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Testy Tuesday – 7.5% or Bust!

Wheee, this is fun!

Will our 7.5% lines hold?  As I mentioned yesterday, we expected a test of our 7.5% lines at  Dow 10,950, S&P 1,160, Nasdaq 2,400, NYSE 7,450 and Russell 690 and we remain TECHNICALLY bullish if we hold them.  The Dollar was doing well until about 3am this morning but then turned down sharply – some sort of rumor is driving the market and, of course, heading into the G20 pretty much any comment made by any Central Banking official is blown way out of proportion.  

China is likely to raise rates today, making a small concession to the US on their exchange rates but more so to cool off the massive property bubble that is forming in their cities.  That may put some downward pressure on commodities without strengthening the dollar – an interesting combo, but one that illustrates how China is becoming more important in the Global marketplace than the US.  

If China is raising their lending rate to 5.56% and their deposit rate to 2.5%, they risk attracting even more money, including a reverse carry-trade from the US, when money can be borrowed from the Fed at 0.25% and lent to China for 2.5% giving the trader a 2.25% profit for the year.  2.25% may not sound that sexy, but when it’s done by Investment Banks and other investors who can lever their money 10:1, that’s a 22.5% on their cash.  This is how Japan has supported their economy for two decades but it’s hard to imagine what will happen if the US Dollar, which makes up 62% of all money on the planet, starts flowing out of the country in even faster quantities.  

pboc1019We were just discussing investing in foreign countries in Member chat and I warned that this may not be the best time to make that kind of move as the dollar is very possibly bottoming here and transferring US Dollars to another currency risks hitting a reversal that wipes out any interest gains and possibly even some the principal as the Dollar rebounds and you find yourself in the wrong currency at the wrong time.  

I guess I should talk about AAPL although we’ve already discussed it in depth in Member Chat but they do seem to have had some kind of earnings and, although very nice – expectations were already a bit high so they seem to be pulling back from their 33% run since September 1st.  Gosh, what a shocker, eh?   Who could have seen that coming?  Oh right, it was us!  I said yesterday that if AAPL did not justify a $300Bn market cap (a 10% gain) that the Nasdaq would fall 5% in 3 days so we’ll see how smart I am this week.  We placed our bets on the various Q ETFs as our key hedges and we got fantastic entries (re-entries) on our October Overbought Eight list in yesterday’s market silliness as the Nasdaq tested our 12.5% line at 2,475.  We will be thrilled to get a 5% pullback to the 7.5% line at 2,365 but we’ll be satisfied to take some profits at the 10% line at 2,420 as well.  

The banking sector kept the Asian markets afloat last night as the foreclosure nonsense begins to subside.  As I guy who used to be in the industry, I told Members from day one that this would not amount to much but it sure has been fun listening to all the "experts" in the MSM pontificate on "Foreclosuregate."  As I mentioned in the Overbought Eight post, our primary long plays last week were on XLF as we sought to take advantage of the sell-off and Oxen Group’s David Ristau hit it out of the park yesterday with his pre-market Alert to Members to go long on FAS, which flew up from $21.40 at the open to $22.62 at the close, well past the 5% goal for the day so congrats to all who played along at home on that one!  

Oil made it all the way to $84 yesterday and that gave us a nice entry on USO weekly $36 puts at .38.  We were hoping for cheaper but it was too tempting at the end of the day despite the short time-frame.  As I mentioned in "Oil is not Well" this weekend, as well as yesterday’s post, we were expecting a pump job yesterday ahead of the mandatory dumping of the November contracts and there are still 98,423 open contracts for November delivery on the NYMEX with just 2 days to trade.  I will be surprised if less than 70,000, representing 70M barrels of oil that could be delivered to US consumers, were not canceled by tomorrow – otherwise people might realize there is plenty of oil available and stop paying $80 a barrel for something that costs an average of $16 to extract from the ground and $10 more to ship.  

Stock Price Graphs.Imagine the chaos if the US Government forced the traders, who currently are pretending to order 397,209,000 barrels of order for December delivery, to actually ACCEPT delivery of the barrels they ordered – CHAOS!  They have NO INTENTION whatsoever of accepting those barrels.  As you can see from the chart on the left, we are already over 360M barrels of commercial storage in the US, more than 10% above the 5-year average and pretty much as much oil as can be shoved into every nook and cranny in the US has already been stuffed into the channel in order to fake demand over the summer and keep up the con that oil should be more than $65 per barrel.  

The Democrats do the same nothing about this scam that the Republicans did while the American people pay tens of Billions of dollars every month to speculators like GS, JPM, C and other market manipulators who buy oil they have no need of and store it on tankers to fake demand and wait until the last minute to cancel contracts to make sure supplies are in a constant state of disarray – all in order to reach into the American consumer’s pocket and steal as much as they can from one of the few things you can’t do without.  These are the same people who are trying to get a market going for fresh water – God help us all!

Natural gas can’t be faked the way oil contracts can because you can’t put natural gas on tankers and drive it around for 6 moths at a time (although that is the promise of LNG if they can get that going).  Without LNG, natural gas is pretty much a local product and the natural gas reserves are as full as the oil reserves and, since they can’t scam natural gas the way they do oil, we have a more accurate reflection of true demand in the pricing.  That’s why UNG has fallen 25% in the past 3 months while USO has gone up 5% – that’s the difference between manipulated an non-manipulated markets.

The Natural gas traders were hoping a hurricane would come and disrupt production, driving up prices.  That didn’t happen of course but oil manipulators don’t have to wait for natural disasters to strike, they can create their own crisis any time by paying a few teenagers to attack a pipeline or giving some Somali "pirates" $10,000 (several year’s salary) to attack an oil tanker or simply buying a tanker full of oil and then not delivering it for 6-9 months, creating fake demand on one end (the purchase of the oil) and a shortage on the other end (the failure to deliver) that drives the price up.  With 397M fake orders already out for December delivery, a $1 move up in the price of oil is worth $397M to those traders – kind of puts the $10,000 they pay to the Somalis into perspective, doesn’t it?  

Yet the Democrats do nothing, the Republicans do nothing and even the Tea Party says nothing about this constant crime against the American people.  Oil accounts for 65% of our trade deficit and the oil trade devalues the dollar as we literally trade $50Bn of hard-earned American cash each month for something we BURN!  Oil inflation causes food inflation and increases the transportation costs of all goods and it’s use in extraction of other commodities continues a vicious circle that spawns global inflation.  

Why is nothing being done about this?  Well perhaps it’s the $12M spent lobbying by COP this year or the $7M spent by CVX or RDS.A’s $6.4M or XOM’s $6M or the $4M spent by Tea Party-backing Koch Industries, who also made over $1M in direct donations this year already!

This is blood money stolen from your pockets and then paid to politicians so they will look the other way while your country is sold down the river to the same people who were allowed to loot an pillage it in our last commodity-driven rally (’07-’08 in case you are one of the many who seem to have already forgotten).  Don’t worry though, it’s not like things are any better in Europe, Japan or China – it’s a global sell-out and our politicians are no sleazier than any others.  You can read all about the subject on Global Witness or get a nice overview from the NY Times’ "Oil, Cash and Corruption."

So, where was I?  Oh yes, so we took the opportunity of that totally BS run-up in oil to short it – as I told you was out plan in the morning post.  As I warned Members yesterday, shorting the futures on the resistance lines with our stops is a game of lost $50, lose $50, lose $50, make $250 at best but this morning may shape up to be one of those "best" mornings as oil has been crashing down from $84 all night.  I know I get boring telling you what a farce commodity trading is all the time but if you don’t understand the game then how are you going to make money playing it.  As I often say to members

We don’t care IF the game is rigged as long as we know HOW it is rigged so we can play along.

Is that cynical?  Well maybe but I can only tell you there is a crime in progress and go to Washington and tell Congress there is a crime and supply evidence to committees that there is a crime and consult and volunteer my time for underfunded groups that try to prevent that crime year after friggin’ year, but I’m not a superhero – I can’t stop it by myself people and, sadly, neither does it seem like anyone can so all we can do is make a little cash and try to elect better leaders.  

See, things never change.  That cartoon is from ’93 and we changed leadership and ran up the budget and bombed Iraq some more – big deal!  Meet the new boss, same as the old boss.  

We waited out yesterday’s nonsense and now we’ll have our proper test.  Whether or not we hold those 7.5% lines depends on other earnings and, of course, the dollar so lots of fun and excitement ahead.   We have 5 (FIVE) Fed Governors speaking today: Dudley, Evans, Lockhart, Fisher and Duke and we have BSX, CREE, GILD, JNPR, SLM, WDC and YHOO reporting after the bell with fairly mixed results ahead.

KO had a beat and we’ll be going over that one in Member Chat as I will be interviewing CEO Muhtar Kent this afternoon unless he cancels after seeing what a cynical mood I’m in this morning…  I’m sure he won’t, KO is a very nice company so this should be fun.  What’s not fun is ICSC Retail Sales dropping 0.7% this week, the worst week we’ve had since May and this week alone drops the month into the low-end of the forecast 2.5-3% range.  Redbook Chain Store Sales looked much better at up 2.7% from last year but let’s watch those trendlines! 


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  1. What a crock of sh*t.  I’ve been hearing all my life that "they", both the Republicans and the Democrats are going to fix the campaign finance laws.  (which can probably be traced to the root cause of our demise)  Instead they do the exact opposite by allowing uncapped covert money from business and non-profits to enter the election stream.  No doubt to combat the Tea Party grass roots movement that has both the parties petrified.  To add insult to injury, they pass it via the supreme court to give themselves cover.  They’ll do anything to keep their phony baloney high paying political jobs.

  2. Sorry about the formatting in the previous post.  Does anyone know how to copy and paste from an word document without the formatting showing up?

  3. There’s a little box with a W on it on the bar of the comment box – that’s for pasting from Word.   

  4. Hey all,

    We are looking at a new Short Sale this morning in Seagate Technology (STX). The stock looks solid for some movement downwards today.

    Check it all out here!

    Good Investing!

  5. "There’s a little box with a W on it on the bar of the comment box – that’s for pasting from Word."  
    I don’t see a W in the comment box.  Could it be Firefox???

  6.  Phil,
    You were spot on with the USO call. I could not enter yesterday. USO looks like it will open down a dollar. Is buying the put still on maybe the $35 weekly? Thanks.

  7.  In regard to praizada’s comment – I have USO puts from yesterday – would you sell into open?  Or sell half etc. thanks.  nice call.

  8.  wow – looking for an ugly open with 
    gold, oil, and copper down over 2.5% – dollar up over 1% (dixie)

  9. Phil
    Do you like PFE here for buy write? I am thinking of selling the 2012 20 for $1 and $15 puts for 1.44 and buying the stock. Even at this price (and with the 4.2% dividend) I get a 43% return if it holds 17.5 if below 15  I am in the shares at roughly 15.15. and still collect the dividend.
    Your thoughts appreciated.

  10.  anyone know what is going on with Korea – down over 5% (ewy)

  11.  Phil, thanks but I answered my own question with a sell.  Can’t trust this nutty market with a nice gain.  Thanks again.  

  12. DBC falling off a cliff. Phil’s commodity call was spot-on.  Just rampant speculation in these markets.

  13. Pharma;
    any opinion on immu,

  14. Good morning Vietnam!


    DCTH – Jan12 $5/15 Bull call spread fro $3.  First round.  Selling Dec10 $7 Ps for 45c or better.

  15. IMGN/laurel – gonna go back in by EOD.  Otherwise, the Apr11 6/9 bull call spread selling the $7 Ps is net $1 on the $3 spread. Not quite as sexy on that one, but does not tie up as much $$.  I still like the front month calls.

