Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Wednesday Chart Watch – The International Perspective

So, how are we doing?

I liked David Fry's tweet (is that the right word – I feel so old when I don't know this stuff!) yesterday which said: "SPY volume again pathetic at 55M shares. What's there to write about today? Seems many investors still stuck on planes that aren't moving."  Dave was smart enough to take the day off – me, not so much.  We did pick up another .20 with up the DIA Weekly $114 calls at 10:41 in Member Chat for $1.60and those were done at 1:05 for $1.80 as the market looked too risky to me.  That was kind of silly as we do know that low volume is the bulls best friend but we're trying to get back to cash each day on quick trades – especially on calls that expire on Friday! 

As you can see from the Euro chart (click to enlarge), I'm not ready to give up on my bearish premise, which is essentially that Europe may be in worse shape than the US and the Dollar and – IF the EU runs into crisis – then the Dollar looks RELATIVELY better and, despite all of Timmy and The Bernank's best efforts to destroy it – a strong dollar will pretty much undermine everybody's bullish premise since the only real bullish premise people have is that our worthless currency will drive people into equities and commodities since Treasury and the Fed will artificially keep bond rates so low as to make them unpalatable alternatives.  

Even Glenview's Larry Robbins, who I thought would perhaps have an original thought in his Dow 20,000 premise, does not.  The man entrusted with $4.8Bn of other people's money predicts that p/e multiples will expand by, get this, 45% by the end of 2013 – rocketing the Dow to 20,000 despite just 5% annual earnings growth.  Larry Robbins thinks those investing in 10-year treasuries aren’t doing so for the paltry return. They’re in it to front run the Fed and make a quick buck at the expense of the taxpayers. Once this trade is over, Robbins says, they have nowhere to go except the high quality equities in the stock market.

Read into any bull premise and you'll find inflation at the heart of it.  The Global Economy is not really improving but the numbers are looking up because it costs more money to do everything.  Now, I had an odd little thought that investors were not stupid enough to believe that just because numbers go higher, it does not mean that the economy is healthy but, silly me, I completely overestimated the intelligence of the investing public (not you, of course, only people who aren't reading this!).  

How else do you explain the prevailing logic that the price of something as basic and necessary as gasoline can rise 50% in 4 months, back to our 2007 average yet GM gets an upgrade from Gang of 12 Members MS, JPM, BCS and CS – all on the same day (yesterday) that gasoline breaks the year's high.  GM jumped 2% yesterday and now has a $58Bn market cap, which is almost 1/2 of the $138Bn they lost in Q4 of last year!  Overvalued?  Not according to the 4 IBanks who all felt compelled to release upgrades on the same low-volume day yesterday.

 

Heck, $10Bn in Receivables and $47Bn in Payables is no biggie, nor is $50Bn of "Other" and "Deferred Liabilities."  GM offsets their liabilities (and we're not counting unfunded ones, of course) with $30Bn worth of "Goodwill" that is generated by those fine GM brands like Saturn and Pontiac – which they couldn't get a bid for an shut down at a total loss this year.  GM, in March of 2009 was LOSING $20,000 for each car it produced.  My advice to them back in March of that year was simply "Stop making cars!"  That would have saved them from that $138Bn loss which, ultimately, the taxpayers footed the bill for.   I have had no reason to change my mind so far in GM's new iteration.  

Of course, GM is playing "the China card" and forecasting infinite growth selling to our Chinese masters.  China is, of course, the other bull theme for 2011.  According to analysts, over one Billion Chinese citizens (who earn an average of $2,000 a year per family) will be driving their SUVs to Chipolte on the way to the airport (booked by Priceline) dressed in Uggs and workout wear from LULU while watching NetFlix videos on car DVD players they bought from Amazon.  At the airport they will buy gold from a vending machine, get more food from MCD or YUM and then fly to America where their tourist money will offset the Billions of surplus trade dollars we send them.   

Don't laugh, that pretty much describes half the families in California now so why wouldn't we expect our Chinese masters to emulate us in every way?  After all, we've done such a fabulous job in this country creating a self-sustaining economy – wouldn't other countries want to emulate it so they too can borrow up to their eyeballs and plunge their population into centuries of debt, losing their position in the World to the point where their economy's only hope is selling knick-nacks to farmers and factory workers half a World away?  Of course they would!  It's what we call "The American Dream."

