yuan ($8.95B) over five years. The state-owned CDB has struck similar solar deals this year extending loans to LDK’s

  64. Phil…question…I have RIG Jan 2012 35 Put (sold originally for $7.60), it’s now about $2.40.  With a 68% gain, I know I need to think about doing something with it, but not sure what….maybe buying it back and selling the Jan 50 put for $5.85…thoughts?

  65. SKX / Whoops — my gain calculation was wrong in my SKX trade. The trade generates 15% ((23-19.96)/19.96) rather than 11.6%. I had used the stock purchase price rather than the net for the calc.

  66. Phil/Image,
    Fast Cars…..Multiple Puters…..Large Positions….Mega $$$……..HUGE Images….comes with the territory!!!!

  67.  Phil,
    Am I correct in my interpretation of your comment that you would spend premium ($0.66) to purchase the DIA $105 Puts for October expiry because you feel the market has been pushed up and will likely take a dip later this week?

  68.  Phil,
    Thanks for the explanation on the rolling strategy.  It is starting to make sense.  If one sells the AMZN Oct 160s, then has to roll to the Nov 175 or higher, can one roll again to escape without losing money(ie  in your experience, how many times can one roll before losing money)?

  69. In TZA off IWM 66.65 retest….playing of fyour lines JRW

  70. Good Morning!
    Coincidentially, I was planning to open a position on GS this morning. I think their fundamentals are compelling. I really like the profit prospects for them looking forward, as M & A is really picking up and they are the prime beneficiaries of this activity.  Their operating margins are @ 47%, and the stock is selling at book value, and it is JUST seven times trailing earnings.
    My projection is I feel  the stock is on a (earnings driven) trajectory to the $200 – $210 price per share by April. I am also factoring some other ancillary general market drivers that will contribute to the projection.
    My question of you is… What is the best spread, with an April expiration, that you could suggest for me? Margin is not an issue, but maximum profit targeted to my projection is the only concern. Many thanks!

  71. Phil/ Aapl
    Thanks for clarifying my reasoning flaws.
    That is exactly why I subscribe here!
    Yes, you are correct. I do own the stock, and the portion I want to protect has a basis ofabout $240.
    My goal however is to keep AALLL of my profit, with Aapl going down to $260-270 in the next month or so, if their earnings disappoint on Oct 19.
    If I can reduce my basis even further, that would be cake or icing or whatever they call it!

  72. Phil,
    I have never been in a spread before so am trying to follow your numbers on RIG 2012 45/60 bull call spread --you said it was now $13--i don’t see it being higher than about $9.60 all day--am i missing something? also sorry to have brought up GROW i must have missed your earlier answer --

  73. Hi Phil,
    Any insight into NTWK runup the last month or so? I’ve owned it for quite a while and rode it up and WAY down. I’m at about break even now.

  74.  Lflantheman,
    Re: your strategy on AAPL long calls covered with 1/2 weeklies, can you comment on how you manage the long call with regards to a downward move.  Using your example, Buy AAPL Nov 290 calls, short 1/2 weekly 290 call.  IF AAPL drops to 270, buy back the short call for a profit.  Now for next week, do you sell the weekly 270 call and continue to hold the long call?  At what point do you close the long call out if appl continues to drop?  Thanks!

  75. Ben/ Aapl
    As you can tell from Phil’s response, I am also TRYING to learn.
    I think, yes, you can sell the calls but as we have seen from the recent move from 240, selling calls did not help, and I am actually in the hole with those, as I did not expect this much of a move…So, I will likely have to roll those calls I. Next couple of months….
    Selling the $300′s would make sense if you are betting on Aapl going down. Even then, you could get burnt, if you want to hold the stock longterm….

  76. Hoss,
    The BOT’s gave you the ol head fake.

  77. yup…but I got out w/ small profit because of I hit sell market instead of sell stop when I was putting up my trailing stop…

  78. JR,
    You playing the lines or the channel?

  79.  Risk/reward today on IWM trading seems unfavorable as we’re unable to stay consistently on one side of the 8EMA. My guess is we get batted around from 66.62 to 67 for the reasons Phil stated (hedge fund prop job). It definitely looks weak in both directions. On days like today I try not to trade, but fading the trend is likely the best strategy as we go sideways. I’m in IWM calls at the moment purchased close to the 66.62 line. We got punched down twice at 66.83 and 66.80. Maybe I’ll tighten my stop as we approach these again. 

  80. Phil/HCG
    Well, I am getting used to breast enlargement and the production of milk….. LOL Yes, the horror stories of misinformation.  The study "Pounds and Inches" explains the workings of the protocol.  Yes, the diet / protocol is limited to 500 to 800 calories per day (800 will work- the original study is 40 years old).  HOWEVER, if a person was to only eat 500 to 800 calories per day, they would indeed be inducing a starvation diet.  BUT, the difference is HCG releases the nutrients from stored fat cells in your body to supplement the calories you take in orally… the 500 to 800 calories per day.  Doesn’t it make sense, if your body can store excess calories (to all the wrong places), these same fat cells can reverse the storage to release the excess calories to your system.  When you read the study, it is very clear.  As I said, it makes sense to me and it worked for me.  Physicans in the Phoenix area will prescribe this HCG under  their care for $1,200 to $1,500.  This hormone is available on the net… I purchased it from Salt Lake City, Utah. @   The study also, showed the ability to keep the weight off – of course, continued bad habits of portion size, to much fatty foods and no exercise will add the weight back on.  For me, I just needed to lose it, so i could position myself to maintain my lower weight without resorting to medications….. As, i stated earlier…. READ THE STUDY.. 

  81. BIDU
    if you listen to Cramer, ( and please, I am NOT suggesting you dqo), BIDU is going to $120 from $100…. Before it does anything else…
    We’ll see….I have no skin in it

  82. drcraig / confluence

    I start with a 6 month daily chart and calculate the strength of each S/R line (currently 14). Then fine tune on the 1 month 30 min chart for the likely daily trading range (sub S/R’s).

    Trend lines can go back 2 years. Once all of that is on my 1 and 3 min charts I just watch the stoch, RSI and momentum, and confirm with the 8EMA on the 3 min.

  83.  acrobra, do you live in phoenix as well? congrats on your weight loss by the way.   Its the wild wild west of medicine in phoenix.
    Yes, half of my colleagues are on hcg!  It seems to work – i don’t know what the long term effects are?  But anyone can loose weight if you just consume 500 calories a day – shoot, that is a big gulp!

  84.  JR- Forgive my ignorance, but how do you calculate the strength of a line? 

  85. hoss18
    Be careful today, the computers have changed and volume is low. No trades in cash.

  86. TLT rockin’.  I don’t care about the small pullbacks, this thing is gonna go hog wild 4Q.  Like 1020 and others, I am moving out of all longs, or if one stays in, hedge.


    On another note, I found out over the weekend that ARNA was 1 of 2 stocks that was heavily shorted after Sept 1.  If Scott from Sabrient is watching the board, can I ask if he has access to real time data?  Had we known this (we knew they were shorted 1/3 of float, but how much was taken b’f Sept vs after?)  This is critical information to know, b’c things are leaked or others know things that we do not, and hence we get whipsawed.  DCTH is another example.

  87. exec,

    Playing the lines (currently out, made $0.55 in TNA 1/3)


    I agree, "sometimes the only way to win the game is not to play"

    1020 / video

    Can we get Ben Affleck to play me  8-)

  88.  Pharmboy,  there are new studies out showing that the margins of open prostate surgeries are better than robotic surgeries with better nerve sparing.  i.e.  less tumor left and happy wife.   But ISRG, has a great razor blade model, so i think its a risky short – i know GS downgraded today.  They are also doing a good job expanding in GYN surgeries -

  89. for us elderly people I do not like the new font although I know it may have a value- not for us who cannot see!

  90. drcraig / strenth

    The number of times it is a line S or R.

  91.  Maya,
    BIDU is very volatile. This position could require some extensive trade management. It is not for folks who are new to options. 
    My 2c.

  92. Closed TQNT, up 35% on rummers of CDMA iphone use over 2 weeks. Are traders into this on other stocks? To me this is a bad indicator!

  93. jomama/HCG
    Yes, I am in Phoenix/Scottsdale. 
    Regarding HCG, long term effects….. I doubt there is any…. because the dosage amount is far less than what is prescribed for correction in boy adolescents problems… And a woman’s body produces this hormone naturally…. so what are her long term affects ????? .  In my opinion, as one former user said…. What are the long term affects of obesity ???/ What are the long term affects of a Stomach Bypass operation ???/?  The biggest problem for me was the boring routine of eating the same food for 24 days…..(my choice) instead of making different meals…. But, hey…. that’s looking back… I’m 25 lbs lighter and feel great….. just think… that 25 lbs is equal to 5 - 5 lb bags of sugar around your stomach…… not too cool lugging that around and I can really feel the difference…. But, with a new weight loss synthetic drug… we can grow the economy……LOL 

  94. Jo – do you still see robotics as the wave of the future?  How about MDT or JNJ moving in on ISRG?  I don’t know enough about surgical.  I have a company that is using excimer laser for psoriasis, vitiligo, atopic derm, etc, but looking at expanding into plaques in arteries as a replacement for stints.  Spectranetics has a huge machine, but ours is much smaller and the handpieces (consumable) are way cheaper.

  95. JRW – SKX was slain by TZA …. hard to beat a 3x ultra even when you’re SKX.

  96. jthoma
    I have trouble with the font also. Farsighted is a handycap for computer users. I have 2 new pairs of progressive, the last are called progressive 360, they have a very wide chanel with more inbetween range. I think they are worth it. The first try was called wide angle, not good for computers or reading a book, I use them for driving at night as they are clear, only scratch gard. The 360 comes with antiglare. May be worth a check.