  16. PFE/dclark – PFE/DK – I like them long-term so a good play at net $13/15.25 but I’d rather take a bigger position on the $15 puts and calls at $4.90 for net $12.70/13.85 as the 2x put-to price is your net entry on the $17.50s and your be on the $17.50s is 100% in the money on the lower spread.  You do give up a lot of upside – maybe 1/2 of each?

  17.  So much going on, not sure what is the real news today????? better go lean today trimming

  18.  To whoever I told to beware shorting BIDU into Thursday’s earnings…. hopefully you waited until this morning to close out your short.   : )

  19. Fix/Exec – They did fix the finance laws, now there is no limit to contributions and, of course, when a candidate retires, they get to keep their unused funds so now they don’t have to wait to take fake jobs at lobbying firms to get paid off.  That’s much better than the old system where a politician had to trust a lobbyist to take care of them AFTER they voted for their bill, isn’t it?  

    Finally some fun on our levels today!  Levels are the same.  Our 10% lines are still 4 of 5 green this morning – still just waiting for another 100-point gain on the Dow:  

    • Up 10%Dow 11,220, S&P 1,177, Nas 2,420, NYSE 7,500 and Russell 700
    • Up 7.5%: Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5% (must hold): Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 

    As usual the Nas and the RUT are keeping things together but the SOX failed to hold 350 and the RUT is teetering on that 700 line.  

    Copper blew $3.80 and is bouncing off $3.75 and oil is at $81.67 with each .50 a critical test for them around here.  TBT flew up past $34 but is calming down a bit, it will be interesting to see where all the Fed speak gets us.  That schedule looks like this:

    Tuesday’s economic calendar:
    9:30 Fed’s Dudley: ‘Housing: Current Trends in the Nation and the District’
    9:40 Fed’s Evans: Economic Outlook
    11:30 Fed’s Lockhart: Economic Outlook
    12:50 PM Fed’s Fisher: NYABE conference
    7:00 PM Fed’s Duke: ‘Come With Me to the FOMC’ 

    So a wild day is in store for the currency markets as traders try to read the tea leaves.  Our old friends at MEE had a nice pop today on rumors they may get sold so a good time to sell into that excitement if you were in those old plays.  

    There are major riots in Chechnya that I didn’t get around to mentioning, that could escalate and drive people back to the dollar and that can knock the markets even lower (led down by commodities) although not so bad for gold.  

    China is cutting their exports of rare earth elements by 30% so I like REE at $10, selling the Apr $10 calls for $2.60 and the $7.50 puts for $1.35 for a net $6.05/6.78 entry.

    Be careful out there, it’s going to be a wild day!

  20. Bots are fighting hard to hold 11000

  21.  jvest: bidu
    that would be me, luckily I’m slow to make up my mind :)

  22. Phil--sold my USO puts for 100% profit--Tx

  23.  redlog — take the $$$ and run!  : )

  24. Phil/Fix,
    This stuff makes me sick.  The corruption in our government makes the soviets look like amateurs. 
    What’s amazing is they will pass a law that enables unlimited contributions (aka bribes) which allows them to keep the unused funds, and it will either go unreported, or worst yet, the politicians will trumpet it as a major victory for campaign finance reform.  Unbelievable.  The majority of the people in this country are ignorant.

  25. JR,
    You playing a bounce?

  26.  Phil
    Mattress official position?

  27. W box/Exec – Sorry, it must be an admin thing.  I’ll have to talk to the guys about putting that on for all.  

    USO/Praiz, Jo –  Yes, very cool with the $36 puts now .95 (up 150% so .12 trailing stop or 1/2 out here and .25 trailing stop on rest) so good job to all who played that one!  I wouldn’t chase, you never can tell with oil.  If anything, I’d go for the Nov $35 puts at .80 with a stop at $82, probably a .15 loss.

    PFE/DClark – I’d rather patiently wait for a pullback but my target for a pullback is $16 so I think, if you want to be aggressive, that buying the stock at $17.47 and selling the 2012 $15 puts and calls for $4.80 is net $12.67/13.84 and, if PFE does drop down, you can buy back the callers for maybe $1.50 and then wait for a comeback to sell the $17.50s for $1.50 and that would be a very nice spread.  

    Korea/Samz – Some strange thing about Brazil raising its tax on foreign fixed-income investments.  Apparently Korea is a popular investment for Brazillians.  That’s why global trading is so wacky – there are so many interconnecting threads to keep track of.  

    Volume on this sell-off has been very light.  Just 35M shares traded on Dow in first half hour – very easy to reverse and would make a strong showing for the bulls bouncing off Friday’s lows so look alert and take those short profits!  

  28. Defensive play to keep shorts on is DIA Nov $112 calls, now $1.09 and were $1.60 yesterday and $1.90 on Friday so adding these with a stop at $1 is a good way to ride out a bounce off the 7.5% lines without cashing out all the shorts

  29. Thanks Pharm, I forgot about that one but as least my logic is consistent from day to day! 

    Good job Savi – 100% is plenty of money to make for one day and, if that statement sounds stupidly obvious, just keep that in mind next time you think about not doing it…  Never lose more than 20% and occasionally make 100% and you can be wrong 6 out of 10 times and still do well!  

    Ignorance/Exec = Bliss. 

    Mattress/Deano – Still the naked Jan $112 puts but I think it is now prudent to get a 1/2 sale of the Nov $110 puts for no less than $2 (now $2.15) if we’re not going lower than this

  30. Why REE and not much bigger MCP?

  31. Hi Phil:
    I am thinking of covering my short BIDU Nov105 calls w/ 1X weekly 105/110 call spreads.
    Please advise.

  32. thanks Phil on USO, scored more than a double on it this AM.

  33. drcraig looks to be right on AAPL, heading back up. Bought a call spread yesterday. bought back the higher call this AM, and doubled up on the lower call. I might end up making some decent money on this.

  34. Lflan
    Where are you with your apple wisdom?
    I managed to pick up a handful of shares yesterday, as the sell off in the after market was overdone with earnings of $4.64 on $20.3B…but, more important,
    What do you see as the trading strategy going forward?
    How about Jan 310 calls? cheaper today, for sure

  35.  REE/Phil
    So you did a Strangle on REE Apr 10c/7.5p both sold for net credit ??

  36. Hi Phil,
    DIA Mattress are we selling any Nov putters today ???

  37. Phil,
    Good morning to you.
    How would YOU trade AAPL here?
    If you believe in the 4 th Quarter, have to buy some calls here, no?, and then wait till Dec/Jan to sell the same calls?

  38. Phil,
    REE  Did you mean BUY the calls and sell the puts on this one?

  39. REE/Phil – what about an APR11 7.50c/12.50p strangle? (no losses btwn $5.75 or $16.75); also any thoughts on HRB from September list now that they have been battered?

  40. LOL – This Foreclosure thing is turning into a Make-Work program for lawyers as they "clean up the paperwork."

    At the open: Dow -1.05% to 11027. S&P -0.85% to 1175. Nasdaq -1.64% to 2440.
    Treasurys: 30-year -0.52%. 10-yr -0.23%. 5-yr -0.07%.
    Commodities: Crude -2.78% to $81.47. Gold -2.74% to $1334.50.
    Currencies: Euro -0.93% vs. dollar. Yen -0.78%. Pound -1.17%.

    10:00 AM On the hour: Dow -1.26%. 10-yr -0.11%. Euro -0.9% vs. dollar. Crude -2.72% to $81.52. Gold -2.3% to $1340.60.

    ICSC Retail Store Sales: -0.7% W/W, vs. +0.8% last week. +1.7% Y/Y, vs. 2.6% last week. Unusually warm weather hurt sales of seasonal goods. The weakest Y/Y rate since May now lowers the full month forecast to a very soft +2.5% Y/Y from 2.5-3% Y/Y.

    Redbook Chain Store Sales: +2.7% Y/Y vs. +2.5% last week. Strong sales of cool-weather apparel gave a lift to discount and department stores.

    Sept. Housing Starts: +0.3% to 610K vs. 573K expected and 592K (revised from 598K) last month. Permits -5.6% to 539K vs. 578K expected and 573K (revised from 571K) last month.

    More FREE MONEY!   Atlanta Fed’s Dennis Lockhart says he favors further quantitative easing to help boost the economy. QE2 "can do some good," but "it has to be a large enough number to make a difference," Lockhart tells CNBC. "Something along the lines of $100 billion a month would be in range."

    Chicago Fed president Charles Evans addresses the foreclosure saga, saying the Fed "actively encourages efforts to find viable alternatives to foreclosure, like loan modifications.” Foreclosures are a necessary part of the housing market’s return to normal conditions, he says, and the extent of the documentation problem is still uncertain.

    China’s central bank will raise its benchmark deposit and lending rates by 0.25%, the first increase since December 2007.

    Russian news agencies report that insurgents have stormed the parliament and agriculture ministry in Chechnya.

    "Economic movements appear to be pausing recently," says Japan’s government as it cuts it economic outlook for the first time since Feb. 2009. The economy is in a mild deflationary phase, and a slowdown could intensify if the global economy loses steam or there are exchange rate swings.

    France’s refineries are shut, schools are closed and travel is halted or delayed as labor unions launch widespread work stoppages ahead of Wednesday’s parliamentary vote on the country’s pension system. The unions oppose a government reform which would increase the minimum retirement age to 62 from 60.

    Give us FREE MONEY!  U.S. multinationals like GE (GE) and Cisco (CSCO) are pushing for a tax holiday in order to repatriate billions of dollars “trapped” overseas, arguing using the money domestically will boost the economy. An unconvinced White House has thus far rebuffed the requests.

    BX still buying everything in sightSigns of life in the CMBS market: Sources say Goldman (GS) and BofA (BAC) are expected to sell $3B of senior debt left over from the 2007 sale of Hilton Worldwide to Blackstone (BX), while JPMorgan (JPM) and Deutsche Bank (DB) are expected to sell a $2B loan connected to the Extended Stay hotel chain by the end of the month.

    Still keeping C downThe Treasury says it’s entering into its fourth pre-arranged trading plan to sell Citigroup (C -1%) common stock, and Morgan Stanley (MS) will sell 1.5B Citi shares as the Treasury’s agent, bringing the Treasury’s stake down to ~7%.

    JNJ still sloppy, this is why I stay away from themYet another recall from J&J (JNJ), this time following consumer complaints of nausea, stomach pains and other symptoms after taking certain Tylenol caplets or smelling a moldy odor on the bottles. It’s J&J’s 13th recall this year, and its fifth because of odor problems on over-the-counter medications.

    Massey Energy (MEE +9.7%) is said to be considering strategic alternatives, including a possible sale of the company or the acquisition of another company, and could "be in detailed due diligence with one of the multiple options" by mid-November.

    Following Angelo Mozilo’s settlement with the SEC, David Weidner writes that “regulators can look back on a decade where the biggest crook they outed and put behind bars was Martha Stewart.”