I worry about silly things like where the next Trillion is supposed to come from (and we had a very bad bond auction yesterday, as did Europe) and where the additional $50 a week for gas ($2,600/year) is going to come from for each global family along with another $50 for groceries and how the builders are supposed to afford $5 copper and why is NFLX "worth" $10,000,000,000 when they will barely make $120,000,000 this year and, also, how long will they keep being able to use 20% of the Internet bandwidth of the United States for free?  

These are, however, all abstract concerns, like our $15Tn national debt (not counting the $111Tn of unfunded liabilities to be, theoretically at least, collected by Boomers over the next 20 years), our decaying infrastructure, our declining educational outcomes and, of course our near 20% real unemployment rate.  

Intellectually, I know that the US no longer matters in the grand global scheme of things yet 70% of the US economy is still consumer spending and even if that drops off just 5% and even if the US is only 1/2 of the S&P 500's total sales – that's still a 1.75% hit to sales.  Clearly though, with the VIX at 17.5% and S&P Short Interest at just 4.15% (the lowest level since 2007), happy days are here again and I'm only speaking to 4.15% of the population who are worried (and at least half of them are probably bulls with small hedges).

So, if we're going to get bullish in 2011, we need to switch off that thinking part of our brain and get ready to go with the market flow – much the way we had to in 1998 and 2007 – it doesn't matter how stupid an investment may seem, we're going to be betting on the madness of the crowd's and, looking at those SAT scores, it's a pretty obvious bet!  Since we will be following form rather than substance, let's make sure we know what the market looks like from various perspectives – priced in Dollars, Euros and Yen, for example:

Obviously, we need to keep a close eye on those Yen levels as it does look like, from a Japanese perspective, we are failing to hold our 20 dma supports as the Yen comes off the mats at 118 and gains 3.3% in the past two weeks.  I mentioned that Europe may look worse than the the US and thus the Dollar looks better than the Euro but what a joke that the "safest" looking currency is the one whose country is carrying a 200% Debt to GDP ratio.  That's good news for the bulls actually as both the US and Europe is rapidly racing to catch up with Japan (assuming they stand still, which is doubtful) and THAT is how our markets are supposed to go up 45% in two years – what could possibly go wrong?

I played a fun game with my daughters the other day when my oldest asked me to explain how the Fed causes inflation and I said to here.  Go ask your sister how much money she wants for a piece of gum.  They both came back and reported that they had agreed 25 cents would be fair.  I then took 20 strips of paper and wrote $100 on each one and gave them 10 each and said – "Congratulations, you are both rich."  

I then said to Madeline, now ask Jackie how much she wants for a piece of gum.  Jackie initially asked for $100 because she (8 years old) could see Madeline had $1,000 and Madeline didn't have anything smaller than $100 and was about to give it to her, when I suggested she offer Jackie one real dollar.  

Jackie accepted the offer and gave Maddie a stick of gum and then I said to Madeline, "What happened?"  She told me she got a stick of gum for $1 and I said – "How much is a stick of gum worth?"  We did the math and determined that, at 7-11, 5 pieces of Trident are $1 so a stick is "worth" .20 in "real" money.  I said to Madeline "What made you go crazy and give your sister $1 for something that is only worth .20?"  Her answer: "Inflation."

As traders, inflation will make our lives VERY easy.   All we have to do is own something, hold it a while, and sell it to someone else.  As long as the Fed and Treasury keep printing money and handing it out – we don't have to wait for it to "trickle down" as we're selling our stocks and commodities to the top 1% who, like my daughters, get money simply handed out to them hot off the printing presses.  This works even better, of course, when we use options for leverage, as I illustrated with our "5 Trades to Make 5,000% on a Breakout" as well as other bullish set-ups we've been looking at to capitalize on an inflationary market.  

Hedging against inflation is ridiculously easy using options.  Just last Monday I put up a trade that returns 20,000% on cash if we "just" get to S&P 1,550 which was DB's high-water target until Larry Robbins trumped them today.  That trade requires selling 2012 $85 SPY puts to pay for the long position (a bet that the S&P holds 850 for the year is the risk side) but that requires some margin, of course.  An adjustment to that trade would be selling AAPL Jan 2013 $175 puts for $8, which pays for 2 SPY Jan 2012 $125/135 bull call spreads at $4.80 for net .80 on the 2 $10 spread so the return there, at S&P 1,350 in January of 2012 is $20 on the $1.60 cash commitment for a nice 1,150% gain.