  97. shadowfox- thanks but it would be much less expensive for all the old people on here to change the font size back- LOL!

  98. LCC – hey chartists, a question: on the one year chart of LCC it looks like an Ascending Continuation Triangle, right?  What is the rule of thumb for a breakout; i.e. when it crosses out of the triangle up or down, what percent of movement is deemed a confirmation of the breakout direction?  It sure looks like it’s ready to do something…

  99.  Pharm, i think they have to show results – decreased overall costs with better results.  Now that this is been questioned in prostate cancer, the urologists (that suck at robotics) can justify open prostatectomies.  For marginal urologists, the robot takes longer and increases their opportunity costs.   But, hospitals are marketing the technology…..But this is why I can’t seem to get on board with DNDN – ultimately, who is gonna pay for it & is it worth the costs?
    Last week, we had a few cases for  urinary stress incontinence cancel.  Turns out medicare is finally coming to their senses and denying reimbursement for urologic pacemakers.  These cost over 15k for a condition that isn’t life threatening and can be medically controlled.

  100. Phil, what do you think of the following movement?
    I initially had 15x Jan 2012 $5s in LDK (avg cost $2.87)..
    I shorted 7x Dec 2010 $7s (credit $1.33)
    So, unless I roll, in Dec if LDK finished above $7 (now $10) I would have a max profit of $7 – $5 = $2 – $2.87 (initial cost) + $1.33 (short calls) = $0.46 x 700 = $322 dlls.. that is not for sure though since LDK can fall below $7 by then..
    BUT, if I do the following movement:
    Roll up 7x Jan 2012 $5s to 7x Jan 2012 $10s
    Roll up my short 7x Dec 2010 $7s to 7x Jan 2011 $10s 
    Everything for $1.3 in credit (x 700 = $910 NOW! for sure!)
    This way, if LDK finishes below $10 in Jan 2011, my callers expire worthless and I still have one full year to exploit my 7x Jan 2012 $10s.. if it finishes above, I can roll up and convert it to a vertical call spread! :)
    So, that’s the play for 2/4 of my position.. with this spike up, I sold into the excitement and sold 1/4 (4x) @ $5.5 (with the avg cost of $2.82 gives me a profit of almost 100%)..

  101.  Maya1 
    This is helpful for me because it makes me think about the position without holding the position. I don`t have the cash for 100 shares of AAPL.
    If you own 100 shares at $240 and its at $293, youi`re up $5300 or 20%.
    You want to insure that $5300 in profit.
    I think the only way to do that is go out to Nov or Jan and buy the ATM put for $1900. So for three months you are going to tie up $31,2000 to insure the profit you have today. The reason you want to do this is you love AAPL and don`t want to miss an uspside move.
    The problem is, whenever you introduce a P or C that is`nt hedged into your AAPL trade, its like an unexploded grenade that you are going to have to watch like a hawk. What if AAPL drops a few points, then takes off again. Any profit in the stock price is going to be negated by the loss in the put and at some point you are going to have to decide when to ditch that put., either when you`re going down or up. Guess wrong and there goes  a chunk of the profit you have today. Also, you`re adding stress   into a situation that  right now is euphoric (profit).
    When I buy stocks I set a 7% trailing stop. I just think that works for me, if a stock drops more than that it is usually reversing the trend. I never want to own a stock, even a great one when it reverses.
    You can take Phil`s strategy and sell the Jan 300C and that would give you insurance down to a 7% stop. So selling the 300c still gives you a piece of an upside move (and you can always roll) while insuring you down to 270 or so and it does`nt cost you anything, in fact it reduces the cash you have tied up to around $27,000.
    Or sell today and take $29,300 and look for another trade, you seem to be pretty good at it.
    I`d appreciate a correction in my thinking here. 

  102. LCC/mrm – depends upon the time frame, but it is a breakout here for sure.  They really need to bust through 9.60 or so.  From May, it looks like a wedge and could go either way.  From mid July, definite ascending triangle.  Those upticks to 11 were are low low volume.  MACD and RSI are about even, so could go either way IMO.

  103. Phil – looking for an emerging market hedge – I was considering the Oct 28-31 bull call spread on EDZ for 0.8; or would you recommend a bear put spread on EDC (emerging market bull 3X), like the Nov 32-31 for 0.5 or less?

  104. Thanks Jo.  Helpful.   DNDN – I have always thought the same.  As I have always noted, prostate problems have more things in clinical trials than any other disease, etc.  Things will come to light in the field in the coming 5 yrs.  JNJ is one to watch on that one with the Cougar Bio purchase.

  105. You can specify the font that internet explorer uses and then force it’s use:
    Click the Tools button, and then click Internet Options.
    Click the General tab, and then click Accessibility.
    Select the Ignore font styles specified on webpages, and Ignore font sizes specified on webpages check boxes, click OK, and then click OK again.

  106. Font    Was the new print a conscious choice  or a glitch….it just appeared after Phil’s long box post.  I prefer the standard for what it’s worth

  107.  Pharm, i gave a long reply but it is "awaiting moderation"?

  108. Speaking of prostate:  AstraZeneca has suffered a setback in its oncology drug development strategy. The pharma giant reported that the closely watched prostate cancer therapy zibotentan failed a late-stage trial. At a minimum, the Phase III failure is forcing AstraZeneca to put any plans on filing for regulatory approval on hold. The therapy is in two other late-stage trials as well.

  109. Phil, what do you think of the following movements I made in LDK (now $10)?
    Had long 15x Jan 2012 $5s in LDK (avg cost: $2.87)
    Sold short 2 months ago 1/2 (7x) Dec $7s (credit $1.33)
    So, if I don’t do any adjustments, my max profit in Dec with the covered ones IF LDK finishes above $7 would be $0.46 ($7 – $5 = $2 + $1.33 (credit of short) – $2.87 (avg cost) = 0.46 x 700 = $322 NOT FOR SURE.
    However, if I roll in the following way now:
    my long 7x Jan 2012 $5s to 7x Jan 2012 $10s
    my short 7x Dec 2010 $7s to 7x Jan 2011 $10s
    all for a credit of $1.22 (x 700 = $854 FOR SURE NOW!)
    THis way, if LDK finishes above $10 in January, I can either roll my shorts to covert it to a Vertical Call Spread, or just let it be called but I already secured my profit!)
    Also, I took advantage of the excitement and sold 1/4 @ $5.5 (profit of almost 100% over $2.87)..

  110. Mattress/Phil: Following talk of mattress play so far’s got me confused, maybe just slower than usual today.
    Here’s how I understand it:
    a) Sold DIA Jan 108P (already in play)
    b) BUY Oct 105P
    c) To hedge against possible rapid drop sell some puts?
    per phil:"you may want to lean towards selling a few puts to cover a possible loss on the more aggressive put play if you are worried. "
    Would you mean enter a Oct vertical put w/ Oct105Ps as the higher leg? like selling Oct103Ps??
    Phil/Yodi please explain??

  111. Phil: I am holding -10 SDS OCT 30 PUTs (leftover from a hedge) and uncertain how to manage the position. Since there is still 0.80 of extrinsic value left I am not feeling rushed to roll the PUTs out to DEC or JAN 11. Is there any sense in rolling the PUTs to CALLs (i.e., DEC 34 strike for about even) if I beleive the S&P500 is going to stay above 1100 by DEC expiration? Thoughts? Thank you.

  112.  mrmocha 
    With triangles you are looking for volume on a break. Its really hard to pick direction.  If you go back to May 25 and notice that move (though it was from consolidation, kind of what is going on now), that`s what you like. 

  113. RIG/Hoss – When you have a short put like that, I assume you REALLY would like to own RIG for net $32.60 at this point so you have virtually no fear of a downside.  That leaves the only issue as "do you have something better to do with the margin?"  I doubt it as TOS tells me the net margin requirement for pocketing $2,400 for selling 10 of the 2012 $35 puts is $1,250 and, if that’s your case, this short put still pays almost 200% to margin over 15 months – there really aren’t many better things to do with money than that!  In fact, I’m bolding this because it’s pretty damned good as a new trade too.  Can you sell the Jan $50 puts and up your risk by $15 to make $3.40 more – sure, as long as you REALLY want to own RIG for net $44.15, which isn’t bad either but no the deal of the decade they would be at net $32.60 but, since you can always roll back down to 2x the $35 puts – it’s a good deal too.  

    Territory/Exec – Maybe it’s because I have such a big main monitor, those things look extra huge to me (which is "what she said", of course)…

    DIA/Cslan – Yes but those are more momentum plays so we look to make 20% and get out rather than let premium decay get the better of us.  

    Rolling/Ongba – It depends, it’s not a cure-all, it simply provides more buffer to the losing side as you gain position in exchange for time.  Obviously, you can roll up and up and up almost every month but you are tying up your money (margin) the whole time and that’s not really a good thing as it’s money that isn’t earning elsewhere.  Think of it more as loss avoidance.  In the above RIG trade, you are tying up $1,250 to make $2,400 – that’s a pretty easy decision and then you consider "what if I have to roll to 2013 $30 or $25 puts?"  Well, then you are tying up $1,250 to make $2,400 over 27 months – still not bad.  You need to go through the possible outcomes and find the trades you are willing to stick with long-term.  To me, there’s always a 50/50 chance you may lose, no matter how sure you are – it’s what you do next that defines your trade.  