    American Electric Power Company (AEP): Q3 EPS of $1.04 beats by $0.12. Revenue of $559.4M (+11.5%) vs. $545.1M. (PR)

    Bank oBank of America (BAC): Q3 EPS of $0.27 beats by $0.11. Revenue of $26.98B (+2.3%) vs. $27.15B. Shares +2.1% premarket. (PR)

    New York Mellon (BK): Q3 EPS of $0.51 misses by $0.03. Revenue of $3.43B (+3.1%) vs. $3.39B. (PR)

    Peabody (BTU): Q3 EPS of $0.99 beats by $0.08. Revenue of $1.87B (+11.9%) vs. $1.85B. Shares -1.6% premarket. (PR)

    Diamondrock Hospitality Company (DRH): Q3 EPS of $0.15 in-line. Revenue of $151.1M (+9.7%) vs. $156.7M. (PR)

    EMC (EMC): Q3 EPS of $0.30 in-line. Revenue of $4.21B (+19.7%) vs. $4.15B. Shares +1% premarket. (PR)

    Forest Laboratories (FRX): FQ2 EPS of $1 beats by $0.07. Revenue of $1.04B (+7.7%) vs. $1.07B. Shares +0.5% premarket. (PR)

    Goldman Sachs (GS): Q3 EPS of $2.98 beats by $0.70. Revenue of $8.9B (+0.7%) vs. $7.92B. Shares -0.5% premarket. (PR)

    Harley-Davidson (HOG): Q3 EPS of $0.40 beats by $0.05. Revenue of $1.09B (-1.9%) vs. $1.10B. (PR)

    Illinois Tool Works (ITW): Q3 EPS of $0.83 beats by $0.01. Revenue of $4.02B (+12.2%) vs. $4.01B. (PR)

    Coca-Cola (KO): Q3 EPS of $0.92 beats by $0.03. Revenue of $8.43B (+4.7%) vs. $8.30B. Shares +0.8% premarket. (PR)

    MGIC Investment (MTG): Q3 EPS of -$0.26 beats by $0.39. Revenue of $382.3M (-7.5%) vs. $382.7M. (PR)

    New York Times (NYT): Q3 EPS of $0.07 beats by $0.02. Revenue of $554.3M (-2.7%) vs. $560.3M. (PR)

    Omnicom Group (OMC): Q3 EPS of $0.57 misses by $0.01. Revenue of $2.99B (+5.5%) vs. $2.96B. (PR)

    Occidental Petroleum (OXY): Q3 EPS of $1.47 beats by $0.12. Revenue of $4.89B (+19.3%) vs. $4.75B. Shares -0.4% premarket. (PR)

    Parker-Hannifin (PH): Q3 EPS of $1.51 beats by $0.44. Revenue of $2.83B (+26.5%) vs. $2.64B. Shares +4.9% premarket. (PR)

    State Street (STT): Q3 EPS of $0.86 beats by $0.03. Revenue of $2.15B (-3.7%) vs. $2.19B. (PR)

    SuperValu (SVU): FQ2 EPS of $0.28 misses by $0.01. Revenue of $8.66B (-8.5%) vs. $8.74B. Shares -5.2% premarket. (PR)

    UnitedHealth (UNH): Q3 EPS of $1.14 beats by $0.30. Revenue of $23.37B (+9.1%) vs. $23.31B. (PR)

  41. Phil--would it be prudent to buy more SVU today?

  42. Augrusot-- thank you for the props on Apple. I made the wrong trade, as many of us did. We saw it coming too. There were major differences in the lead up to Google vs Apple earnings that led to much greater expectations at the time Apple reported. The Apple gap up we expected had already occurred. I was concerned about this, but not concerned enough- I had "faith" that the statistical odds would trump the context of the current market. I was wrong. My positions took quite a haircut this morning, but I held them, expecting the Apple freight train would likely keep rolling. I have November 300 long calls, and October 330 week 4 calls (yeah, I was greedy). I’ll probably sell out the Octobers today, and may even sell some half covers on the November longs. 

  43. Phil,
    Oil is rallying slightly off the lows while the dollar keeps strengthening.  Good time to reload the USO puts???

  44. A few weeks back, someone posted about watching a movie about a successful lobbiest that made them sick. I feel like getting sick, but lost the link. Anyone remember the movie name?

  45. i think everyone is out sick

  46. Morning Phil! Interviewing Kent sounds like fun. How did this interview come about, and where can we read or listen to it?

  47. Not a good day to be a "bug"…. Hmmm – is that pyretherin I taste in my coffee?

  48. MCP/Alik – I like them as a long-term moly play but I don’t think of them as specifically going after the kind of rare earths that REE has been buying up.  I’m just thinking REE may have been in the right place at the right time but it’s speculative and only the crazy options prices made it attractive as a buy/write.  If you want to play MCP up, the June $22.50/30 bull call spread is $4.50 and you can sell the $25 puts for $3.50 for net $1 on the $7.50 spread that’s $2 in the money to start.  Worst case is you own them for $26 (20% off) and b/e is down at $24.25 above the $22.50 calls

    BIDU/Reza – Well they are very dangerous into earnings but do you really want to bet against yourself?  To me, if you don’t have faith in a short-term play then kill it – don’t spend money defending what is essentially an all or nothing bet.  

    Good job Aug!

    GS sneaking up past 2.5% on good earnings no one is discussing.  AAPL right-priced around here ($300-$330) so all good so far.  Very nice for our backspread, of course, especially as those Nov $330s hit .01 this morning (wish I had caught that on the buy side!).  Now the Nov $330s that were sold 4 for $10 are back to $5.40 and the 3 Apr $360s are $13.50 (down $1.80) so $4,050-$2,160 = $1,890, which is up $1,300 from the $590 entry so a very nice 220% gain, even if you didn’t stop out the callers into the initial excitement.  That’s why I love these backspreads, they are a great way to play earnings without taking too much risk! 

    REE/Newbie – Not a strangle, a buy/write where you buy the stock and do the short strangle.  See "How to Buy a Stock for a 15-20% Discount." 

    Mattress/Yodi – See above but I’d rather not.  I don’t think much of this bounce and I still think we need a better pullback on this on better volume.  So far, we have the same commodity sell-off and financial relief move as Asia did.  

    AAPL/Maya – I’d wait for their product announcement and see what they do.  They are high now so the trade is to stay away until they are low.  You just blew the opportunity to sell earnings premium but the long months are still expensive (see above spread) so why would you want to be on the premium buying side of a trade we just made 200% on in one day.  That would clearly make you the sucker paying the obscene premiums, right?  

    REE/DD – Nope, buy the stock, sell the puts and calls.  Is it really possible that we have all these people who haven’t read the New Members Guide and done their homework?  This is a totally standard play we do CONSTANTLY.  

    REE/Brooklyn – I think that’s fine but watch the call side, if they go crazy you’ll need to cover.  

    HRB/Brooklyn – we knew they weren’t going to do the refund loans back in Sept.  At $1.75 the Jan $11 puts are a great sell to get back into but selling the $9 puts for $1 is even better as the net margin on collecting $1,000 for selling 10 should be around $550, a very nice return in 3 months, even if you don’t get the stock for net $8!  

    SVU/Savi – I’d wait for the downgrade police to show up.  This was a bad quarter with bad guidance.  

    USO/Button – I think the risk/reward is certainly not the no-brainer it was yesterday.  Oil still looks weak and I like the Nov puts I mentioned earlier with stops.  

    Interview/Jbur – No, for some reason he is calling me on the phone.  The Coke people love me for some reason, ever since I told them they were doing everything wrong at an analyst event….  

    KO is a typical multinational that had 5% international growth and 2% US growth so they put in a good Q.  How much of that is attributable to exchange rates is one thing I like to look at as well as my other questions which will be (so far):

    • What is Coke’s strategy regarding positioning themselves and their health drinks in the US markets? 
    • What will be the impact of bans in schools on "sugary drinks" as well as the government’s new restrictions on using food stamps for "unhealthy" beverages.  With 20% of the US population on food stamps, what does Coke plan to do about it?
    • Also, Rein’s excellent question which was: "Whether or not the ethanol demand artificially driving up the costs of high fructose corn syrup might make it beneficial to move more of the offerings back to cane or beet sugar.  While providing an opportunity to market to the seemingly corn syrup free crowd." 

    I think I have 10 mins so that should be about it.  

  49. Buying USD/HUF at market. Setting stop @ 195 – will take profit at 220.00. This is a play on Euro weakness over the next period of time. The Forint usually follows the directional moves in the EUR.

  50. Good morning,


    IWM   68.14, 68.77, 69.22, 69.93, 70.15, 70.38, 70.94, and 71.57


    I think they want to get over 70.93, but we may retest 70.15 as a floor first.

  51. drcraig
    I was with you on AAPL, and I believe we made the correct directional bet. The problem that AAPL experienced was the inability to get the componentry to build the iPads… Sales were not a problem. Time to roll the front month options, I believe, as this company is a winner and will see $350 next year. Their competition are nothing more than "also rans"

  52. Phil – given the general lack of downgrades wrt GE; is this a good time to enter? I was considering the March 15-16 bull call spread for 0.6 or so; or buying the June $15 or $16 calls and selling weeklies against? Or would you recommend waiting a bit more?

  53. Phil / SKX update
    Bad news for the 30% short interest!
    Very interesting update for you on my return to the US:
    I’ve been told the SportsScan weekly sales data shows sales of Shape-Ups have increased 40% + over the past month, partly because selling prices and margins have improved, which confirms channel checks that discounting is now immaterial.
    The bears seemed to be preoccupied with that weekly data when sales were softening, but now that sales are rebounding the data gets no attention.
    My channel checks confirm that sales have bounced since the cycle low during back-to-school, confirming that BTS seasonality played a much bigger role than anyone anticipated.
    SKX will soon get more respect for the improving fundamentals. I suspect that institutional buyers concern is over the potential for an inventory write-down as well as overall inventory levels (which will admittedly be too high at around $320mm at 9/30). But no write down is coming as most of the first generation Shape-Up products sold-through at relatively healthy margins, even when marked down. And, the CFO won’t reserve on a product which is still selling at healthy margins and is being reordered around the world. We call this a basic/ classic.  It’s pretty basic retail accounting.
    Retailers agree toning may evolve, but it’s here to stay as a category and will be even bigger next spring. SKX is still leading the product development of the toning category, so I don’t think their role in this category is at risk.  Other big brands are committing new resources to this flourishing toning / comfort walking trend, which will just reinforce the category credibility next year. Skechers’ great advertising and new sponsorship like Malone/Kareem announced today will cement category leadership.  Spring will be huge.
    ps SKX should announce the earnings date on 10/20 as being 10/27 (possibly 26th) with conf call on that date.  If mgt confirm no material inventory reserves, the stock could bounce imo.

  54. /AAPL – I missed a chance to sell Jan 11 $320 put for $29 this morning becuase my order was set for $30. It is now around $25. I wonder what new thing will be announced tomorrow? If it is just mac related do we really think the price should be this high…

  55. GE/RN – If they get back over the 200 dma at $16.30, then it may be time to get in but more likely they complete a test of at least the 50 dma at $15.75.  Since that’s a tight band and GE is a blue chip, like the PFE play earlier, there’s not much harm in getting aggressive with conservative hedges.  With the stock at $16.20, selling the 2012 $15 puts and calls for $4.70 is net $11.50/13.25 and, when the put/to price is a no-brainer for a 2x entry – then there’s nothing wrong with not waiting for a "more perfect" entry.  If GE drops to $15.50, the calls will get cheaper and the puts a little more expensive so maybe $11/13 is the best you can hope for…

    SKX/Tusca – Nice update, thanks.  I’m not even a little worried about those guys anymore.  They do still have a long way to go so, for those of you who missed the fun at $22 – you can still go with the Apr $20/22.50 bull call spread at $1.50 and sell the $20 puts for $1.60 for a .10 credit on the $2.50 spread an your worst case is owning SKX at net $19.90.  

  56. Phil – I cannot sell naked puts, I can only do bull put spreads, which don’t have a favorable margin requirement for numbers to work out. Hence I am looking at going long on calls; but I will wait for a test of the 50 dMA as you suggest.

  57. Hi Phil,
    Got into the UUP long 13 March call, short the 12 March put yesterday; its up nicely today, the put is up 20% and the call 8%; I don’t understand how the Chinese raising rates is bullish for the dollar.  Should I reap some profits now, on this technical dollar bounce or let things roll.  Cheers

  58. Pepsi has already beat KO to the punch I think with their "Pepsi Throwback" product that uses real sugar but is only available for a limited time only. Maybe KO should see how well Pepsi’s product does first and take notes(?)