Now, I would not suggest making this trade unless you REALLY want to own AAPL at $175 (now $326) as you are obligating yourself to do so should it fall but the margin on that trade, even in an ordinary margin account, is just net $1,755 (according to TOS) to collect $800 in cash.  That $800 in free cash plus just $160 more out of pocket converts to $2,000 if the S&P hits it's relatively modest goal and you end up with a lovely 100%+ return on margin in just 12 months – even with an ordinary account.  

THAT's the way we, in the top 1%, fight inflation!  That's the way the government hands out money to those of us in the top 1% because we don't need $1,755 in margin to borrow $800, we can borrow $8,000 for $1,755 in margin so, as long as owning AAPL for $175 doesn't bother us – we can commit to owning 10,000 shares, collect $80,000 and take another $16,000 in cash to buy 200 of the spreads for a cash plus margin commitment of $33,550.  If the Fed is successful and the S&P makes it to 1,350 (up 8%) over the next year – then we collect 20,000 x $10 or $200,000 (up 496%)  for our troubles.  

They will tell you it's a zero sum game but that's not so, that $200,000 doesn't come from nowhere – it comes from the inflated cost of every other stock you ordinary investors are forced to buy.  It comes from the food you eat and the gas you put into your tank and the pills you buy at the drug store and it comes from your inflated tax dollars as well as from the Debt burden our government places on you and your family and it comes from the retirement fund you put away for 40 years that will barely pay the rent by the time you cash it in.   

So thanks for the free money suckers!  We're getting ours and I very much suggest you get yours or we'll be buying your gum for $1 too as we give you back .0005% of what we take while the government tells you how nice it is that we're trickling on you.  

 


Tags: , , , , , , , , , , , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!


  1. mplaut — Thanks for the article! I’d put it on the must read list Phil: http://www.the-american-interest.com/article-bd.cfm?piece=907  The meat of the article doesn’t really start until it starts talking about "going short volatility", which is about half way through. And although seemingly diverging from the initial topic of wealth inequality, is still loosely related but more important IMO. 
     

    Some juicy tidbits to whet the appetite:
     
     
    In that same year, the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. 
     
     
    It is naive to think that underpaid, undertrained regulators can keep up with financial traders, especially when the latter stand to earn billions by circumventing the intent of regulations while remaining within the letter of the law. 
     
     
    For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism. 
     
     
    The underlying dynamic favors excess risk-taking, but banks at the current moment fear the scrutiny of regulators and the public and so are playing it fairly safe.


  2. Phil, I apologize in advance, but I simply can’t get my head around what happened here:
     
    had the CCJ 17.5/25 bull call spread for Jan, now hugely in the money. While waiting for the clock to run out, I was surprised to find somebody executed me on my $25 short calls, leaving me short the stock and handing me money. I still hold the 17.5 long calls which offset the short stock, but what would you suggest is the cleanest way to wrap this up?
     
    I invested $5.25 trying to make $2.25, and it appears successful. Do I just let it all play out and wipe itself out?


  3. Circus/Phil
    Phil… You are REALLY To Pessamistic LOL… Your assumptions are formed under the old math…. Today, we have found the new math….. AND all those Chinese Coming To America (remember Eddie Murphy???) as you describe will find messmermized to find the American Dream, as you say…. But, you forgot to remind us that America will find it’s way back to greatness (Toby Keith) – singing, with new cooperation, especially with new Congress direction and Mitch McConnell turning over a new leaf towards real leadership…. NOW… GET ON BOARD LOL……… 


  4. CCJ/barfinger,  nice trade.  I think you can just sell CCJ 25 Call again for more premium.  my 2 cents.


  5. NET $  = +.17%,  dx/y =  (.11)%
     
    Futures = 1256.50, for the open fair value 1254.06
    overnight:  high = 1257.00, low = 1252.25
     
    10yr = +.03%,  30yr = (.24)%
     
    not sure anything matters right now, except for the POMO and free money boys. The market is just juiced and does not  even move right anymore (for many many months)
    The Cash and the Futures used to move and cross each other all of the time (I watched for 4-5 years).  In the last year, I only saw the cash cross below the Futures on the Flash Crash Day.  So from March 2009 till the flash crash, the Cash/Futures – only Cash leads.  Then since the Flash Crash only the cash leads.
    So it is still a Free Money giveaway and Cash driven market.
    Need to see that relationship return to normal.