    GS/Gel – I do not share your enthusiasm.  GS makes almost 1/3 their money on the HFT scam.  I believe this will go away in the next 2 years.  That only pushes their p/e up to 10 but they are crushing margins on M&A work and that smacks of desperation – not that they are in trouble, per se, but that the old gray mare just ain’t what she used to be.   I think $140 is a fair price for them but they don’t excite me over $165 with $180 a spot I’d consider shorting.  However, they are nicely volatile and if you want to make $50 trading GS on your premise (which I don’t buy) then you can just buy the $150 calls for $11.90 and sell the $135 puts for $8.90 and you are in for net $158 to the upside with a worst-case that it’s put to you at net $138.  I’d be more patient and sell the 2013 $125s for $19 and take the $140/200 bull call spread at $21 with a $57 upside off about $29 of net cash and margin but I’m not bolding it because I’d rather buy GS next time they test $120.

    AAPL/Maya – So how about protecting yourself by taking $293 off the table for a $53 profit?  If you want more upside you can take the Jan $290/310 bull call spread for $8.80 and sell the $240 puts for $4.50 so you are in the $20 spread for net $4.30 and the worst thing that can happen is AAPL is put back to you at net $244.30, which is about where you liked them anyway.  So all you risk of your $53, all the way down to $240, is that net $4.30 and you leave yourself with $15.70 more upside.  If that trade doesn’t seem worth the risk – then what the heck are you doing risking $293 a share on this stock?  

    If you have margin and patience, TOS tells me that selling the AAPL 2013 $200 puts for $22.50 uses just $9 of net margin ($31.50 margin less the $22.50 cash you collect).  $22.50 buys you the 270/320 bull call spread so that’s a clean $50 to be made at AAPL $320 in 2013 in exchange for tying up $31.50 of cash and margin.  I like that better than buying AAPL for $293 and hoping they get to $350 to make the same $50 and your worst outcome is owning AAPL at net $200, about 1/3 off.   

    RIG/Datuu – You are right, it’s cheaper now or maybe I read it wrong before.  I see the 2012 $45s at $22 and the $60s at $12.50 so about $9.50 is right, which means it is worth keeping that leg as you have 50% more to gain and it does seem to be in the bag.  You can still invest $3 in the other trade, which I like better than spending money on your caller, who still has lots of premium.  Vertical spreads are very dull and they DO NOT pay you early so if you are an adventure junkie who can’t stand planting a seed and watching a tree grow before you get your fruit (see "The Man Who Planted Trees"), then these trades are not for you.  As to GROW, no big deal, if I don’t like something I’ll tell you why..

    NTWK/Kjbur – What is this, bring your micro-cap to work day?  We do VERY few of these kinds of stocks as we prefer to get into stocks where there are options that can provide us a long-term income stream.  In general, I like NTWK about as much as I like black on a roulette table.  I’m more curious about what you like about a company that made $5M in 2008, lost 8M in 2009, and made $1.4M in 2010 (fiscal) for a grand total of losing $1.6M over 3 years?   They have more debt than cash and the only reason they are shooting up at the moment is that they finally got back into compliance with the Nasdaq.  Also, I never trust any company where the majority of their "news" is from press releases.  If you feel compelled to play stocks around $1, we like SIRI and YRCW although SIRI is also up on a good run so a bit higher than we like for an entry.  

    Good strategy Dr. Craig!  "Sometimes, the only winning move is not to play." – WOPR  

    HCG/Acobra – Thanks, that fills it in quite nicely.  

    Big gulp/Jo – Can that be your 500 calories?  If so, I might be able to make it work…  8-)

    ARNA/Pharm – That’s interesting.  Ilene can give you his Email.

    GMTA JRW!  

    Font/Jthom, Shadow – There was no on-purpose change of font.  This is my first day using Chrome on my main screen.  What browser are you using and what font looks worse to you?  I’m not liking the way the font came out when I pasted the news but the regular chat looks good to me.    Also, I hope you guys know that you can magnify your browser windows through the settings – I run everything at 115% on my high-res screen.  

    LCC/MrM – Doesn’t look ascending to me.  More like the back of a TRex that’s about to take a bite out of the 200 dma pattern….  8-)

    EDZ/RN – Yes, I do think they are bottoming but Oct is very tight time-frame for an out of the money hedge.  My logic on a trade like this is that I think EDZ is too low at $28 so, if it went to $22, I’d be pretty comfortable buying it, right?  That means I can sell the Jan $25 puts for $3 and be happy.  Now, I can decide what kind of short-term fear I have and yours sounds extreme so let’s say we can spend $3 on the Nov $24/31 bull call spread (about $3.10) and now you get $7 if EDZ goes up to $31 (10%) and you are starting out $4.30 in the money so you can set a stop at $1.50 and roll out of that if things go the wrong way.  So, with the stop, you risk an assignment at net $23.60, which is 20% below the current price and, of course, you can roll it along.  

  114. Ah, I see a couple of problems with the fonts.  It seemed to come from the news and the comments that followed the news kept it’s crappy font size. 

    Does anyone know a code or something I can put in to fix it?

  115. FSIN – March 11 $10 IO positions are way high.  This came across my screen a week or so ago, and with the OI still there, I am buying a few (risk risk risk) at 90c to see where they can take this thing.  Volume starting to pick up in the stock.

  116. Phil: Thanks for the advice. At my age (58) I probably should not be risking capital. So I will put your advice to practice and find myself some good blue chips that give me growth. I am well hedged in properties, and have a solid pension. I do want to play the 100k in riskier stocks.  Which Articles to read on entry points for some blue chips and buy/write strategies? In the 400 I have 2100FRO, 2000SLV, 2000 PGH, few SFL few MSFT, 2000 GRO (pfuiii). ADBE 5 ARTIFICIAL as per your advice. The fisrt two I alredy hedged with the buy/writes, but I am still too heavy on them, PGH I will follow Pharms strategy to get some money out of them and out with half later. But I have cash and it is idle. With you advice I will start getting into the blue chips. Thanks.

  117.  Oh nuts, now I tried to fix one thing and messed up another!  

  118.  Phil,
    I am short 500 of GOOG stock at 485 from last expiration. I was planning to sell out on a pullback. However, this current rally has made me feel some pain. I am thinking of selling the Oct 540 PUTS for $20 to get me out at $520 if the stock pulls back and yet give me another $6 off leeway if it keeps rising.
    Your thoughts on mitigating the pain.

  119. Pharm,
    Anything coming up this year with SPPI. I’m holding some long calls and forgot why I entered. :-)

  120. Phil / font — your 8:52 post caused the chat font in IE8 to change following that post. Before that post, it was Calibri 11pt, after it changed to Verdana 8pt. I think there is likely some missing HTML tag that closes the font in your post. Note that you didn’t type anyrthing after your headlines.

  121.  Test Font size 

  122. aclend – Thank you, I’ll check it out!

  123. Phil- I usually stand back 3 feet and kick my computer as hard as I can!

  124. The forced font only works for reply. The problem with the new font is small print with double space, magnifing to 125% only fills the screen and lots more down page clicks.

  125. Fonts / Phil – also the smilies don’t seem to be working  :-(

  126. phil: 1000 GRO at 3.51. how can I optimie position? It is 1000 and not 2000 as I wrote.

  127. Fonts / Phil – well, hmm – your smilies don’t seem to be working. 8-)

  128. JRW – Sorry, not Ben, but perhaps gel1 – he says he has nicer hair than George Clooney…… ;)

  129. These BOT’s are Borrrrrrringgggg!!!   We need a country to go broke or a major institution to fail to liven things up.

  130. Day traders JRWIII
    IWM makes no sense at all today IWM trending up,TBT trending down, and what is the volume spikes every now and then? Any thoughts?

  131. reza99
    DIA question I bought the Oct 105 a a momentem play in the hope the market will go down. We are officialy still nacket on the mattress. Only if I would be worried that I would be losing on the 105 OCT long putter I should sell some 107 OCT putters at 1.55 but at the moment this putter is only trading at 1.11 so it does not make sense. I still think the market will go more south.

  132.  JR – How do you make use of fibonacci retracements? Regarding the number of times a S/R is a line- does that mean you keep a running tally for EACH S/R line daily?? How is it that your calculations so accurate and reproducible from day to day that lines tend to reappear accurate to the penny so that you can tally how many times a line has been a "line"? Finally IWM starting to behave. Hopefully the downward manipulation is finished for the day, and we’ll end up where we started. 

  133. The Sept 30 and Oct 1 options seem to offer an interesting opportunity for short term spreads. I am considering the following 2 spreads, and would appreciate thoughts from everyone (both spreads on the QQQQ, because I am long some techs):
    1) Buy Oct 16 $50 puts, sell sept 30 $49 puts, into the $1 spread for 0.9. If the Qs fall below 49 by Wed, one makes 10%, or can roll into the oct 01 and next weeks options.
    2) Buy weekly $50 puts and sell sept 30 $49 puts, into the $1 spread for 0.48 – no chance to hedge if we dont fall below 49.52 in the next few days.

  134. yodi
     How far south? ##### or just Barzil?

  135. SPPI – their cancer drug.  They are fine in here.  Beaten down, but not out by any stretch.  

  136. how many days can they do it?

  137.  Phil, You mentioned that WAG is reporting tommorrow.  Are you bullish on this stock?  Thanks for all your insight and your informative answer regarding yrcw.