  59. Phil,
    This is a follow up question to the high fructose corn syrup question:
     ( From Bloomberg)
    Sugar output will be cut by about 20 percent next year if farmers can’t plant genetically modified beets, as ruled by a federal judge in August, the Department of Agriculture said in a court filing.
    Beets, which account for about 44 percent of U.S. sugar output, would lose 1.627 million short tons of production without a supply of genetically modified seeds produced by Monsanto Co., USDA economist Daniel Colacicco said in an analysis made for the case. The department’s 10-year production forecast made in February was for a crop of 7.649 million tons next year.
    “The limited availability of conventional seed will severely restrict plantings of sugar beets in 2011,” Colacicco wrote in his report. The impact of smaller beet-sugar supply would be “severe,” although it may be mitigated by imports and substitution of other sweeteners, he wrote.
    About 95 percent of the U.S. sugar-beet crop is genetically modified, according to the document.
    U.S. District Judge Jeffrey S. White revoked the government’s approval of the seeds, saying the USDA hadn’t properly considered the potential environmental impact
    Do they have a Hedge- Strategy for these potential price increases?

  60.  Phil, 
    I am holding 5 short 100 Nov BIDU Calls, sold for 7.8 now 8.6, so nothing too much doing now, but with earnings coming, not sure what to do… Any insight into what might be coming from their earnings, or a way to play in case they take off? I am not sure if GOOG earnings are correlated with BIDU’s AND if that is already priced in, so any kind of dissapointment would pull the shares down big time.

  61. Sugar / Randers – sounds like it’s time to make nice with Cuba! ;)

  62. Speaking about long-term moly plays: what do you think about TC (good fundamentals, down 5.18% today, is it a good idea to buy on a dip?) And what do you think about GS, ADM as long -term plays ? I know that you do not like the activities of these companies but both of them, especially GS have very good fundamentals and arguably are well run.

  63.  Phil, 
    I had a buy-write with POWR Dec 7.5 Calls and Puts sold. Was just called away. Do you recommend reconstructing the play, rolling it to a longer expiration or just moving on (closing the puts) with the money in hand?

  64. Phil, we are not getting heavy pullbacks after some earnings announcement already. I have short 3x Oct $180s that were rolled up from Aug $165s, then Sep $170s.. My INITIAL intention was not to end up short in the earnings month but since I’ve been rolling, I had to. Now that I’m seeing companies are reporting good numbers and stocks reacting with just MILD setbacks, I’m thinking of doing a ratio backspread by selling ONE more Nov $180s to bring my avg premium at @ $8.00 and buy 3x Jun $210s.. the delta of the Nov $180 is 0.59 and the theta -0.14, whereas the delta on the Jun $210 is .37 and the theta -0.04. This way if CMG surprises with good numbers I can roll, roll, roll since I’m covered all the way until Jun until I eventually get to keep the premium or else convert it into a bull call vertical spread (I still think CMG is overvalued though). If CMG dissapoints, I would get to keep the entire premium of the 4x Nov $180s and sell whatever value is left of the Jun $210s.. what do you think? I really don’t feel like taking a big hit by being short naked and CMG surprising to the upside… I’d rather sacrifice a bit of money in order to protect my bet on earnings month.

  65.  I forgot to mention it’s all this on CMG!!

  66.  REE/Phil
    I have read the buying at a discount 15-20%, I just didn’t realize when you said "I like" it meant you were doing a Buy/Write I should have realized it when you indented gave the math on the 6.05/6.78 entry. I haven’t seen many recently so missed the signals. 

  67. Exec/Ignorant
    Ignorance is the Not Knowing With the Ability to Learn…..  Stupidity is the Inability to learn….. The American people are STUPID…. LOL  They have no desire to learn….. Too busy with shopping with the devalued dollar….

  68. phil/aapl
    sorry, but what one day trade was that …that made 200% and I missed?
    Maybe I just did not get it?
    people, including me did not want to bet against the stock going into earnings, so I thought the time to sell calls would be AFTER the stock jumped up 10-20 points on earnings.
    Since it went down, is now not the time to either buy calls or sell puts?
    I feel I am missing a concept

  69. Phil’
    your buddy Timmie talking in silicon valley today-- what the hell is he talking about?? how dumb does he think we are??

    Tuesday, 19 Oct 2010 07:26 AM

    "Treasury Secretary Timothy Geithner vowed on Monday that the United States would not devalue the dollar for export advantage, saying no country could weaken its currency to gain economic health.

    "It is not going to happen in this country," Geithner told Silicon Valley business leaders of devaluing the dollar.

    Geithner broke his silence on the dollar’s protracted slide ahead of this weekend’s meeting of finance leaders from the Group of 20 wealthy and emerging nations in South Korea, where rising tensions over Chinese and U.S. currency valuations are expected to take center stage.

    "It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to (be) competitive," Geithner added. "It is not a viable, feasible strategy and we will not engage in it."

  70. Phil / OCN  Phil you explained why you think the foreclosure logjam will pass.  Is OCN a buy then?

  71. Phil / big oil    Is this a good time to take my profits on holdings of XOM and COP, hoping to buy back at $65 oil?

  72. Ouch!!  Mea Culpa.  Of course, the wireless connection to my brain was off this morning….

  73. Phil:
    I am thinking of ditching 1/2X  OIH Nov 117 puts in favor of buying them back cheaper after a run up.
    Appreciate your advice. Cheers.

  74. Joke of the Week/Geitner
    Top Award for joke of the week is Geitner’s Statement regarding the dollar….. Yes, he thinks we as listeners are All Stupid…..As they say, "Do as I say Not as I do"….

  75. Phil
    Sold 50 NFLX OCT 22 160s on Monday They are over 50% so I know what I SHOULD DO..  I have a strong conviction that these will expire worthless.  I really don’t see how they can get to 160 by Friday. 
    On the other hand, I’m thinking of buying to close today and if they go up again after earnings – jump back in.   What’s your .02 on this?
    Still holding another 50 of the 165 NFLX Nov   These are now 56% profit.  Yeah, I know.

  76. AAPL/Nicha – I think it’s mainly an OS/X announcement and something about some kind of flash storage device.  ISuppli now says 43.7M IPads will be sold next year and 63.3M in 2012.  At $500 each (and that’s the cheapest) that’s $31.65Bn new dollars in 2012 at 40% margins would be $18Bn or about a 50% bump in total company income off the one product.  Then we have to consider 120M IPads buying apps.  I hate buying Apps and never did on the IPhone but I’m sure I spend $100 on the IPad and, if you compare that to what you spend on a laptop – it’s still a great deal.  So 120M x $50 is very fair there for another $600M in profits from App sales.  

    So, do we like a company at $300 that’s very likely to deliver well over $50Bn in profits in 2012?  Duh!!!  So let’s call AAPL worth $500 easy ($500Bn).  Now, what if Jobs dies?  Surely they can maintain what they have, right?  We might not want them for another decade but I don’t think they can stop this growth short-term.  So, I’d have to say the dead Jobs dip is already priced into this stock and they are worth more than XOM, who turn in $40Bn on their best year.  

    Still, AAPL could drop back to $240 and even $180 if something tragic happens but those will be big DD opportunities so I still like plays that put 1x to you at low numbers in the worst case like selling the 2012 $240 puts for $19.70 and buying the $230/260 bull call spread for $20, which is net $1 on the $30 spread that’s $50 in the money and the worst case is you own AAPL at net $241 with a b/e at $234.50.  Margin on that should be about $22 + $20 cash so a very nice play and much better than that if you have PM.   

    Waiting/RN – With those restrictions, learning to be patient would be the most profitable move you can make! 

    Rebound seems to be running out of steam at this point.  Been getting worse and worse since Europe closed.  Dow volume just 94M at 12:45 so very stickable though – I imagine they will work hard to hold Friday’s lows (11,000, 1,170)

    China/Humvee – When you are making money and you don’t know why, it’s always good to get to cash, which is much easier to understand.  The China rate hike makes Chinese stocks less attractive and chases money back to the "safety" of the dollar.  So much of the emerging market moves have been based on the global carry trade – the unwind can get very messy.  As I mentioned in the morning post – China tightening may mean slower commodity growth in China and the US (see oil chart) clearly has declining demand so, without that never-ending Chinese growth story – guys like Gel will end up with a whole barn full of unused copper and gold and platinum, etc…

    PEP/Kwan – Actually they seem to be extending it.  They just pushed a deal through WMT to roll out Sierra Mist Natural (same thing) in a nationwide free sample thing.  

    Hedging/Randers – Yes, I do plan to ask that. 

    BIDU/Amatta – No way to tell as it’s all about China.  Based on GOOG numbers, it does seem BIDU should post solid gains but will they be the kind of gains that justify a p/e of 100?  Probably not.  That’s certainly no guarantee of safety but as long as you are comfortable rolling them up to 2x Jan $125s if you have to (now $4.40), there’s not much sense in worrying about calls that are 75% premium.  If you are not comfortable with rolling and holding, then this is a very foolish trade for you to be involved in in the first place.  

    TC/Alik – I think all these guys ran up too fast and it’s better to wait for a pullback of more than a single day.  If no one test the 50 dma through earnings – then I was too bearish but let me see it first.  As to GS – I live them at $120, not so much at $160 and I love ADM as a stock when they are cheap, which they are not at $33.20.  I have no reason to bet against them but no reason to like them long either.  

    POWR/Amatta – I think the spreads are too wide and the stock is way up so I’d walk away and find something that’s on sale.  It’s earning season – there are sales every day – why buy something that’s still at the top?

    CMG/Rav – Gee, I didn’t know I missed their earnings and they supported their 38 p/e.  When did that happen?  Your backpread idea is fine but the bottom line is you are going longer on the stock but it’s like I just said to Amatta above – if you are not comfortable with rolling a naked caller up to 2x a higher strike and waiting – then you shouldn’t be in the position in the first place rather than jumping through hoops betting against yourself to mitigate phantom damages.  

    Buy/write/Newbie – No problem.  Wasn’t really directed at you but you just happened to be like the 3rd or 4th person in two days to miss something like that – been a while since we had that problem. 

    AAPL/Maya – The backspread we did yesterday.   I have been saying for days that I thought AAPL was overbought into earnings and yesterday I said it was foolish not to take the bullish money and run on AAPL – I guess I could have gone with bigger, bolder letters but it seemed to me like there were many people very determined not to listen to me and it’s not like I thought they would crash – just that they wouldn’t go up any higher.

    Timmy/Datuu – "It’s not going to happen in this country" – WHUCK?  What does he think has BEEN happening since he took office?  I agree with him, it’s a stupid strategy but it’s clearly the strategy we are pursuing and I asked him about it back in May or whenever it was I was in DC and he laughed his ass off so I’m very pissed to see him making BS statements like this after massive damage has already been done.  

    OCN/Tusca – Sure, that’s a good catch as they are pretty much down $1 (10%) because of the whole foreclosure thing.  They have lousy option pricing (almost no trades) but you can sell Jan $10 puts for $1.30 and that’s not too bad with a $8.70 net entry. 

    XOM/Tusca – I think if you can take XOM/COP profits or lock them in through call sales, it is a good idea.  

  77. Geithner is even more stupid than what I ever imagined. What in the hell does he think massive deficit spending does for the dollar, relative to other currencies. Did he not learn in school that QE directly dilutes the value of the dollar. The folks in his audience must have been chuckling, and wondering how this guy ever got the job.

  78.  doubled, yes you know! take them!!! take the profit for God’s sake.. :)

  79. Is there someplace where I can get the 50dMA, 200dMA, etc? Or do I need to read them off a chart?

  80. Foreclosures.  It remains to be seen whether there will be a "fix" wink wink that will benefit from the banks.
    However, Phil, don’t dismiss this issue until more is known.
    White House just now announced that "Federal Regulators" to meet TOMORROW to "discuss" the foreclosure "crisis".

  81. Brains/DD – Don’t take those things personally.  As I said to Newbie above, often it’s simply a question of you being the third person to say something so I get snippy in that response while the other two got a pass.