  6. ok, just had to get that out


  7. DIA116 Puts in 1050P
    They are now 15.75s, what happened to the 0.25??


  8.  barfinger
    12/29 is the ex-div day. you lost the dividend. you may cover CCJ, and 17.5c


  9. @Phil
    One day about 20 years ago, my dad and I got into a ‘debate’ (he yells at me, I at him) about the existence of god. He began donating money to his church in what my mom said was alarming amounts (she wanted a new couch and carpets) and when I asked him why,  his essential reason was that he thought it might look great on the credit side of his account when it came time for St. Peter to admit him into heaven.  In other words he believed that there was a god, a heaven and that he could buy his way in after living a life of sin.
    This man believed this right up until the day he died, and upped his contributions to the church after my mom passed away.  It wasn’t any help that he developed dementia in the last years of his 92 yr old life and couldn’t remember much about his finances.
    The take away?  He is among many hundreds of millions if not billions of ‘believers’  that make the Catholic chuch immensely rich beyond Midas’ dreams and he was able to live over 20 years with this belief  and never had to give it up.  He lived 92 years with a completely irrational belief that he could not prove any part of, threw unconsionable amounts of money away on a completely corrupt religion, and felt great about doing it on the promise of entry into a paradise.
    I can’t really see any significant  difference between what he did and what is going on in the financial markets:
    A lifelong fantasy that he never had to pay a price for, moving off to extinction without knowing whether he was right or wrong.


  10. Watch out guys. I got an email this morning from “Ilene” from “Phil Stock World”, asking for my name, addresss and social security number. It was a very sloppy phishing attempt. I later received another email saying if I didn’t want to send it by email, I could call a phone number instead.

    Did anyone else get an email like this?


  11.  Good morning!  

    Wheee, what fun – nice pop at the open as the dollar gets smacked below the 80.50 line for no particular reason.  Oil flew back up from $90.80 to $91.40 but none of that matters until we see inventories at 10:30. 

    In an ordinary market, I’d want to jump on shorting the Dow at 11,600 but this market is just scary!  Still, the DIA paid a dividend and that has knocked Jan $116 puts down to $115.75 puts, now $1.50, still not our $1.23 target for a roll to the Feb $116.75 puts, now $3.10 for $1.60 and hopefully we’ll be able to sell 1/2 (10 in the 1050P) the Jan $114.75 puts for $1.50 (now $1.10) on a pullback to cover 1/2 the roll cost.  Keep in mind this is, at the moment, committing another $3K to the position and turning it into a long-term spread.  

    As a short-term downside play, I’m liking those DIA weekly $115.75 puts for .32, which are 20 points out of the money but that can happen in an afternoon and we have 3 days – a .12 stop makes a nice risk/reward on this play but craps roll money only!  

    11.500 is now long-gone and we’re left watching last week’s highs and they are falling already at Dow 11,600, S&P 1,260, Nasdaq 2,675, NYSE 7,935 and Russell 800 - that’s 3 of 5 and that is technically bullish folks!  

    There’s no volume at all, the whole thing is BS, blah, blah – who cares, it’s a rally!!!

    So let’s enjoy it while it lasts but cash is still king as it doesn’t take too many inflation hedges to make sure you’re not going to miss anything to the upside.   The tricky part is staying in position to take advantage of the downside that may never come but we can get more comfortable with that in January.  

    Let’s enjoy the ride and watch those lines on the Nas and the Russell for the death of the bears. Obviously I’m skeptical and there’s no way I can get behind it until we see some volume to confirm but we have to respect those lines 

    The conventional wisdom is that something’s gotta give in the divergence between China stocks and the U.S. market – either U.S. stocks correct significantly in-line with the Chinese market or China turns back up. But Josh Brown likes the chances of a "repatriation trade" that brings a reversing of flows back into the U.S. market minus leadership from Shanghai. 

    Former Shell Oil president John Hofmeister paints a scary outlook for gas prices in the coming decade: $5/gallon by 2012. "Within 10 years, we’re into energy shortages in this country big time. Blackouts, brownouts, gas lines, rationing." He expects no new drilling in the Gulf of Mexico for two years: "The headline is the moratorium is lifted; the reality is you can’t get a permit."

    Worldwide spending on oil and natural gas exploration and development is projected to hit a record next year, a sign of the energy industry’s confidence that high crude prices won’t fall and may go higher. A Barclays survey estimates spending on new wells, producing platforms and other energy infrastructure will total $490B next year, up 11% from 2010.