  138.  ETrade anybody?  For those of you who are on ETrade or are thinking of going there, BE CAREFUL WHEN CASHING OUT ON RATIO SPREADS. Today I put in an order to get out of the 47.5/50 Oct RiMM ratio spread. This was a 2:1 ratio. Instead of ETrade figuring the mark at the 2:1 ratio, it figured it at 1:1 causing me to potentially lose more than $1K on the trade. This had happened to me once before on a different trade and I ended up doing each leg separately. Today I called though and spoke to their derivatives team, who in a nutshell gave no explanation. In fact when they attempted to execute the same trade they showed the same mark for a 1:1 as I was seeing. It’s seems apparent that it’s a glitch in their system as this is not an isolated case. I trade on TOS as well and they’re light years beyond ETrade when it comes to options. I’ve been wanting to move everything to TOS and will as soon as I don’t feel hampered by not being able to manage those positions for up to a week. Moral of the story:  Etrade sucks!

  139. VIX just fell off a cliff!

  140. shadow

    I agree, makes no sense (conflicting indicators); maybe Lloyd is test driving a new program !!

    drgraig / fibs

    If you look at the daily chart and look at moves within channels and apply fibs, you are likely to find my S/R’s close by !!

  141. LUV/Phil,
    I did your Jan 10/11 BCS and sold the Jan 10 puts awhile back. As it moved up I sold the Jan 11 puts also. Today LUV is up 14% to over 14 and I rolled the short Jan 10 puts to short Jan 12.50 puts as they were up over 80%. Was that a good play or getting too greedy? Thanks for excellent play

  142. The 10-year note yield dropped 10 basis points, or 0.10 percentage point, to 2.51 percent at 1:31 p.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in August 2020 increased 27/32, or $8.44 per $1,000 face amount, to 100 31/32.

    At today’s two-year note auction, the bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.78, the highest in more than three years. The yield was lower than the 0.446 percent forecast in a Bloomberg News survey of 6 of the Fed’s 18 primary dealers, which are obligated to participate in U.S. auctions.

  143.  Monthly Covered calls – I just put up my watch list for covered calls.  At this point I’m watching a few favorites to pull back for an entry to write calls for the November expiration cycle.  Click on my user id to go to the website.  Enjoy and ideas are welcome.  

  144. how many days can they do this?

  145. fortep
    I have experienced your problem as well and a few others that they can’t explain. The charts are good, but they have promised condors, butterflies, 4 ways, weeklies and I wonder if they have a clue, traders are not patient. I have considered TOS except the complaints on this board go on every day. For me PRO trader is lightning fast for TNA or TZA trades and not bad on IWM puts and calls which are the most important to be speedy. They are both too expensive!

  146. Phil: I’ve reading 2007 articles, amazing, same levels, same volume. Anyway just for the record if I want to be long blue chips in the core of my portflio I should be selling puts now of the stocks I want in anticipation of the coming crash. If it happens I am in at a big discount, if it doesn’t I collect premium. Is this correct? Second: Should I sell the puts at the strikes they are now for a 20% premium collected, or should I sell the strikes I anticipate the stock could be dropping to? Less premium collected now, but in at a lower price? Third. Time frame, front month, three month or 2012"s? Too many qustions. Thanks in advance

  147. For what its worth:
    I sometimes use the EMA 13 cross 34 as a long term trend reversal tool. 
    I got it on JEC today. Looks pretty promising for a 10% run.

  148. Phil
    AMZN  Good advice – thanks! 
    NFLX  I sold the 165 NOV Calls last week on your "I can’t take it anymore" post.  Are these still good?  Also, it seems from your earlier post you’re saying that the Mad Money Mouthpiece is pumping NFLX so that in part the OCT shorts get margin calls forcing some of them out so GS can buy them after they finish with the pump? 
    Therefore, on a play like this should we expect the stock to drop around Oct expiration (assuming market as a whole is held constant for example purposes only) and perhaps get out then with a profit instead of waiting for NOV when they try to do it again?  In principal, is my logic correct?

  149.  Shadow—except for the buggy last program update on TOS, it still seems like the new world to Etrade’s  dark ages. 

  150. Phil:
    Standing pat with that 9:40am BIDU trade? At what point would you scale in further? Thanks.

  151. ben1be / 13-34 — any voodoo in those numbers?

  152. OK, I believe that is better?   It does seem to have been the news post that screwed us up but it doesn’t show up on Chrome as a problem – only on IE so feel free to let me know if we have font issues – eventually I’ll figure out what’s going to cause them before I put things in.  

    Problem seems to be that, unlike IE, Chrome picks up the font styles of whatever I paste.  

    LDK/Rav – Sounds good and the $5s were certainly too deep in the money.  I would have cashed 1/2 at $5.70 to take 7x $5.70 off the table ($3,990).  Then I would roll the 8 2012 $5s at $5.70 ($4,560) to 14 $10s at 2.65 ($3,710) and pocket another $850 ($4,840 in pocket).  Then I would roll the 7 Dec $7s at $3.20 ($2,240) to 15 March $10s at $1.40 ($2,100) which is $140 back out of pocket so you pocket a total of $4,700 off your net $3,374 investment which is a profit of $1,326 FOR SURE NOW and you just leave the spread on the table and deal with it when and if you have to but it’s not possible for the March $10s to end up more valuable than the 2012 $10s so it’s all gravy from here and you are free to play with all that cash.

    Mattress/Reza – Ahhhhhhhhhhhhhh!!!  Totally backwards!  We BUY the long put and sell the short puts to hedge against them.  The Jan $108 puts are the anchor position (currently naked and hurting) and the short puts are usually a front-month 1/2 sell just to make sure we don’t burn too much premium or get out of position on the long puts.  Google "Stock Market Parachute" for an explanation of the strategy.   

    SDS/HHF – Those are at $1.45 but they are still half premium so you don’t really want to do anything yet but you keep your eye on where you want to roll like maybe the Dec $27 puts, which are $1.10 so net .35 at the moment and if that net goes past .50, you should be concerned but, hopefully, as the premium on your caller expires, that roll should get cheaper and, eventually, even or better.  If you get buried, THEN splitting to puts and calls is a good idea but, for now, we’re just testing a possible range top – worst time you can pick to bail.  

    Entries/Arbo – You can just go back in the portfolio section and see which (if any) stocks are still close to target.  Make a list and look for opportunities into earnings and, of course, new things come up every day like wouldn’t you like to own $32,500 worth of RIG at $32.60?  If so, then sell 10 of the 2012 $35 puts for $2.40 ($2,400) and that’s a 7.4% return on the whole $32,500 over 15 months but it only ties up $1,250 of margin so you have $31,250 of buffer margin now that will help you make other trades like selling 10 SKX $22.50 puts for $1.10, which ties up $2,500 in margin for 3 weeks to make $1,100.  If you do nothing else with your $31,250 of extra margin than make $1,100 per month on various short trades, that’s still going to be $16,500 of bonus cash to your long trade and now we’re over 50% returns without taking any crazy risks.  What’s the downside.  If SKX drops $5 to $17.50 then you own 1,000 shares at a $4 loss.  As long as something like that happens to you less than 1 out of 4 times, you are still ahead of the game and, of course, you can roll the puts along and the only real penalty is each month you do not collect your $1,100 because you tied up your money but, if you are REALLY happy to own SKX at net $21.50 – what’s the problem?  So always look for stocks you REALLY want to own 7 years from now (at 65) and make trades on them when they look like they’ll make your goals.  

    GOOG/Oncmed – Ouch!  A stop at $500 would have worked wonders on that one…   You are out $50 and mostly because you didn’t sell a short call, which would have buffered 1/2 your loss on the premium.  The problem with selling puts is you clearly don’t REALLY want to own GOOG at $520 since you didn’t think it was worth $485.  I’d get off the short play and sell the Jan $560s for $23 – you can’t be worse off as you are simply skipping ahead to re-shorting them at net $583, which is another 10% up from here so you are protected from losing $50 more between here and there.  That gets back half your money if it works out and, if you want to push it, you can also sell the Jan $460 puts for $9.20 but you will be pissed if GOOG has dumped out to $450 after earnings and you own it but that’s super-unlikely and the $9.20 makes a nice extra upside buffer to get you 60% of the way to even.  

    Font/Rain – That all sounds great but what 8:52?  

    Smiles/Snow – Yet another Chrome-caused tragedy!  

    GRO/Arbo – You have $3,510 tied up in GRO and it’s now $1,440 and you want to "optimize" it?  There’s nothing to optimize, they don’t even have options and I’m pretty sure it would be lunacy to DD on them.  I’d say if you have $1,440 and you want to make $2,070 so you’ll have $3,510 again – you are better off selling 10 HOV 2012 $5 puts for $2.15 (assuming you get TOS margin of net $400) and buying 20 2012 $5/7.50 bull call spreads for .50 ($1,000) and then hoping HOV gets to $6, where you keep the $2,150 from the putter and add $2,000 from the spread for $4,150 back.  You can make up to $3,000 more if they make it to $7.50 so a nice upside bonus in a bullish bet on housing over 15 months.  

    Livening things up/Exec – That’s on the schedule for Friday.  

    TBT at $31.44 is worth a try.  Oct $30 calls are $1.80 so .36 premium for 3 weeks is not bad.  Gotta root for Japan to intervene.  

  153. Yodi,
    $1.55 is probably how much it cost to go long the DIA Oct105Ps?
    Looking at the DIA Oct107P delta/gamma, Dow has to at least drop about 150 points (this week or early next) from here before Oct107P is $1.55. Assuming that Dow went lower in this time frame, when do you pull the trigger on selling Oct 107Ps?
    Do you wait for a push up  (from 10780) after the swoon??
    What if the DOW went down closer to Oct16th? What are the strategies to salvage the trade?
    I appreciate your explaining this a bit further.