    OIH/Reza – Actually I like them into earnings as it only takes one good miss to spook the sector but watch out for SLB having good earnings.  I think on Friday.  

    Joke/Acobra – Yep and the joke’s on us!  

    NFLX/DD – I don’t think they make $160 but, "When in doubt, sell half" would seem to apply here.  

    DMAs/RN – I read them off, my favorite charting site.  

  82. Cap,
    I’m sure that if it is really a small crisis the Federal Regulators will be able to make it a BIG one. You know, never let a crisis escape sort of stuff…

  83. more headlines on Reuters .. WH concerned about effect on housing market and economy; and banks face fines and lawsuits from homeowners if irregularities found.

  84. Fed Fisher now on tape dissing idea of inflation targeting, and, it seems, QE2

  85. WFR back at day’s lows

  86. Phil,
    Any thoughts on strategies to hedge LT bullish china positions? Sell calls on FXI, bull call spread on thinly traded FXP vs naked FXP position, etc?.
    Thanks in advance,

  87.  Is all this agricultural inflation nonsense going to move CME? I like them long term, and hold Mar-360 calls. 
    500, or the moon, whichever occurs first ….

  88.  Phil,
    TIF (Tiffany & Co.) is trading at near its al time highs of 51. They were recently (Sept 23) downgraded by GS with aPT of 41. 
    I am selling the Nov 50 calls for 1.70, with a plan to roll them to the 2X Dec 55 if necessary. Im having trouble figuring out the rollover plan given the option prices today. Would appreciate your thoughts on how best to enter the trade.

  89. No volume to this sell-off !!!  (So be careful)

    It’s ALL about the $

    Or for a closer view:

  90. 11:00 AM On the hour: Dow -1.05%. 10-yr -0.16%. Euro -1.08% vs. dollar. Crude -2.52% to $81.69. Gold -2.27% to $1341.00.

    12:00 PM On the hour: Dow -0.74%. 10-yr -0.16%. Euro -0.76% vs. dollar. Crude -2.17% to $81.98. Gold -2% to $1344.60.

    01:00 PM On the hour: Dow -0.97%. 10-yr -0.09%. Euro -0.92% vs. dollar. Crude -2.73% to $81.51. Gold -2.24% to $1341.30.

    Another reason the dollar held up against China today:  Brazil’s real responds to another tax hike on foreign inflows – as well as a Chinese rate hike – by falling 1.2% against the dollar. "This currency war needs to be deactivated," says finmin Guido Mantega. "We have to reach some kind of currency agreement." (ETF: BZF)

    The average consumer will spend a bit more this holiday season$688.87, a 1% improvement from last year but well below the $750-plus spent per shopper in 2007, the National Retail Federation projects. The result "is depressing and shows just how little consumer confidence has rebounded," 24/7′s Doug McIntyre writes.

    Dallas Fed President Richard Fisher: Sees Q3 growth at just over 2% ("stall speed"), gradually accelerating to "moderate" afterward. It’s unclear whether money policy can help with credit constraints; fiscal remedies may be better. He echoes his own worries about competitive QE. Quotes a trader on sovereign debt data – U.S. is still "best-looking horse in the glue factory" – but says being least worst isn’t good enough.

    Moody’s reports commercial real estate prices have fallen to 2002 levels (chart), down 45.1% from the Oct. 2007 peak. Distressed sales make up a big part; the firm says the market is split between high-performing trophy assets, very weak distressed properties and flat results for small healthy assets.

    Forge a foreclosure, win a car! Some employees of Florida’s largest foreclosure mill were given jewelry, cars and houses from the firm in exchange for altering and forging foreclosure documents, according to the Florida Attorney General’s Office.

    There’s one group that feels Foreclosuregeddon is a bit overblown: mortgage-bond investors, who have pushed senior securites backed by Alt-A loans higher this month to 64 cents on the dollar, up 31 cents from record lows in March. (earlier: CMBS thaw)

    With flash-crash investigations still fresh, another worrying software upgrade was behind a $7.9B mispricing of S&P 500 ETF SPY on NYSE’s Arca market at 4:15 p.m. yesterday. The fund’s price was briefly quoted at $106.46, compared with a $117.74 opening – but the closing price was updated to $118.54, and the exchange will "bust" the low trades.

    The FDIC starts executing a plan to return its Deposit Insurance Fund ratio to 1.35% of insured deposits, even as it cancels a three-basis-point assessment increase schedule for Jan. 1. The agency lowered loss expectations and will keep holding back rebates to banks until the fund is healthier.

    Gold’s off 2.3% to just over $1,341, part of the ripple effects from China’s first rate hike in nearly three years and a rising dollar (+1.14% against euro, +1.08% against pound, +0.36% against yen, +1.21% against Swiss franc). Does the metal’s move dent its safe-haven reputation?

    Intel (INTC) says it’s planning $6B-8B in investments into plants in Arizona and Oregon and a new Oregon fab, projects it says will support between 6,000 and 8,000 construction jobs as well as up to 1,000 new permanent high-tech jobs. About 75% of its chip manufacturing still takes place in the U.S.

    Microsoft (MSFT) is announcing its Office 365 product, a cloud computing-based subscription version of its productivity software. The company plans a limited beta program in 13 countries and regions.

    What does Ray Ozzie’s departure from Microsoft’s (MSFT) chief software architect role mean for Ballmer’s bench? A number of high-profile defections opens questions about who’ll back up the CEO in long-term planning, or short-term absence.

    Notes to clients show analysts still bullish on Apple (AAPL -2%) despite today’s post-earnings pullback. UBS, Oppenheimer and others see a strong holiday season for iPads and iPhones, and strong demand for the iPhone in China.

    Three lunchtime reads:
    1) Felix Rohatyn looks back, and sighs
    2) NYT is wrong about the Japanese economy
    3) Beyond being No. 2: China’s rise, and needed adjustment

  91. BAC leading the financials downhill on report PIMCO is demanding they repurchase mortgages.  What a fantastic way for Gross to manipulate the markets!  Doesn’t have to have a legal leg to stand on – just have the AG look into something and poor BAC is screwed as are the rest of financials and TLT goes flying up off "support" at $100.  That is amazing! 

  92. phil
    would you buy the vxx at these levels?

  93. Hi Peter— are you around — are you selling any nov put for spx, and or RUT if so what strike

  94. DBA index is 25% Sugar and Corn combined. Maybe these are due for inflation..

  95. Hi Phil — how do you check if the sell off volume i real or not, where on the TOS platform, thx

  96. Phil – I bought some shares of SCO yesterday (the 2X short oil etf) at $12.40.  My original plan was to buy those shares w/ the expectation oil will be back down around our ideal level of 77.50 in the near future.  That should mean about $14 SCO or higher.  Once (if) that happens my plan is to then sell either the $13 or $14 Nov Calls (maybe Dec depending on when we get there … 77.50).  What do you think of this plan?

  97.  Interesting market action on IWM and AAPL (and probably everything else I’m not watching, courtesy of our bot controlled market). Lots of selling pressure met by buying at these levels. Who will win? Will we get a POMO funded stick today? Hmmm..

  98. This, by the way, is why it’s better to cover bearish downside bets with those DIA calls than to take them off the table before we are sure we don’t need them anymore.  As somebody noted yesterday – the fast money crew flipped bearish and now everyone is nervous so it doesn’t take much to panic people out of positions.  Gold now down 5% in 2 days

    China/8800 – That was our EDZ play last week.  Other than that, yes, FXP is a good way to play down here.  You can sell  Nov $27 puts for .95 and buy the Jan $28/33 bull call spread for $1.50 and that’s net .50 on the $5 spread that’s on the money.  Good if you want to put a little money to work protecting some China positions.  

    CME/BDC – I think a little late to bet on ags going up.  

    TIF/Onc – Good plan, I agree with the logic and you can spend a little and roll them to the Jan $55s, now $1.20 if you have to.  You can also, since that is your escape plan sell the Jan $38 puts for .55 so that would pay for the roll if needed.  This is a good thing to do if you think a company is overpriced but still like them if they get cheap.  

    Just finished speaking to Kent – ran 5 mins over so he was either engaged or annoyed!  We hit most of the points – he’s a super-sharp guy, on top of every aspect of the business and definitely a guy I would invest in!  I’ll write something up this evening

  99. BIG cup and handles on the Inverses.

  100. Phil
    I know I am small change compared to most others members, but I just wanted to let you know that during the last two weeks with the shorts you and others suggested I have 6 winners and 5 losers. My losers were small because I tried to follow your guidelines as best I could. On the other hand my winners on average were around 50%. Consequently, I am up $2000 in 14 days. Thank you for your patience and help. I think I am making progress getting rid of some of my poor trading habits of the past!

  101. AAPL — Days like today are why I prefer to stick with the fundamental analysis and leave the interesting options tricks to Phil.  But I don’t own a single AAPL November option, so I’m not overly concerned.

    For me, one of the biggest bits of news from yesterdays calls was hearing that iPad supply/demand is in balance heading into the Christmas quarter.  But I wouldn’t want to bet whether or not iPads will be hard to find the week before Christmas…  In any case, between the iPad, the iPod Touch, and the iPhone, it’ll be an interesting Christmas.

    Re: VZ and the iPad from earlier today.  Nope, VZ is currently only going to be selling the Wi-Fi version.

    Considering AAPL’s Airport product line, I’d love to see AAPL ship the equivalent of a MiFi.  Although I’d prefer one that was multi-protocol (CDMA/GSM/LTE) / multivendor rather than specific (I leave WiMax out because I think WiMax will ultimately lose).  That way it’d be portable between service providers.  But multi-protocoal would probably be cost-prohibitive (of course that’s also why AAPL would ship it instead of some cut-rate no-name off-shore manufacturer).

    As a user color me annoyed that AT&T still rakes their customers over the coals when it comes to tethering.  I should be able to tether an iPhone and an iPad (and a laptop) on a single data plan.  Even if I have to pay for excessive bits.

    As AAPL’s cash horde continues to mount, a small part of me just wishes AAPL would just buy Clear or T-Mobile.  But I don’t think the margins are there to support that approach. ;-)

    But AAPL’s first priority is delivering a customer experience that surprises and delights their users.  And right now the cellular providers are in the way.  It’ll be interesting to see how it all shakes out down the road.


    PS: Phil, I look forward to reading the KO answers.  By the by, it’s 1 in 5 people on food stamps in NYC.  Nationwide, it’s estimated that they’ll be some 43.3 million people on food stamps this month.  But that’s closer to 1 in 8 (aka 12.5 percent).

  102.  SKX/Phil,
    Your thoughts on a Nov 30c/22p Strangle?

  103.  Anyone remember Phil’s EDZ play. I cannot find it. Thanks

  104. Rein my IPhone is jailbroken and I use MYWI to tether my IPad..for free

  105. I am guessing the China rate hikes took some wynd out of WYNN and the casinos.  Its down substantially.  I am guessing that a lot was riding on Macau business.

  106.  Kustomz — Yes, jailbreaking is an option (and one I take advantage of from time to time); however, I’m thinking of / speaking about the general user base and their user experience.
    There’s a reason both AAPL and GOOG seemingly played around with becoming MVNO’s.

  107. Phil, 
    I found your EDZ trade from last thursday 

    Emerging markets/Fortep – great idea! Our old friend EDZ is way down at $23.46 and you can sell the Apr $19 puts for $2.70 and that will pay for 1/2 x Jan $19/22.50 bull call spreads ($1.70) for net .35 per $3.50 spread that’s 100% in the money to start!  
    EDZ is at 25.54 ($2 up) would you still do the similar trade? sell the Apr $21 for $3, and do the Jan 21/25 bull call spread ($1.55) for a net .50 per $4 spread that’s all ITM

  108.  Well, I had shorted PCLN on Oct 14th selling 1x Nov $380 @ $9.10 in premium but with the swing today I closed it profiting 20%. The company announces earnings mid-November so the stock for sure will experience another spike up.. I will then re-sell them (perhaps even at bigger prices). I must TAKE THE MONEY.. and RUN!