    U.S. firms have asked the White House for a tax holiday to help them repatriate some of their $1T-plus of offshore earnings, but the truth is that multinationals have been quietly, but legally, finding loopholes around the tax for years.

    From the appointment of Tim Geithner through the neutering of Dodd-Frank, the institutions that led the world into the GFC used their skills and clout to head off every response aimed at making them accountable. "It was very clear by February 2009 that the banks were going to get a free pass," says Simon Johnson. 


  12. EDZ: I seem to have let this one get a little (okay, a lot) out of hand.
    Long 4x EDZ Jan 25/28 Call spread @ 1.05 now .20
    Short 1x EDZ Jan 2012 20 Put @ 5.30 now 5.70
    I realize that ultimately I’m safe as long as EDZ stays over 20.  But, is there an adjustment that makes senses here (especially after today’s drop at the open)?
    I’m looking at going out to April for about .35-.4.  Should I be looking at rolling down as well as out?
    thanks


  13.  SPX 1261
    DOW 11617
    LOL


  14.  Phil
    I got the "Ilene" email as well – you may wish to send out an alert on this. Not a phishing expert – but they have spoofed "admin@philstockworld.com"


  15. When are crude inventories released? It already happened right? I cant find any data on it and there was no real spike in volume…


  16. Phil, what do you think of TIE here? I know, I know – a little diffucult when we were recommending it around 10 but they have pulled back a bit, with a little insider buying, ajrcrafts still being rolled out & folks becoming older and fatter?


  17.  $FCX — $119 + — a good spot to take a short position IMO


  18.  I guess PSW made the big time being spoofed and targeted by identity thieves … be careful w/ your info folks.


  19. jromeha / inventory — I think you’re off by one. Inventories are tomorrow: http://www.bloomberg.com/markets/economic-calendar/


  20. Phil Looks like USO up today.  Should we make that adjustment in the 1050p on the Jan $39 puts?


  21. NET $ = +.62%,  dx/y = (.26)%, big jump on the net
     
    C= 1261.31, F =127.00
    10yr = (.14)%
    VIX = (1.20)%


  22. Cap / Spoof — He’s been spoofed for a long time! look how long he’s been bearish! :-)


  23. Rainman- THx. Im just so used to wednesday 1030 being an important time for me. Just checked Yahoo finance and they have both today at 1030 and today at 1300 listed for petroleum inventories and bloomberg has tomorrow….


  24. Rainman – Thanks  I thought the OIL inventories were today as well.


  25.  Email/Palotay – Actually, that was a legitimate Email but poorly worded.  Ilene needs the SS # to pay commissions earned from our referral program for anyone who earned over $500 (silly government rule).  I told here to send out a Tel # because some people are not comfortable Emailing their SS# but we can’t pay commissions without it thanks to the new regs.  You can ask to have the money credited towards membership instead – contact Greg (admin@phist….) if you have any questions.  

    Funds/Rain – And you wonder why I’m starting one!  There is literally no better way on the planet Earth to make money than running a hedge fund.  If we do get visited by the inflation fairy and we use trades like the one I listed in today’s post – it’s simply ridiculous how much money can be made.  

    CCJ/Barfinger – Yeah, when they go that DITM then that can easily happen.  The simplest thing to do is just buy back the calls – you have $25 of the money and you need $14.79 out of pocket, which you can get from selling the $17.50s for $22.30 and just pocket the $7.51, which is your full spread.  No big deal, just done a bit early.  If you think you’ll be missing something, you can put 1/3 of the profits into the 2013 $35/40 bull call spread at $2.50 so you risk 1/3 of your gains for another 33% upside over 2 years.  

    New Math/Acobra – I don’t think of it as "pessimistic" – I’m just trying to be real at a time when no one else is.  I’ve put out dozens of bullish long-term plays this month because they are hedged and I’m confident we can get out with little damage if the market does drop.  We cover them with shorter-term bearish bets because, if the market drops, it is likely to drop hard and fast and, if we make it past April without a drop,  then inflation will be firmly entrenched and we can begin to bet the farm on 20% annual market advances.  Actually, it’s funny that you say that about America because Madeline asked me to explain the cartoon above with the dragon and I said that America is worried that China is getting so big they will become number one in the World and we need to either fight the dragon or it will consume us and she said "Or, we could just be friends with the dragon and share."   Now THAT’S an optimist!   8)

    Perhaps it will all work out.  I was an advocate of inflating our way out of this mess years ago (see Dec 2006: "Burning Dollars to Fight Gravity" and Feb 2008′s "Inflation Nation").  It’s not the inflation I object to it’s the type of inflation (top down) that I don’t like.  Bottom up inflation is great but there’s none of that going on, this is nothing more than a disguised pillaging of whatever is left in America as the S&P 500 and the top 1% feast on the carcass in preparation of moving on to greener pastures overseas, leaving the bottom 99% to clean up the mess (but they’ll still be happy to sell you stuff from Asia!).  Is that pessimistic?  Nah….