  154. For some reason, I keep getting knocked out of premium membership into the report membership and it says that my post is "awaiting moderation".  So I log out and log back and it gets me back to premium.  Not sure if this is my browser or a system glitch.
    Just thought I would send it again:
    AMZN  Good advice – thanks! 
    NFLX  I sold the 165 NOV Calls last week on your "I can’t take it anymore" post.  Are these still good?  Also, it seems from your earlier post you’re saying that the Mad Money Mouthpiece is pumping NFLX so that in part the OCT shorts get margin calls forcing some of them out so GS can buy them after they finish with the pump? 
    Therefore, on a play like this should we expect the stock to drop around Oct expiration (assuming market as a whole is held constant for example purposes only) and perhaps get out then with a profit instead of waiting for NOV when they try to do it again?  In principal, is my logic correct?

  155.  rainman
    Just the EMA moving averages used on a nine month daily chart. Its a trailing indicator, but when the cross is clean, it gives you some really  strong trends. Works good on JEC.

  156. Mattress/Phil: OK, I am beginning to get the picture. I look for the "Stock Market Parachute". Thanks!

  157.  Hey all,

    We have a new Longterm position that we are taking a look at in Frontier Communications. The company has a price target of $16, and it is currently rated as a Buy. The company has large potential with its acquisition of Verizon landlines.

    Check it out here.

    Good Investing!

  158. Phil/SDS: Patience and fear management are two valuable skills I’ve learned during the last few months of membership at PSW. Numerous times over the last week or so I’ve had the SDS adjustment trade set-up (i.e., either a roll to DEC or change to CALLS) and elected to hold off. It’s good to hear that my instincts are changing for the better.

  159. Phil / GS
    Thanks,  I tempered my enthusiasm, and sold the calls and and puts, with a 2:1 ratio on the puts ( for an income goose )

  160. Phil / 8:52 — I have no idea why I said your 8:52 post and I can’t find which post it was now that every thing is fixed but all looks normal again.

  161. Just spending the day painting the close…

  162. Gel1
    wanted to thank you for your posts — i followed you into NGG and IDCC--really appreciate your sharing--

  163. JR
    You have anything between .15 and R1?

  164.   Phil

    Following up on jomptien’s post on the LUV 10/11 Bull Call and 10 Put trade. I have made 77% of the potential gain if I have my number’s right. So does it make sense to unwind that trade and move to higher trade like a MAR 13/14 Bull Call and sell the 13 Puts (Credit of 0.25) I am assuming you would like LUV at 13..
    Thanks for the trade. novice

  165. exec,

    No, but I have a supporting ascending trend now at 66.91.

  166. reza99
    DIA First it is not such a great deal to have the DOW drop 150 points we have seen this more than once in the last month.
    But you need not to forget I do have the OCT 105p long so any downdraft will compensate. So you do not have to drop 150 points. The momentum play for me is more a protection for a downdraft, if you make a profit with it it is fine. As soon as you will sell the 107putter it will work more like a balancing scale you stop the bleeding on the loss of the 105 putter, as I paid only .72 for it and by selling the 107p  even at 1.10 or 1.20 will cover the cost of the loosing putter. and you will find in the end your short 107 putter will be worthless. But do not mix the momentum play with the mattress play as the mattress is there for a down market and you realy do not make money with this play. (protection only)

  167. shadowfax
    How far south? I will tell you at 3.55PM

  168. DIA/Yodi – I still don’t see real strength.  We do think they will prop us up at this level through the end of the week but then what do you do.  Let’s say Theta decay is 1/3 by week’s end, so in covering with $107 puts you pick up .35?  Not really worth it to cap your gains in a sell-off is it?  Sometimes – it’s just not a good time to sell.  

    NFLX $165.50!  BIDU $103, AAPL $293.82 – why isn’t the Nas up more???

    Qs/RN – Well what if the Qs pop to $51?  Then you lose .60 on the Oct $50s.  Don’t fool yourself into thinking these things are without risk.  Your Oct $50s lose .33 PER WEEK, selling a .15 put against it only mitigates 1/2 the theta damage but you almost may as well just spend .22 on the Oct Weekly $49 puts as that limits your loss to less decay than the $50 puts will have and no limit on the upside (downside).  The problem is you are BUYING more premium than you are selling there.  The other spread is better but I still prefer the puts as you are making a limited bet with no limit to upside.  The problem anytime your strategy is to spend money on premium to hedge is that you lose on a flatline because your long calls don’t make money and your shorts lose it.  Unless you have buy/writes that mature and make money, in which case you are still better off with mid-term hedges as they pay 5:1 and you’d only make a double with these by pure luck.  

    WAG/Ash – NO!!!  All the Pharmacies have impossible comps because last year they were selling out of flu shots and people were buying up all the disinfectants, hand sanitizers and stuff that go with it.  They got none of that this year so it’s almost impossible for them to beat.  WAG had a good run already of about 20% so I like selling 5 Oct $31s for .65 ($325) and buying 3 Jan $33s for .85 ($255) for a $70 credit.  If WAG has a huge beat and cracks $31, then you need to add 2 or 3 more longs in preparation for rolling the callers (Nov $32 calls are .60 and you still have Dec and Jan to roll to).  If they don’t make $31, you have $70 in your pocket plus whatever value is left on the long calls

    ETtrade Sucks/Fortep – That was my mantra a couple of years ago when I tried to talk people off of that nonsense.

    LUV/Jomp – I think too greedy.  Your strategy is what?  To keep rolling each potential profit up and up until it burns you and you end up taking a loss instead?  When you roll like that, just make sure you yell "Let it ride" loud enough for your family to hear you so they know you are a gambler and can get you help at some point.  I know you must have heard that "no one ever went broke taking a profit" but do you know how many people go broke by taking their profits and pressing their bets on the same trade over and over again?  Pretty much all of them…

    10-Year/Pharm – Oh yeah, people just can’t get enough of that 10-year money at 2.62% can they?  What a crock!  

    Thanks Rev!

    How many days/Jthom – I believe 3 more after today.  

    Blue Chips/Arbolito – No, you don’t sell puts in anticipation of a crash.  When we crash the puts go up in price.   WHEN a stock is cheap, THEN we sell a put to create an even cheaper net entry but MCD, for example is $75 and that’s NOT CHEAP and selling the Dec $70 puts for $1 is a $69 net entry but THAT STILL ISN’T CHEAP.  RIG, on the other hand, as I said above, is reasonable at $63 but selling $35 puts for $2.50 is net $32.50 and THAT is RIDICULOUSLY CHEAP.  When given a choice between buying something for a price that is "not so bad’ and  buying something for a price that you can’t possibly imagine being lucky enough to get an entry on – choose the latter…

    NFLX/DD – Sure.  We liked the $165s because that’s as high as we thought they’d go and here they are at $165.  The Nov calls are $15.25 and that’s $14.65 of premium – not much to be done there.   If you are worried, sell the $155 puts for $10.30 but if that doesn’t seem very smart – then it’s a good thing you are still short!   Right now it’s tempting to do a 2x roll to the Oct $165 calls ($8.50) but the escape route remains the Jan $180 calls, now $14 and if that worries you – then you should get the hell out of the short $165s while you can.  Keep this in mind next time though – these are not good trades for you if you don’t have the conviction to stick with it – it’s not worth the stress.  The logic of the trade is NFLX is simply not worth $165 so if it goes to $185 or $205 or $225, we can just roll it along and wait for sanity to resume.  There are not many stocks you can point to where that strategy doesn’t work – EVENTUALLY.  Remember, you only have to be right (about a pullback) once, they (your callers) have to be right every single time.  

    BIDU/Dclark – Well if you entered the Nov $95 puts right at $5.30, those are a non-issue at $5.10 at the moment although I do like rolling up to the $100 puts for $2.  The Nov $105 calls shot up to $7.50 and that’s the side I was worried about as they purposely jam a stock up if a lot of people buy puts to try to flush them.  Since the Jan roll is still there, I think just pressing the puts up $5 for $2 is the way to go at the moment.  If they gap up to $105, then we need to reconsider.  

    Moderation/DD – Maybe your browser is not holding the cookie (could be a security thing).  I rescued that post and answered above.  If something is hold for moderation, I can see it but feel free to say "hey, my xx:xx comment is held for moderation" but you only have to worry if my answers go past your question and, as I said, that doesn’t really happen because I CAN see them.  

    Instincts/HHF – Good job.  Once you get the concepts down it’s just practice, practice.  Trading properly is a profession – there are no short-cuts, you have to put in your time.  

    GS/Gel – I feel better about that!   8-)

    8:52/Rain – Maybe you meant the post with the news in it.  That’s the one I fixed. 

    LUV/Novice – On a Jan Trade to make 40% more than you have now as a pretty sure thing are you sure you are trading that for more than 2 in the bush?  Are you THAT bullish on LUV to not only maintain a 30% gain in price but to head up another 10% to put your new play in the money?  Is there nothing that can possibly cause it to be put to you at $13?  I like the Yankees and, at the beginning of the season, I would have said they would win 90 games.  By the All-Star break they won 50 and maybe you could have gotten me to say they’ll make 100 (10% more) but not 110 because they already lost 33 games and that meant they would have to go 60/29 in the second half and that would just be silly to bet on right.  Same team I liked at zero, same team I liked at 50 but even a team (OR STOCK) that you love gets to the point of diminishing returns.  Learn to recognize that.  Unlike local ball teams – there are 9,000 stocks out there and LUV already gave you a double – get a fresh horse!

  169. 12:00 PM On the hour: Dow -0.28%. 10-yr +0.51%. Euro -0.12% vs. dollar. Crude -1.07% to $75.67. Gold -0.02% to $1297.80.

    01:00 PM On the hour: Dow -0.28%. 10-yr +0.57%. Euro -0.11% vs. dollar. Crude -0.71% to $75.95. Gold -0.02% to $1297.90. 