  109.  Well, I had shorted PCLN on Oct 14th selling 1x Nov $380 @ $9.10 in premium but with the swing today I closed it profiting 20%. The company announces earnings mid-November so the stock for sure will experience another spike up.. I will then re-sell them (perhaps even at bigger prices). I must TAKE THE MONEY.. and RUN!

  110. JR/Light Volume,
    I don’t trust these institutions, they know what’s up before anyone else.  They can be whittling this market down because they know more bad earning are coming out.

  111. Nice chart JRW.  UUP still going up.

    VXX/Syd – I am not a big fan off buying VIX calls.  They are pretty dangerous and hugely volatile so it’s generally just a gamble. The premiums are huge and there is nothing to own if you miss your mark but, on the other hand, the VIX can go from 20 to 40 in days and you can get seriously burned.  I think roulette is easier…

    DBA/Randers – Actually Kent (KO) seems to think that sugar and corn are spiking (he is obviously annoyed by it) and was pretty much saying wait and see what the facts (of the harvest) are, not the rumors of shortages that are driving speculation today.  They are hedged so they don’t care although they do care if the prices keep going up and their rollover hedges get expensive.  

    Sell volume/Gucci – Actually I use the Dow volume on ETradePro, I like that best as it’s usually around 150M so a nice easy number to get a grip on vs the Billions of SPX/NYA shares.  Also, the Dow doesn’t tend to get bloated by single companies getting active (unless that company is one of the 30).  

    SCO/SrF – The problem with long-term oil shorts is you are subject to short-term shocks, especially with ultras.  If you bought yesterday and you gained 7% today, that’s great but isn’t that a lot for one day on a stock?  There’s a reason we say ALWAYS sell into the initial excitement and now sometimes….  You caught a break at the right spot and you can take profits now with zero risk or you can risk all the money you made,. plus what you were going to risk in the first place, to hopefully catch another move like today before it reverses.  Keep flipping a coin and you’ll see heads AND tails eventually…  You were willing to buy at $12.40, it’s now $13.30 so you can cash .90 profit and buy the Jan $10/14 bull call spread for $2.30 and sell the $12 puts for $1 and you are then in for net .40 on the $4 spread that’s $3.30 in the money and the worst thing that can happen is you own the stock again at net $12.40.  Meanwhile, your upside is $2.70 if SCO moves up just .70 by Jan expiration and you don’t begin to lose the .90 you made until SCO is below $12.10.  

    Excellent DClark – I love to hear that – congrats!  

    AAPL/Rein – If they bought a provider I would short them.  That would be distracting nonsense and, as you say, no 40% margins to be had there.  As to food stamps, I liked Kents answers, he WANTS people to choose healthier drinks but he can’t force them to.  It’s kind of like MCD with salads and stuff – they have taken huge hits pushing healthier alternatives and they just don’t get the interest or returns of the regular stuff but at least they are trying.

    SKX/Newbie – I wouldn’t bet against them going higher.  I like the above spread better.  

    EDZ/Novice – Unfortunately (from a new entry standpoint), they are up 10% already from where I picked them.   I still like selling the Jan 22.50 puts for $2.50 and 1/2x of that funds most of the purchase of the $21/16 bull call spread at $2 for a net .75 entry per $5 spread that’s $4.67 in the money.  Not a bad return with a very rollable risk.

    EDZ Old/Novice – Ah, I love how consistent my logic is from day to day…. 8-)

    WYNN/Kinki – Oh it was all Macau.  Vegas numbers are TERRIBLE.  LVS crashing and burning as well. 

    Good job Rav!   That is one crazy mofo stock…

  112.  finally some relief on the short side! 

  113.  AAPL — One more thing on margins.  I believe on the conference call AAPL said that they spent $100 million on their free bumper program and that was versus an anticipated $100 million in anticipated revenue.  So that would have moved their earnings ~$0.10 to ~$0.20 by itself.
    So while people are handwringing about margins (and thereby potentially driving the stock down and giving us the opportunity to build positions at lower prices), note that that expense is now behind them.  I’ve not worked through the math just yet; however, I think we’re going to find that the margins on the iPad are better than the market had been anticipating.

  114. Just closed my short OPEN puts for 75% profit-TX Phil

  115.  AAPL 
    To announce new laptops and OS very soon, tomorrow/next few days…..

  116.  SCO/Phil – this is in my IRA (TDAmeritrade – but I use TOS)… so it always rejects vertical call spreads.  Is that the norm for TD/TOS?

  117. AAPL — Phil, I agree that if they bought a provider, it’d definitely be an interesting challenge.  If they did, one imagines that they’d operate it akin to the iTunes store — a break-even differentiator designed to sell more hardware, not an actual profit center in and of itself.  But, unlike the iTunes store, a cellular network is incredibly capital intensive.  So the MVNO approach would be better.

    Anyway, very low likelihood at this point.
    Really the major element is a reminder that AAPL’s "thinking outside the box" is literally outside the box that AAPL sells.  DELL and HP (CPQ/PALM) and MOT and NOK and RIMM suffer from a much more narrow focus — which is good for producing commodities — but not for differentiating their products.  GOOG is more interesting — and the closest thing that the US has to Bell Labs back during Bell Lab’s heyday.  And who really understands what MSFT stands for…a


  118. AAPL – Thanks to the guys who said last night to buy at the open, I bought some 300 calls at open, sold half two hours later up 50%, and covered the rest with 310s at my entry price so in now for a zero-cost spread.  Will be interesting to see what it does next.

  119.  Phil/ EDZ. I think you meant buying the Jan 21/26 Bull Spread (not the 21/16).. Thanks

  120. for IRA accts. that is (I know you can do those in the normal brokerage)
    p.s.  I know how much you hate the IRA rules…. me too!

  121. Rein, what are your thoughts on the cost savings using Liquid metal tech?

  122.  Phil, 
    Would this a point to take out a leg of the SDS (the long call) to try to make back some of the losses (down 125%)… or you think we continue down tommorrow?

  123.  KO — On the sugar front, it’s kind of interesting that really the Coke bottlers that have a lot of say in that.  In Atlanta, you can still find sugar’d Cokes.  In parts of PA/NJ/NY, the bottler still distributes sugar’d Cokes.  In parts of the Southwest US, they upsell sugar’d Cokes to the "wealthier" class.  And simultaneously sell the same product in different packaging to those from south of the border so they’ll be reminded of home.
    I don’t know that there’s any investment thesis that derives from that.  But I still find it interesting.

  124. Phil,
    This big sell off doesn’t exactly fit into the Omega theory.  Someone must have slipped the Bots your post that showed the overlay and this is their attempt to throw a curve ball.  Probably be up 300 tomorrow.

  125. Bumpers/Rein – Having dealt with AAPL from day one, I don’t think they would green-light a product that did not have sustainable 38% margins.  It’s probably question #1 when they are in design mode – does it make 38%.  If not, it’s damaging to the bottom line and they let someone else make it (printers for example).  

    OPEN/Savi – Very nice.  Speaking of ridiculously overpriced companies, NFLX heading down again…

    GS holding up very wel, up 2.7% for the day.  

    Oh another tidbit from Kent – he does not seem to think there will be a beet sugar shortage and therefore he must think (my inference) that the MON boi-beets will be approved.  MON already had a good bounce that we caught last time and now they are heading up to retest $60 and I like the "set and forget" play of the 2013 $40/60 bull call spread at $10, selling the 2012 $47.50 puts for $5.25.  This should be net $4.75 plus $8 in margin for a $20 spread that’s $17 in the money to start.  If all goes well, $47.50 puts and the $8 in margin go away in 12 months and then you are left with hopefully $20 to collect in Jan 2013 – of course, with market turning south – NO HURRY, especially on the put sale.   

    SCO/SrF – TOS allows verticals and i’m pretty sure that goes for IRAs but who knows what’s grandfathered in and what’s available to new clients – you need to call.

    EDZ/Novice – Yes the Jan $21/26 bull call spread is the one to buy.

    SDS/Amatta – I think this is the first 2.5% of a 5% correction.  Assuming it’s a mild pullback to the 5% lines, we get -2.5%, -1.25%, -0.66% and then maybe find support.  Finishing the day below the 2% line is bearish for the next day. 

    KO/Rein – I have to go back over the audio because it was a bit rushed but he did seem sensitive about the whole corn syrup thing – probably takes a lot of crap for it.  

  126. Phil,
    Reading your remarks on VXX which look negative in respect to the play which was suggested the other day. The writer of this play thought that the VXX could not go much lower they other day iniciating a buy write by buying the stk and selling the Oct weeklies, which looks like they working out fine so far.
    2nd Are you still cool on the Mattress I scaled a small amount in to the Nov 110 at 2.15 now already up to 2.65, but as you said you think this is just the tip of the iceberg thks

  127. Oh, very interesting line from KO earnings report:

    Strong growth continued in countries with per capita consumption of Company brands less than 150 eight-ounce servings per year, with volume up 10% in the quarter and year-to-date in those countries.

    So this company differentiates countries by whether or not they consume 150 servings a year per capita or not!!!  That’s AVERAGE and, apparently, that is their goal for "maturing" a market.  Pretty amazing numbers….

  128. Wow…amazing number…..
    JRW, you are the MAN!  Thank you for posting your levels.  Played TZA off the break of 70.38 and rode it down to 69.22.  TYVM.

  129. Sugar/Rein – Also, Kent made the point that there isn’t enough sugar on the planet for them to switch from corn syrup and still supply the same amount of drinks.  

    Omega 5/Exec – We’ll see what we get.  Don’t forget we were trending over the line so a move back to trend is no big deal.  The outlier was last week’s move up so erasing those gains puts us right on track again.  

    VXX/Yodi – I agree that 20 is generally a low for the VIX and I remember saying a couple of days ago that I thought you could do much better with a QID or whatever put than trying to long the VIX.  The Qs (or other index ETFs) are based on FACTS of positions that will or will not occur.  The VIX is based on sentiment and, while we can assume it goes up when the market goes down – what is the fascination with it – why not just bet the market to go down?  It’s NOT a hedge – it’s an independent bet you are making on something that does not balance out your positions unless your positions are short strangles in which case you could construct some logic for hedging volatility.  Even so, we had a huge up move and the VIX went down so you are not even guarding against upside swings – it’s simply a bet on the market going down and there are far more efficient ways to do that without paying ridiculous spread premiums on low-volume contracts.  

    Copper ripped down to $3.72!  What a joke when a supposedly consumable metal can drop 4% in 24 hours.  What happened, did a 10M ton building project get canceled?  NONSENSE!  Oil barely hanging on to $80 but don’t forget, once they dump all those contracts the shenanigans can begin again.  

  130. kustomz — The liquid metal thing is interesting; however, I’m not sure if it’s quite ready for prime time yet.
    The metals themselves were, in the past, outrageously expensive (niobium and tantalum are sometimes among the components and they cost ~100x as much as aluminum).  But AAPL also (somewhat stealthily) pushes industrial design, mechanical design, and process engineering as well as consumer electronic design.  The feel of the current generation MacBook Pros and iPhones are distinct because of these efforts.  But they took margin hits in order to deliver the "better feeling" product (while also cutting waste).  But, from a cost perspective, I don’t get the impression that they actually reduced their overall manufacturing costs (at least not on the MacBook Pro).
    So I’d be surprised if we saw an "all liquid metal" product in the near-term.  Although I would not be surprised if we shortly saw antenna designs that were liquid metal.  Or combination heat sink / antennas / phone side casings.  I think it’ll immediately make a fantastic component material.
    The current aluminum process of "cutting away everything that isn’t a MacBook Pro" is energy, material, and time intensive.  Especially once they melt and recast the leftover aluminum.  But, unless they’ve found a way to make liquid metals substantially cheaper (and who knows, maybe they have), I don’t think we’ll see a full-sized laptop just yet.
    But liquid metal might be a godsend, mid-term and longer-term, for iPads and iPhones.  And maybe MacBook Airs.  And the more they ramp the process, the cheaper it’s likely to become.  Unless they require too much unobtainium. ;-)
    And, as AAPL have an exclusive consumer electronics license, it will allow them to make products that feel different in your hand than anything else.  There’s an interesting line in small products — if the products are too light they feel cheap.  And fragile.  And, oddly, people associate a certain heft with quality.
    Anyway, I’m watching the developments with great interest.  But I remember both carbon fiber and titanium laptops from AAPL.  So it’s not clear whether this is a life-time relationship or a dalliance for AAPL. ;-)

    PS:  I do find it potentially interesting that the exclusive license is for "consumer electronics".  Definitely that would seem to cover the iPad and iPod Touch.  Not so clear on the iPhone.  And the laptops seem right out re: exclusivity.

  131. Out of TZA at $23.88 for 6%; 7 1/2% on the day !!

  132.  KO — It would be interesting to see what kind of hue and cry would arise if we made "healthy Coke" for the rich and "HFC Coke" for the poor.  And then disallowed the poor access to "sugary drinks" purchased with aid.
    Of course we did make it a point to push tobacco out to the rest of the world.  So obviously we could do the same thing with HFC. ;-)
    Anyway, re: sugar production.  Soon we’ll be driving our cars on soda (or at least the fructose / sucrose that would have been in our soda.  Until we normalize the ethanol nonsense, I think HFC is "safe" from an industrial perspective.  I can’t speak to the health perspective (is there sufficient data comparing and contrasting artificial sweeteners to HFC).

  133. JRW- is there a separate place where you are stating your trades (ie, when you’re in/out)? Didnt see any mention of TZA until your 3:53 post. Txs.

  134. Man you gotta like those weeklies if you are prepared to own the stock… sold the Oct. 22 AAPL 300 put yesterday, despite today’s AAPL drop closed the position out today for 68% profit!

  135. hoss,

    You are most welcome !!

  136. Phil, could you explain in a post again the 5% rule and how you produced the levels that you did?

  137.  AAPL – AAPL’s margin guidance of 36% is tied for the second highest number they’ve provided in the last 16+ quarters. ;-)
    See <>

  138. sns1

    No, since the methodology post went up, I only post changes in bias; looking at the 3min chart my two trades today were obvious. If you all still want me to post everything, I can, but it takes up a great deal of board space at times.

  139. JRWIII
    I got burned by etrade again today, twice trying to buy and trying to sell when they disconnected on me. Do you trade through Swab? I failed to get the trial software but if you get good executions I like their costs. Thanks

  140. Phil:
    What price do like the MON trade from earlier? Referring to your NO HURRY comment. Thx.

  141. Nice 50-point stick into the close to keep the Dow down just 1.5%.  Volume ended up big at 247M on the Dow so a lot of cash went into the stick.  Like I said earlier, they REALLY didn’t want to give up that 11,000 line.  

    5% Rule/Joey – Hopefully, someone has a link because I have to run to a meeting but I’m pretty sure it’s right in the comments of the Scaling Article from the Strategy Section.  

  142. JRW- I am still paper trading and found it very useful to follow your trades so continued posting would be appreciated if not too much trouble.

  143. shadow,

    Schwab is my primary broker; their execution has never been a problem.

  144. MON/DClark – They are at $57.50 and I think very fairly priced here and at $50 I find them compelling so that’s what the trade takes advantage of.  

  145. JRW III
    Thanks!!!!!!!!! I will pursue ASAP, I do like etrade pro but it is not ready for day tradeing, I will leave some spreads there to keep the software.

  146. Lots of "hand-wringing" in the gold market…. Geez, even Gold has to take a breather – Phil, this is your opportunity to take a long position, as this is a pause on its way to $2500. – November 3, will be the confirmation, as that is the "way of the future"

  147. Phil,
    I see Cree reported and they don’t like it.  Where do you see value in this company?  Any price target? Thanks for all the valueable info.

  148.  ISRG announced beautiful numbers.. just not SPECTACULAR like the investors were expecting and what the current’s stock price requires.. it’s down from $279 at the close to $258 after hours.. this is not the typical wild swing from ISRG after an earnings announcement and as such, my SHORT STRANGLE Jan 2011 $200 put / $370 call is going to work very well.. now that I’ve read the numbers, this is a top-of-the-world-class best managed company with steady impressive earnings but they don’t justify even a $320 stock price.. as such, I might sell some more calls in the mid $300s range for the November’s expiration.. it is nice to be able to make moves AFTER one knows the information.. 

  149. gucci,
    I didn’t sell additional short strangles today.  Although the VIX went up, the short calls at 6%-10% OTM lost more value than the short puts that are 10-15% OTM, so selling short strangles didn’t really give more credit.  I just watched the caller’s value plummeted today.  Another down day and I’m ready to sell more short strangles.

  150. JRW/Entry/Exits - If you do decide to post your positions,  it would be appreciated in building confidence in the method.  I believe the boards only get mucked up when others post their TNA/TZA entry/exits…as it is easy to skip the "yellow" if you don’t want to read the day trade entry/exits…not so easy to skip the "Hey JRW, got in at IWM 69.34…cool beans!" statements.  Thus if everyone would just watch and learn from your position posts, and not reply their own entries constantly (including myself)…then it would be nice, as long as Phil is OK with such.
    Shadowfax - My Etradepro ran flawless today…with CNBC running via EtradePro the entire time…no disconnects (plus I lose RUT volume data if it disconnects…and that didn’t happen).  I’m guessing you have a glitchy Internet connection and/or a computer that is bogging down (virus detection running a check, auto-download software updates, etc).  EtradePro takes an enormous amount of data for such limited graphics, and if you are running the Live TV, you would need a lot more bandwidth.  I’m running 6MB DSL and it works fine, every now and then I get a Live TV glitch, but never the trading platform.

  151.  Infinera (NASDAQ: INFN) warned today and took Finisar Corporation. (NASDAQ: FNSR) down with it (along with most of the optical industry).
    Eons ago I mentioned FNSR.  I fortuitously sold half my FNSR position yesterday.  So I was quite happy to begin reloading it today.  FNSR is worth checking out if you think the economy (and data networking and cloud computing and Internet connectivity as a whole and a 3G/4G/LTE migration) is going to grow the optical networking markets going forward.
    I personally think INFN’s problems are specific to INFN, not endemic to the industry.  INFN has less than 80 total customers — it doesn’t take much of a change to disproportionately impact them) however, I’m biased.  Otherwise I’d have had a position in INFN instead of FNSR. ;-)

  152. Phil / FXI   Why is this down 2.35% today when the Chinese interest rate hike is just confirming that their economy is still red hot.  Shouldn’t we maintain a position in the Chinese mkt given their superior growth performanc and currency prospects?

  153. goldman
    Thanks for your comment. I have had this problem too many times, today I also had CNBC live running, never skipped a beat but when I clicked sell and OK pro disconnected while CNBC went on and my second computer with PSW and yahoo carried on. The same with a buy later on. I was tradeing IWM in 50 contract orders, in the past the issue was 100 contracts. With TNA and TZA usually 1000 shares no problem other than market orders sometimes fill different than expected. Do you do similar orders?

  154. shadowfax/ETPro - I trade the actual TNA/TZA triple ETF, and not the options.  Never had issues other than some delay and penny scalping by the MMs, yet that only seems to occur on orders of less than 2,000 shares for some reason.  I’m sure there are better programs out there, but I do like the interface of ETPro.  In regards to options, Etrade is lacking to say the least…I had to explain weekly options to the options department…they didn’t know they existed and you can’t trade them via Pro…

  155. tuscadog…. I’m taking this opportunity to acquire more FXI… China is for real, and you can bet your Yuan on that one.. It is diversified ( 25 of the best ) so one mis-step and you are still safe… nice play on the sinking USD and the rise in the Yuan, as well.

  156. goldman
    What do you run? I use Internet Explorer Windows 7. I have a feeling that e pro and all etrade has problems with 64bit, the CNBC won’t even load in 64, only 32 bit. The 64 bit IE is faster than anything out there 32 is maybe the slowest. Thanks as you may be able to help figure this out.

  157. tuscadog… another good play that is regional, is a long on EWM ( the Malaysian ETF ) this will follow the FXI…. and you can bet your fortune cookie on that one. 

  158. Shadowfax/Computer - purchased the HP shown below and have Pro output onto three screens from this one computer.  It is 64 bit and I placed an ETPro icon on the desktop so I can right click the icon, and select "Run as administrator"…which is required for the Live TV to run properly from my experiences).   I run all other software on a high performance laptop.  I don’t like mixing my trading platform with any other software programs…plus since I only do financial work on the one computer, I know it is secure…having not been to misc web sites, etc.

  159. Trading AAPL:    Hello All!   Stuck today in my other job, but catching up on the events since earnings report.   Overall a 2.7% drop in the stock price following earnings to 24 hours later.  The earnings report was very acceptable, but not earth-shaking, thus the negative response.  So what to do now?   Well, I bought mostly Jan 300′s, a few Nov 300s before the earnings report.  The Novembers are down about 35%, the Jans down about 20%.   I think we wait until tomorrow’s "announcement" but I’m inclined to just hold the 300′s and sell weekies against them.  I would doubt that AAPL will fall further as a result of the announcement itself, but who knows?   In any event, I’m keeping the 300s for both months, expecting the stock to continue to move gradually upward, and using them as a way to sell weeklies without incurring margin.  I don’t see anything specifically pushing AAPL lower except perhaps the general market movement..  And, by the way, I think Phil may have been the only one on this site to call it correctly, saying that iAAPLhad pushed too high already and would have trouble moving up more in the short term, even with a good earnings report.  I did read one writer on another site who called it exactly as it happened……good earnings report but a pullback anyway.    His follow-up article today is a bit gloating, but he does get the credit for a precise call.  ( I’ve tried to relocate his article, with no success).  So there you have it.  A short-term prediction miss for most of us, myself included,  but hopefully no one here made any disastrous trades around the report. 

  160. goldman
    Thanks, I have considered that computer as my 2nd 3rd and 4th are old XP machines, actually there is 1 better than that HP. Did you upgrade to 7 pro? The link says 7 Home premium which is what I have.

  161. shadowfax – no pro upgrade, just home version.  I have run ETpro on my laptop using XP, Vista, and Win 7 without issues, although I burned up my laptop motherboard twice outputing ETPro to two monitors (Dell is wishing they had not sold me a 4 year warranty…LOL).

  162. Shadow – one point with ETpro…don’t let the computer go into power-save or screen saver mode…that is one thing that I have found that can disconnect the link between ET and the software…although the connection indicator will turn red and the wave pattern will halt, plus a disconnection warning will pop up.

  163. Gel- on the earlier currency play – USD/HUF- you stated you were setting your upper profit stop at 220. Is that a typo? Did you mean 202?

  164.  iflan – i was watching from the sidelines, but i have to admit that your excitement seemed warranted especially after seeing GOOGLE earnings/stock price.  
    PHARM – what do you think about GILD’s earnings?  I think they hit 42 by year end.  

  165. GILD/jo – lol – less than when they were trounced back in April.  What a bunch of hogwash.  I would have to agree, and will be jumping in on the call side, selling some Ps along with way.  Frickin’ hedge funds did that bull…..I am going to see how the candle paints tomorrow b’f making a final decision.

  166. goldman
    You have been great! I have my power savers as never never never always on. I am going to visit my parents in New England after the elections and will hook up cable or Verizon and find out if that changes anything, it is faster than max here as I am about to order whatever seems best. I am bringing my best 2 computers and plan to buy another hopefully on sale after Xmas. THANKS!!!!!!!