    02:00 PM On the hour: Dow +0.01%. 10-yr +0.6%. Euro -0.11% vs. dollar. Crude -0.44% to $76.15. Gold -0.05% to $1297.40.

    03:00 PM On the hour: Dow -0.02%. 10-yr +0.6%. Euro -0.03% vs. dollar. Crude +0.01% to $76.5. Gold -0.05% to $1297.50.

    ugust Chicago Fed Midwest Manufacturing Index: -1.4%to 79.9 (indexed to 2007, equaling 100). The index reversed course from a 1.9% gain in July. Autos were the only sector to decline, but they fell 6.9% after a 7.6% increase last month.

    Unemployment could rise up to half a percentage point by mid-2011 despite economic growth, because the growth will be too tepid to generate jobs, according to a new paper at the SF Fed. 

    The Treasury sells $36B in two-year notes at 0.441% (.pdf) – a record low yield. Bid-to-cover ratio of 3.79, vs. a recent 3.21; indirect bidders take 39%, vs. a recent 34.9%. Direct bidders take 10.8%, vs. a recent 15.5%. Treasurys add slightly to already strong gains: 30-year yield -0.10 to 3.7%; 10-year -0.09 to 2.52%; 5-year -0.07 to 1.28%; 2-year -0.02 to 0.42%.

    Breadth is the strongest its been since the spring, with 85% of S&P 500 stocks trading above 50-day moving averages. Healthcare (94%) and consumer discretionary stocks (90%) have the strongest readings by that measure.

    The FDIC approves a new rule removing some safe-harbor protections for securitized assets when a bank fails, requiring sellers of those assets to retain 5% of the risk. The rule takes effect on transactions after Dec. 31.

    ome 279 banks have collapsed in the past two years, resulting in lost jobs, curtailed lending and the big getting bigger. The upside of the failures is that they can represent a healthy cleansing of a sector that grew too fast. Still, the contraction also represents an enduring threat to capital, lending and the economy. 

    24/7′s 10 Most Innovative Companies are headed by Qualcomm (QCOM), which it calls "one of the few large tech firms worldwide that sharply increased R&D spending last year." Runner-up Microsoft (MSFT) has one of the largest tech budgets in the world and which rose sharply last year.

    NBC Universal (GE) plans a bond issue late today that S&P says will be "at least $2.1B," with proceeds to fund part of a cash distribution due to General Electric based on Comcast’s (CMCSA) $7.1B purchase of control of the network. (earlier) 

    Wal-Mart’s (WMT -0.8%) plan to buy its way into the South African market via a $4B acquisition is a risky and expensive move that demonstrates how much it needs growth outside the sluggish U.S. market, analysts say. Such a price tag for a deal in "very difficult and challenging markets" means returns would "lag for years," says one.  That’s what I said! 

    Hospira (HSP +3.7%) shares surge on a report that a U.S. district court invalidated Sanofi-Aventis’ (SNY -2.1%) patent on Taxotere, potentially opening the door for its generic version of the cancer treatment. The drug was one of Sanofi’s top revenue producers, with $2.2B in sales in 2009. 

    Ford (F) may cut the number of models it offers to as few as 20in an effort to focus on engineering rather than brand management. "There will be less than 30, on our way to 20 to 25," says CEO Alan Mulally, who took the company’s helm in 2006, when Ford had 97 models on offer. 

    A new study of developers shows the vast majority believes Google’s (GOOG) Android has a better long-term outlook than Apple’s iOS (AAPL) – not a surprise, Doug McIntyre writes, since iOS is a closed system that works only on the iPhone and iPad. "Apple may regret its decision to keep its source code private and only allow developers to build apps which the company controls."

    Three lunchtime reads:
    1) Risking a trade war with China
    2) Twenty-six conservative dividend stocks that should beat bonds
    3) Gold is the final refuge against universal currency debasement


    OK, I did this one in IE – we’ll see if it behaves better…

  170. Pharmboy
    September 27th, 2010 at 12:20 pm | Permalink  
    TLT rockin’.  I don’t care about the small pullbacks, this thing is gonna go hog wild 4Q.  Like 1020 and others, I am moving out of all longs, or if one stays in, hedge. What do you mean with this? Shorting TLT, which strike? COuld you lease repeat you PGH strategy, I wrongly erased it. Thanks.

  171. This is a pretty complacent market !!

  172. Todays Fat Finger – from Zero on PSW site:

  173.  Phil/ hedges
    what do you think about making buy/write for TZA or EDZ right now with couple of month calls and puts? or not good because of low VIX?

  174. OIH/Phil: Should hold Oct 104.1Ps hold through the inventory reports next Wed or roll them?

  175. Long TLT, out of stock longs or option longs (LEAPS) or buying Ps on the others(e.g., verizon, merck, etc).  I will pay the premium for now, as I have the long P I sold a few months back.  PGH was buying here and selling the April 10 C and 11 Ps for 2.15 or better.

  176. Phil – I know you don’t like the treasuries, but someone does!  And those little flashes noted above give me no confidence in this market.  None.  Although I do like my biotechs….glutton for punishment. ;)

  177. Phil,
    DIA I agree that is why I am not rushing in to things. I am sure the momentum for the putter sale is still in the coming.
    It just looked to me that reza was worried to loose on the long putter, I am still waiting for my short Sep putters to expire worthless. So after that we look what OCT brings.

  178.  Market sooooo heavy………  hard…. to… hold….  up……….

    PGN/Pharm – What happened to the circuit breakers?  Man, I have no faith in these systems at all!  

    Hedges/Tcha – I think we did those on Friday.  TZA is good as you can sell Nov $23 puts for $1.55 and that pays for a $25/31 bull call spread at $1.85 so net .30 on the $6 spread that’s $1.80 in the money now (up 500% to start!).  

    EDZ is also good if our earnings are a miss and you can sell Nov $24 puts for $1.25 and that pays for most of the Nov $27/31 bull call spread at $1.40 for net .15 on the $4 spread that’s $1.80 in the money so up 1,100% if they flatline from here!

    OIH/Rez – Oh, we got out of those the next day.  I’d hang on at this point through Wednesday but any chance to get out even, take it.  

    Flashes/Pharm – I don’t care if you don’t trust the market – trusting the government to pay you back at all in 10 years is dodgey and believing that the dollars they give you after they rack up another $15Tn in debt (not to mention after a decade of unfunded baby boomer obligations coming home to roost) will be worth anything like the dollars you gave them a decade before is not even in the realm of rational.  I am not joking – it’s not…  People buying long-term TBills are simply not thinking things through at all.  

  179. shadowfax
    Going South, 3.55 you just about passed Belize City – 45 possible going for 50

  180.  awesome.  thanks.

  181. Thanks JRW…played TZA long off not touching your 67.15 line @ 3:15, doubled up on the break of the 66.90 trend and bailed just now…..Thanks
    Phil, thanks for the help with RIG…now you have me thinking about selling more of those…lol

  182. Phil: Thanks so much on your answers. I certainly will analyze the RIG position.

  183. Chinese ADR’s seem to be a winner today.

  184. Phil
    Do you have a MON play for earnings? What are your feelings on MON these days?

  185.  Wheeeeee – that was a fun finish wasn’t it?  

    Even AAPL took a dive there at the close (but not BIDU). 

    I’ve gotta run but I’l; be back later.

  186. hoss

    You are most welcome; sounds like you played it the same way I did. 3% on TNA trades and 1% on a late TZA, congrats !!

  187. Phil / breakers — What? No faith? What do you mean, I’m sure they’ll go back and cancel all those orders! Just hope the winners didn’t already spend it on something else!

  188. Reza see with in 1 hour 107DIA Oct putter went from 1.00 to 1.25  just by down 48 points. So you see how quickly the scale can tip !!!! Never rush in to things.
    Phil BIDU saw your comments. The rush up by 6.00 I think is just a flash in the pan, at the worst we can always roll the caller.

  189. Pretty much…i played TNA early..then had to take care of my 2 1/2 little girl(stay at home Dad still my #1 job), then nap came and I got short.  So 1% up and down.
    I’m working on brushing up my day trading again with a little fun money so I quit adjusting my longer portfolio.  I used to day trade e-Mini’s, and your system isn’t too different from what I can tell.  Discipline and hitting when it’s time.  Thanks for the input though, very insightful.
    Have a good one…..

  190. Needs more Tepper!

  191. Not saying holding those bills to maturity, Phil, but for the coming, fore seeable future, they should do very well….we played TBT for a while thinking the inflation boogie man was around the corner.  

  192.  Phil/hedges
    thanks, but if I already have ITM short puts, and I try to understand how better to handle them, is it good idea just to leave them and be exesized and after that sell calls and puts (just plain buy/write) or because low VIX now it wont be good idea and better just to roll short puts

  193. Pharm,

    LOL, TBT translation – SRS II 8-)

  194. Pharm… I believe the Fed is romancing the treasuries ( in an effort to create some inflation )… possibly the BOJ as well, but the dummies who think they are safer long term in this stuff,  than they would be in equities will be the sheep that get sheared  when the scam is discovered.  QE 2 ( inevitable ) will involve a lot of treasury buying by the Fed, but the dollar will reflect weakness when this happens and the ensuing fear of inflation will diminish the bond appeal, thus opening the door to exposing the scam that is in its last days of reality… just my opinion, and with all due respect to those that might disagree.

  195. gel – can’t disagree.  But when unemployment ticks back up, and maybe even higher than 10.5%, who’s gonna be buying ‘things’ in this country?  Hording money and making 2% on Billions, well, better 2% than losing 50% on flash crashes or whatever.  Every industrialized (I use that term loosely) is ‘inflating’, not one country wants a strong currency.  Banks are not lending.  Auto sales are stalled (who cares about that manufacturing sector)! 

    QE2, sure money supply will go up…but will earnings for these companies? P/E will widen, and is that a good thing?  QE 1 worked, right?  Not so sure about what QE2 will do except exacerbate the situation, and Gold/commodities will be the best game in town.

  196.  FYI – If you are having trouble reading the small fonts within Firefox or Chrome you can hold the CRTL and click the + sign to increase the size, hitting the minus sign will do the reverse.
    hope this helps

  197. thx newbie trader! nice tip

  198. Newbie-fonts- very cool- my eyes thank you.

  199. Oh, and we are becoming Japan more than we know it – the ‘banks’ buy our ‘debt’ using our money in our accounts and pay us pennies on the dollar.  We know where Japan has been and where they are going.

  200. IWM Puts/Phil: Are  IWM 67Ps Quarterlies still in play (.85)??

  201. Brazil Confirms What Everyone Knows: "A Currency War Has Broken Out"

    Brazil is buying dollars in droves.

  202. Pharm: Peru too.

  203. Brazil- Good luck – I think the we can print ‘em faster than they can buy ‘em.

  204. Tusca- SKX- Thanks for your analysis on this one. A couple of questions:
    1. Your observation on the BTS sales is interesting. Is there any seasonality to these sales, ie. upcoming holiday?
    2. While suffering through watching a couple of TV shows last night (the wife’s favorites-Desperate Housewives, etc) I noted a couple of commercials for this category from Reebok and New Balance. I normally tune these out but paid attention this time. Is there any significance to this or just trying to play catch up?

  205. On the subject of the currency wars and the effect on gold, what’s happening with Korea is very interesting:
    Here’s a bit of an excerpt:
    "The Chinese and the Japanese are devaluing their currencies to ensure economic growth in the weak global economy.  Some think China is increasing the value of the yen on purpose, just to be jerks to the Japanese, given their latest international squabbles (and historical animosity).  Regardless, this is placing tremendous pressure on the won to appreciate."

  206. ongba….Sorry for the late reply.  I’ve been at my "other job".   Question was how would I handle AAPL  trade of owning 290s and selling 1/2 monthly 290s when it drops to 270.   Answer is it wouldn’t happen.  I would have stopped out long  before that kind of a drop.  My covers would have been bought back when about 50% lost and that would happen long before the stock dropped 20 points.   Whenever I make a trade I set a stop.  For me that’s a  part of the trade.  I can’t sit at the computer all day so I MUST have stops to  protect against unexpected moves.  For example, here’s a trade I might make:  AAPL is $291  .    Buy 10 Jan 11 AAPL calls @ 21.50.  Sell 5 Oct 1 290 calls @ 4.40.  If Oct 1 290 calls <2.00 buy 5 to close @ market.  If AAPL stock <285, sell to close 10 Jan 11 calls @ market.   (I calculated 285 by going to CBOE and looking at market value AAPL when the Oct 1 call drops below 2.00)    Couple of things to notice.  One is, this is a SINGLE TRADE.  I put in the stipulations at the onset.  This takes away all emotion I might have should the stock drop.  The close-out becomes automatic.  Also, I HAVE to do these trades at market;  if they are set at limit I may miss the trade and continue to lose while I’m not watching.   But with AAPL the spreads are narrow, so it’s O.K.  

  207. Phil – RIG  -10 12Jan35P
    My TOS (afterhours) shows that the margin on 10 short contracts is( $5900.56) with a cost of $2340 for a net margin of $3560.56.
    So, we are making $2340 on a net margin of $3561 – pretty good.

  208. Pharm… not surprizingly I agree with almost everything you say, but we both agree the QE 2 will drive the dollar down and Gold/Commodities up, up and away. I firmly believe ( with all of my heart ) that the Fed will avoid inflation, and will overinflate to make sure deflation is non existant. Ben and all but one of his posse are in agreement with that one. Where we disagree, is in the thought we could follow Japan. Japan is a disaster in the making and has been for over 10 years – all due to government mis-management in the MOF. The BOJ is also a boy scout organizaton, compared to so many central banks.  In the US, the real estate issue is in need of a correction ( sooner the better ) and only two events will accomplish this – a rising ( fast ) economy,  or a deflating dollar ( ie inflation ) which will no doubt be the solution as it will take years to correct the ecomony. All of these "underwater" homeowners will feel just fine once their property statrt to jump in price. They really don’t care, as long as they feel they are building equity – all at the cost of the banks who are getting screwed.  No… we will never be Japan… we have consumption in our DNA and we love to replicate ourselves through repetitive childbirth.

  209. BeN/Aapl
    You are correct and so is Phil
    i must admit, though, that I fail to understand Phil’s bull call spread philosophy.
    What if aapl is BELOW the bull call spread range in Jan?
    For example, if I take Phil’s advice re: Jan $270/$320 call spread and finance that by selling puts, what happens if AAPL IS at 250?
    The flip side question is what if Aapl is at $360?
    So, I am trying to look for a strategy, not only to preserve my profits, but also take part in the upside…
    Looking back two months, I would have had only HALF the profits with a bull call strategy as Aapl jumped a lot…
    Maybe, the strategy I am looking for does not exist

  210. Pharm… correction – The Fed will PROMOTE inflation…

  211.  BIDU short –  I was playing around with a "stupid options trick" Phil taught me a few weeks ago to recover a position and came up with this way of shorting BIDU.  It basically a diagonal ratio put spread selling 3 Oct. $90 puts at .84 each and buying 1 Jan. $95 put at $7.60.  Here my thinking:
    If BIDU sits and does nothing by Oct. 15 I make $150.  Margin cost is $2490 so I make a small gain and I still have the $95 put and could sell the Nov. $90 puts.
    My break even is 109.50, so BIDU can rise almost 5 percent with no damage, and again, I can sell puts again in Nov. to cover.
    A 10% drop in BIDU by Oct 15 is about a $570 profit, which is over 20 percent for 3 weeks with little risk.  Maximum profit at $90 is about $750, which is over 30%, and $87 is the break even on the downside.  If BIDU drops to $90 before Oct. 15, I would just close the trade at whatever profit I had.
    Sound good?  The same kind of thing could be done with NFLX and all the other high flyers that look overbought.

  212.  pstas – regarding sketchers – these other brands are just playing catchup.  Their shoes are worn by nurses, moms, restaurant workers, and now kids!   Even without shapeups, they have a pretty strong franchise.  I recently went to legoland, and i was surprised by the amount of adults including (men) wearing sketchers.  They have a pretty sticky price point between 40$ and 110$.

  213. LUV/Phil,
    Good advice about being greedy, got to keep remembering that. Just seemed that over 2.00 ITM thought it would be safe but take it and run is the most prudent.

  214. Phil and all
    I just found my spy and the issue was WYFI is not safe, beware even if you connect direct they can get in. I changed all passwords and unplugged the router. Tomorrow it is 5 screens on 1 computer, that is goning to suck. Your neighbors may not be as slimey or have a department of criminal investigation officer hiding accross the street trying to get your guns and money but I do. Now they are busted by me!

  215.  lflantheman,
    thank you very for sharing AApl sstrategy. Impressive, and inventive! Great!

  216. Acobra65/ Weight loss    I feel obligated to respond to you promoting HCG today; its true HCG is a natural hormone produced by the placenta during pregnacy (most pregnancy tests actually assay for an elevated HCG level ).  The study that I am aware was conducting in the 1940′s ; the subjects were put on a 500 cal diet and were given HCG-- big surprise,  they lost weight.  Their in no known triggering mechanism in the hypothalamus which magically makes someone lose fat and not muscle; its all just conjecture and theory. 
    Of more concern, HCG given long term will cause men to develop an elevated testosterone level, with its potential for side effects including an increase risk of metastatic prostate cancer. 
    If HCG were such an amazing product, you can bet money that a pharmaceutical company would have altered it slightly, patented it and marketed it.  Unfortunately, there is no free lunch.  HCG is a complex protein which doubtfully can survive gastric acidity; would be interesting to check an HCG level and see if you are even absorbing any.

  217.  Maya1 
    This is what it looks like to me. If I`m wrong someone tell me.
    You tied up $24,000  for two months to make $5300. 
    But, you could have bought the Jan 260/280 Aug 11th with AAPL at 250, for $7.65.  Today that can be cashed out for $13.50. If you had put just $7,500 into that spread, you would be up @$5900.
    If the spread  had gone down,  you stop out at 20% for a loss of $1500.
    You would have taken a loss on the stock if it went down. 
    I think Phil is throwing that 2013 trade at you and selling the put because you want to hold the stock so badly. In that trade you either keep the money for selling the put and get a bargain AAPL spread, or get assigned AAPL for $200.
    If the stock goes to $250, you`re probably break even, if it goes to $360, you`re probably cashing out with an 100% profit.