  167. BIIB really needs to break through the top here.  If not they can hit $55 real quick, of which, we will be back on the train.

    What the hell is up with Collins Stewart putting a sell on AMLN and a $6 price target…..All kinds of sells on them.  Might have to look into Ps after the PDUFA date (Oct 22).

    Big volume on BMRN. 

    All the big Pharma’s took a nice haircut today.  

  168. pstas… The target is 220.00. Good luck!

  169. Pharm… are you taking advantage of the draw-back in gold to buy more at this juncture?

  170. Jo… I’m selling some Puts on Gild tomorrow.

  171. gel – might see where the paint comes in tomorrow.  i like the miners in this area more.  GG and ABK were hit hard (5%), and I sold some Ps on GG at the EOD.  I also bought more NUE 40 Jan Cs, as I think they are attractive here and the options in the 40s are moving like butter (in a good way). I have been selling the front 40s on them and it has been ok.  They also pay a nice dividend.

  172.  Phil,
    I remember you saying something about collars not made for the new market environment.  I’d like to hear more of your opinion on trading collars.  In the past, I have done collars by buying a put 6 to 8 months out, and then selling slightly OTM calls on a monthly basis to capture premium and pay for the put.  So each month it is an adjustment game to capture premium and maybe a little of the stocks growth.  I am interested in looking at this strategy using weekly options for the calls since there are so many times to sell and high premium compression.  (Like the BIDU trade I threw out there last week.)  

  173. Looks like AMLN got a ‘complete response letter’ from the FDA, they have canceled tomorrows Q3 conference call to be rescheduled once they have assessed the financial impact of the complete response letter.

  174. Gold/Gel – Thanks but no thanks.  Whether gold stops at $1,400 or $4,000, I will have much more satisfaction playing the other side, I think…

    CREE/Ashmor – I’ve been saying all along I think CREE is way overpriced.  LEDs are just hot for a moment but, in the end, they are just another commodity play that will go to the lowest-cost producers.  What is the hope for CREE?  That they become AMD, INTC, TXN, SNDK?  None of those are really stocks that go to the moon are they?  I GE just going to give up on supplying lighting as it moves to LED?  There are just too many holes in the investing premise for these guys and that means no reason to get involved for the long term.  

    ISRG/Rav – Nicely played and good point about being positioned to act on better information. 

    FNSR/Rein – Good one!  Let’s keep an eye on them for a possible put sale as an initial entry.  

    China/Tusca – They already had a huge run based on those things.  Now they have to deliver without a misstep – that’s hard.  I think they are vulnerable to a dollar bounce as they are essentially exporters so the key is how we behave off the 76 line.  

    Collars/Rev – The only real use of a collar is to lock in dividend payments and, perhaps. to lock a short-term gain into a long-term gain.  Otherwise, you are generally shooting yourself in the foot unless you are running a PM account and using a lot of leverage, which has its own dangers.  Your strategy is sound but I’d be curious to see how it works out over time compared to something more like a set and forget spread.

  175. Hello Phil. I’m a newby who has read the intro pages. i am a bit confused tho. Lets take the AAPL trade you suggested above
    "selling the 2012 $240 puts for $19.70 and buying the $230/260 bull call spread for $20, which is net $1 on the $30 spread that’s $50 in the money and the worst case is you own AAPL at net $241 with a b/e at $234.50."
    My price on $230 2012 calls is about $99 and $260 2012 calls are $76. So my cost is different then yours. Why is that?
    My second question. How does one make money on this trade?

  176. CREE – I somewhat disagree with Phil wrt LED being a commodity product. As I understand it the problem is not how to produce the cheapest LED, but to produce a fairly priced item that consumers appreciate. CREE already has a big Tiawan factory to exploit cheap labor, but the bigger problem is that LEDs are complex and require reliable circuitry and effective heat dissipation. They’re not simple, like incandesants or compact florescents. That is, the problem is not that their market share will be undercut by LED’s produced more cheaply, the problem is that really shitty, cheap LED’s will be produced and the market will accept them initially.
    It’s sort of like computers where for 20 years the market rewarded junk producers and failed to reward quality, except in this case "junk" LED’s will be more obvious than junk computers. (Although perhaps most people used computers for little more than word processors and spread sheets, not the digital office model that’s now common) In the short and medium term I think CREE has a leg up on the market.
    One of the most important developments, it seems to me, will be the legal phasing out of incandescent bulbs which will force the creation of new consumers. If LEDs can find enough new buyers in that population, then they have the chance to increase market share (as a product generally, not talking about CREE alone). But judging the foresight of most consumers, their lack of disposable income, and the high price of LED’s, it seems to me that consumers will be kindest to the LED manufacturer who can provide them with the most incentive to purchase.
    Incidentally, i find that my one incandescent-replacement LED casts a very nice light which feels steadier (though they tell me it’s still oscillating at 60 Hz in spite of claims to the contrary). That being said I would feel better with CREE if they had other products that could allow them to offer LED’s at a razor margin until they become more popular. It’s a case where low profits could be made up with volume, if CREE played their cards right and became preferred suppliers. Anyway, I’m betting they’ll hold level in the short term.

  177. wonderful talk about our messed up financial system and why its going to happen again; its long but I just minimized it while listening to it and reading PSW postings:

  178. Phil/POMO Wednesday 10/20/2010- Should be interesting to see if POMO can stabilize the markets Wednesday morning…perhaps with a nice 45 minute stick save to neutral EOD…
    Per Zero Hedge —POMO added 400 pts to SP500

  179. Good Morning Phil !
    I am quite convinced we will see the FOMC announce a substantial  QE program at their next meeting. I expect it will take the form of the Fed purchasing long term Treasuries, which will keep the interest rates on these bonds at very low rates. I suspect their objective is to discourage banks from holding these bonds, by keeping the yields low, in hopes the banks will start to lend to businesses and consumer, offering the banks a better yield. It is a valiant effort, but without much anticipated success, IMO
    I am holding a large position in TBT ( short naked puts – March expiration ) I have some profit in the position, but I believe I will bail this week.  If, as we expect, the Fed will ease in this fashion, I would anticipate the long term yields to drop, and TBT should fall as well.  I am thinking of selling some TBT naked calls, given the anticipated scenario. I consider you an expert in trading TBT, and do you support my position ?

  180. pstas
    I am planning to tighten up my stops on all USD long plays, going into the FOMC announcement. Although the Dollar has already dropped a significant amount in September ( 8% against the Euro ), because of the Fed’s recent announcement about the anticipated easing, I believe the Dollar will take a hit with confirmation  from the Fed.

  181. Gel- USD- given the chart action, a wise move. Rather a short $ rally.

  182.  Phil,
    Thanks for our comment on collars.  I really like discount writes for my margin portfolio.  I’m thinking through what to do with IRA money, which is my larger portfolio by far.  The discount writes are not very profitable because of the margin cost of the naked put, so I’m weighing the value of collars as a substitute.  I’m also looking at married puts too, since that would leave my upside open.

  183. Good morning!

    Welcome Gwwyat!  Absolutely if you pay the Ask price and sell at the Bid you will get burned on every spread you enter.  These are very liquid contracts and the last sale of the 2012 $230s was $97 and the last sale of the $260s was $76.36 – I don’t know what it was when I wrote the trade up but I guess it was a little better.  Don’t ever pay the listed prices!  On the other hand the $240 puts shot up to $20.90 so the net on the trade, even at the last prices, is now a .26 credit so better on the net.  If you can’t get the net, then don’t make the trade!  That should be rule #0 but it’s trading 101 so I never consider it something I have to teach.  Especially with options trades, saving a nickel means saving $5 and those nickels tend to add up!  This isn’t some lame option service that gives you 2 or 3 trade ideas a week so, if you can’t get a good fill – MOVE ON!  I’m sure we’ll find something to trade tomorrow.

    How does one make money on the AAPL spread?  Well if AAPL finished above $260 then the $230 calls you bought are $30 deeper in the money than the $260 calls you sold so, no matter what AAPL finishes at, you net $30.  Since AAPL is above $240, the puts you sold expire worthless and you do not owe the caller his $20.90 back.  That means you walk away with up to $30 at $260+ and the only "danger" on this trade is you are forced to buy AAPL (your obligation to the put buyer) for $240, which is a 20% discount to the current price.  

    The key to this kind of trade is ONLY to sell puts against stocks you REALLY, REALLY want to buy at the net price.  If you are not VERY interested in buying 100 shares of AAPL at $240 ($24,000) then it would be foolish for you to commit to doing so.  The premise of this trade is that even if AAPL is at $180, we would be happy (well not happy but we would deal with) to take the assignment at $240 and then either DD at $180 for a $210 average entry on 200 shares or we may set up a buy/write combination that obligates us down the road.  That’s what committing to a position is (see Strategy section regarding scaling in).  If you don’t have $42,000 to commit to buying 200 shares of AAPL then AAPL is not a stock you should be playing with by selling puts.  

    As we discuss in the new members guide, the best thing to do is paper trade and account for a few months and try strategies out.  Some you will like and some you will not but it’s very important to learn what kind of trades you understand well and are comfortable with.

    CREE/Tenger – I’m not saying the LED isn’t the future but you are talking about a blip in time where there are possibly, maybe margins to be made in it but I think the window is going to close very quickly.  They are, essentially chips and will suffer chip economics and I have no reason to believe CREE is going to beat Samsung and GE or even INTC if they see a nice market.  You saying it’s a case where low profits can be made up with volume reminds me of the old consultant’s joke "Sure we lose money with every sale – but we make it up in volume!"

    Foreclosure Gate/Cap – I wonder how many things called something-gate have actually panned out as real scandals?

    Simon Johnson/Humvee – He write over at

    POMO/Goldman – I’m concerned now that one of the Fed guys actually said $100M a month because now, less than that insane amount will disappoint the markets. 

    TBR/Gel – I am no expert, I got my ass kicked by that annoying thing!  I just can’t see how the 10-year can go any lower.  We’re heading to 2% at this point – who, other than Bernanke, is going to invest in US dollars for 10 years with a 2% return?  This is fake, Fake, FAKE at every auction and it’s only a matter of time before everyone gets sick of it and Ben is left playing with himself.  In fact, at $100M a month – that seems like what they are expecting to happen anyway.  

  184. Revrodd
    Was reading Phil’s post to you on collars.  In that post he uses a term ‘ PM’ account.  Do you know what that is?
    Not familiar with the term.  Personally I admire and respect you disciplined approach to investing.  My style is at the extreme side of aggressive and I have to learn how to be less that way.  If I yell " Let it Ride" at my house, no one says a word so I can’t use that to temper my behavior.  Phil has done a pretty good job of knocking some of my potential moves and as a result, I have increased my portfolio value by almost 25% since late July
    Best to you

  185. PM= Portfolio Margin

  186. Thanks pstas!

  187. Phil – KO are you going to recommend KO for some upside plays?
      BTW, since you have a direct line to Kent.  Pepsi Throwback.  How about Coke Wayback = sugar+cocaine. Which of course is how Coke got the name.   That would be addictive.  It was easy wayback and perhaps better for most people because we didn’t have government and police back then  ‘protecting’ from us in the name ‘serving the common good’ Nothing more now than a machine that oils itself.

  188. Gwwyat
    When Phil gives a trade idea and you look it over and you feel that the net price is acceptable to you, put in a Good Til Canceled (GTC) limit order to buy or sell (whichever the case may be). If after a few days it doesn’t fill at the price you want and you haven’t found a better place to put your money then just let the order stand. If you get tired of waiting and have another trade idea just cancel the order and go with the new idea. When I first started I kicked myself many times because I would become impatient and change my price to chase a little. I would end up taking less or paying more, only to see that if I would have had more patience I would have gotten the original price I wanted. Good Luck!