  218. Gel – Gold is a different beast, so we will leave it off since we both agree.  So my question remains, has QE 1 worked? Are treasuries getting creamed? Are prices going higher (ie, inflation)?  Is employment better?  Are wages increasing or hours worked increasing?  Cars and airplanes are not being sold.  We have had a credit crisis (still), and things are no better. Housing prices continue to decline, home sales down.  Dow theory has transports needing to lead the way along with banks.  I don’t see them getting any better?  Banks are down in this run up….so when will they participate? Inflation, where is it?
    I understand the dollar demise if there is QE2 and thus the equity market are thought now to be a one-way ticket up because either a P/E multiple expansion.  On another hand, what if there is no QE  then the stock market should enjoy a stronger earnings growth. How come analysts are cutting their estimates right now reducing profit forecasts on 521 companies in the past four weeks while increasing them on just 391 stocks (Intel and other techs comes to mind as they did it themselves). According to CIBC World Markets, over 60% of 2010 earnings revisions have been to the downside in recent weeks.  That is not a recipe for a market going up.  Regardless of QE2, the “E” goes down and the P/E multiple does not expand.  Therefore, the stock market does not go up in this scenario.  If that happens, more layoffs, more deflation, etc etc etc.  Japan, yes, we are becoming more like them IMHO.  A big difference is they have manufacturing (to some extent), we do not.  We are a service economy, and that is the dangerous game we are playing.

  219. I know the Feds say they will…buy when?  B’f the elections?  After?  They are doing it already.  I expect tomorrow to be green, as they will buy short term treasuries.  Time will tell I guess how this all works out.

  220. Humvee, i am pretty fascinated by hcg (intellectually). I have never seen so many physicians & nurses inject themselves with something of this nature. Personally, i just eat sensibly and run a few times a week – but ultimately, if this can help “reset” someones metabolism, great. but this has to be coupled with lifestyle changes – diet & exercise. but you are absolutely correct, there is no free lunch when you are f’ing with someone’s physiology.

  221. Pharm…. Your analysis and facts are accurate for the moment, but this entire situation is playing out and I believe is a little early to project the direction or time line.
    QE-1 did nothing for the economy, but did give the equity markets a short term boost. The problem with QE-1 was it was nothing more than throwing money against the wall, and not even a wall that was identified. QE-2 may be not much better in solving the underlying needs of the economy. I agree…. nothing looks positive, as the REAL problem has not been addressed – employment and monitary velocity. Real estate values are still the major underlying problem in our economy ( not surprised because this was THE cause of the unravelling ), and the best way to resolve this problem is through inflation. The economy will take too long to recover to address this cloud that is placing fear in the factors that can jump start the economy. We will not follow Japan, and we will see inflation sooner than later. At the current time we are flat… ie –  no inflation or deflation. The Fed will most likely announce the QE-2 before the election, but definitely before the end of the year. Inflation is their objective, as it would be very healthy at the moment. This, they hope, will be the shock that restarts the economic heart, but I think it will take some very aggressive fiscal policy from the Congress to achieve a economy that is adding employment. Whatever happens, I have an investment plan that I am very comfortabe executing…… The dollar is doomed for sure.

  222. jomama,  i’m with you; a good sensible lifestyle is the best path to take.  We Americans seem to want our cake and eat it too  (sorry for the joke, but couldn’t resist).  So many adverse effects show up years after a large number of people are taking the medication.  Look at what’s happened with Avandia; it was a huge drug, now its off the market in EU and probaby US to follow, this after years of clinical trials; how/why people inject these things haphazardly is beyond me.

  223. No inflation? I strongly believe the world is in the midst of the largest rise in inflation ever experienced. This is the wrong type of inflation (dollar debasement) and will send the world economy into a tail spin if it continues. If Bernanke stays the path we will see the mother of all depressions in the not too distant future. I think we need to take a step back and look at what’s taken place the past few months. Its late I’m tired but urge you to take a look at commodity prices. Demand caused inflation is a different animal, the Fed has the tools to quell demand but we aren’t in Kansas anymore Dorothy. We are exactly like Japan and far worse, our currency is tied to anything and everything that makes the world go round.   

    You have to ask yourself…. Would Bernanke like to see the Europeans and Britain buy back the US for pennies on the dollar? To think we can debase and cause massive amounts of inflation without the means to sustain ourselves would bring about a revolution of epic proportions. GN and Sleep well..

  224. kustomz
    Hey there Komrade !… Inflation is prevalent in most of the countries with any sort of significant economy ( once again you have called it right )…. excepting Japan and a couple of others that do not matter much in this discussion.. The US is flat !!!. I have to dissent with your assumption this inflation will tank the economies. No so, IMO, as this is usually good for growth…. ie, make something now, and sell it for more later. All these dollars make the average guy think he is getting rich, and paying his debts in worthless dollars. Got to remember though – we are the world’s largest debtor, and we have to figure out how to liquidate this monster debt…. there is only one way, as the economy will suck for a long time to come, and furthermore, we do not manufacture much anymore.  Inflation is our solution, and the Fed knows it. This remedy will soon be played out…. so real estate that has been leveraged will soon be one of the best investments, and T bonds the worst.  Gold and commodities, priced in USD will be a bonanza..

  225. Good morning!

    Speaking of inflation: - Don’t read this after you’ve eaten, you’ll throw up!  

    Short puts/Tcha – It depends on the stock and what kind of roll you can get and your outlook.  I wish there was some simple answer but that’s like saying it doesn’t matter if you buy IBM or C or WFMI or YRCW as if they are just interchangeable and there is some "rule" that says what to do with them – in the same way that would be ridiculous, it’s just as ridiculous to make a blanket statement about what to do with a short put without knowing the price, the strike and, oh yes, the stock…

    P/E/Pharm – Don’t forget that inflation inflates the E in p/e.  

    LOL Pstas – you are right.  It’s like we’re in some Global game of "truth or dare" with our currencies where countries either have to come clean about their balance sheets (truth) or keep issuing debt and buying the debt of other nations (dare).  

    China/Snow – China is like the guy at the poker table with the huge stack of chips.  The other nations have no cards and they know it yet we all try to bluff them anyway and they are not biting.  The only thing the US has going for it is that it would hurt China if we stop buying their stuff but WMT, whose family owners are 4 of the richest people in the World,  isn’t going to let that happen so all of our threats are empty.  

    AAPL/Iflan – You are getting really good at these, it pays to specialize! 

    RIG/Edro – That is strange as it’s way higher than I’m seeing in what is not a PM account – just ordinary margin from what I understand.  I do see net $3,560 on the Paper Trading system though.  Perhaps over some amount in an account they automatically give you better margins.  Still, not bad at $3,560 but it shows you how the rich have such an easy time getting richer comparatively as they get 3x better leverage on the same trade.  With PM, the margin is a net credit as PM assumes a 20% move in the stock and $35 is way below 20% so you collect the cash and are assigned no margin requirement!  

    AAPL/Maya – You are collecting $22.50 for selling the $200 puts.  You then spend that $22.50 on the $270/320 spread.  You were paid $22.50 to accept the obligation to buy AAPL for $200.  That is your only obligation here.  If your bull call spread is wiped out – you lose the $22.50, that was not your money, but you still have the obligation to buy AAPL for $200.  That obligation only comes into play if AAPL is below $200.  At any point between $270.10 and $200, you net zero on the trade but keep in mind you still would be tying up your margin to satisfy the obligation you have to the putter – that’s your real cost of the trade.  You say you would have had only half the profits and, in this unusual situation, that is true but you also have half (or less) of the risk.  

    It is better to make 20% 5 times or even 4 out of 5 times than to make 50% twice and lose $50% once, isn’t it?  Taking better risk/reward bets, even if they have smaller payoffs, over shorter time-frames can build wealth faster than swinging for the fences looking for big pay-offs.  

    And what Ben said!

    BIDU/Rev – I don’t think you are taking the theta (time) decay into account.  The Jan $95 puts at $7.60 are all premium with about 16 weeks to expire so they lose .48 per week pretty much no matter what.  If BIDU rises $5 (5%) then you can expect your puts to be worth about what the $90 puts are now ($5.90) so down $1.70 plus whatever time decay.  On the downside it’s good as long as they don’t fail $90 but that’s a huge move and the putters can be rolled.  As the $1.70 $95 puts can be rolled to the $1.50 Nov $80 puts, I’d be more inclined to sell 2 of the Oct $95s than 3 of the $90s so you collect $3 rather than $2.56 with less obligation.  

    Greed/Jomp – It’s the hardest thing to get control of.  Amazingly, for most people, it’s as hard to take a profit as it is to take a loss.  

    WiFi/Shadow – Privacy is a total illusion in the digital age.  

    Reset/Jo – It seems to me that if fat is storage for emergencies then the trick would be to find what it is that signals fat to begin releasing it’s storage.  Clearly that must happen sometimes so why can’t they just figure out what it is that triggers that action and artificially produce it?  

    Crazy move up in the futures at about 5:15 – good for 100 Dow points but fading already.  Such massive manipulation this month, it’s really amazing – even to a jaded observer like me….

  226. Gel- Treasuries- a "mechanical" question on your Treasury scenario- in theory, should not Treasury prices rise/yields fall in the short term if we have QE2? In other words, more demand for T’s drives up the price , etc. This will lead to further weakening of the dollar, hence "inflation" of commodity prices and eventually driving up expected Treasury yields in the longer term?
    Is that the way you see it unfolding or am I missing something?

  227.   Maya1 
    If you`re a TOS user, there are two great tools available to understand spreads and the profitability of different trades. 
    1. Use the ON DEMAND feature. It allows you to go back in time and actually make the different trades and track them with real data up to the present. The JAN 260/280 spread I mentioned actually made $5300 if purchased Aug 11 and tied up $8300. You can play with the trades, roll them, modify them into ratios etc. You even get margin requirements. I spent a lot of time doing this before I ever placed a trade. It all sounded like voodoo at first. Its like paper trading, but you don`t have to wait for the results of your trades.
    2. Spend the time to get familiar with the ANALYZE page. You can enter trades and approximate them out into the future, or THINKBACK and figure out your profit if you`d made them in the past. 
    Really great ways to understand what Phil is doing.

  228. Phil- check this out:
    Very interesting.