    Normal/Mike – We can’t handle normal anymore.  I dread normal at this point as it will probably look very much like the flash crash when it comes. 

    Fantasy/Flips – Well I really don’t want to get into a religious debate here but sure, people can believe what they want for a very long time.  Ricky Gervais wrote an excellent post in the WSJ this weekend on "Why I’m an Atheist" and you can choose to believe or not believe in God as a matter of faith that is not likely to be proven one way or the other until you die (and, even then, only to you while everyone still living has to wait for their turn).  As Gervais points out, you can believe you can fly and there is no way I can prove you can’t fly – even if I drop you out of an airplane and you splat to the ground it doesn’t prove you can’t fly – only that you didn’t feel like it at the time.  

    The economy cannot keep going up just because people believe it will – it may open the cargo door on the plane with great confidence and it may decline to wear a parachute and it may fall 30,000 feet and not for one second believe it is going to hit the ground BUT – there will be a point, at ground zero – when an objective reality comes into play and all the confidence in the World will not deflect the scientifically measurable fact of the outcome.  

    Everyone is immortal until the coroner puts a tag on their toe – the problem with believing we can borrow infinite amounts of money and never run into trouble is that we rapidly approach the point at which we literally need to borrow all the money in the World – this is not a game that can go on for generations – we’ve already been playing it for generations and our parents were probably the last one that got to retire and die in ignorance of the reality of what has happened to their retirement funds and it’s our children (if they are foolish enough to hang around) that will bear the burden of the debts we have incurred and continue to incur on a daily basis.  There’d better be a God – He’s probably the only chance we have at this point….


  26. The Devil Is In the Details.


  27.  I’m still stuck in NJ! Hopefully flying out tomorrow (4 days after my oroginally scheduled flight).
     
    What a nightmare! Oh, and this LOW VOLUME SUCKS. C’mon traders, you better get busy next week! Good thing expiration isn’t until the 21st. Maximum time.


  28. Anyone know what’s with REE  today?


  29. Reaching out to god Phil?
    "There is a Providence that protects idiots, drunkards, children and the United States of America. "
    Otto von Bismarck


  30.  EDZ/Daveo – LOL, that’s an understatement!  Well, it’s a free play as long as you don’t take a hit on the 2012′s so I’d take the .80 off the table and that leaves you in at net $1.90 collected off the long putter and you are down $3.80.  If you are impatient, you can roll the putter to 2x the Apr $18 puts at $1.80 and hope they get wiped out (and you can cover moves below $21 with momentum puts) and then you are down just a bit and hopefully out of the trade.  In other words, you’ve lost your chance to make easy money on a move up so now you retrench and work on getting out near even.  If this was a hedge and you made money on upside bets, this is not really a problem, right?  As to taking another upside spread – it depends on if you need a hedge or not but, if not – why bother, you should be happy just not to go out of pocket on this one.  

    It is Wednesday, right?  What happened to the oil report?  

    TIE/Jo – I like them long-term at this price ($16.97).  You can pick up the 2012 $12.50 calls for $5.70 and sell the $17.50s for $2.85 and the $15 puts for $2 for net .85 on the $5 spread and the worst case is you own them at net $15.85 (and, of course you can roll to 2013 $12.50 puts, now $2) and the margin should be about $3 so a very nice way to make $4.15 with a low commitment to round 1.  

    FCX/Cap – I agree, that was our original shorting target and shame on them for not breaking $120 with gold at $1,410 and copper at $4.32.  

    Spoofing – WE ARE NOT BEING SPOOFED!  

    USO/DD – No adjustments as the inventory delay is screwing us up.  

    Stuck in NJ/BDC – Why you lucky fellow!   You can just bop on the Newark Path Train and be in NYC in about 20 mins if you are bored. 

    REE/BPS – Lots of rumors that China is curtailing rare Earth exports but I’m not sure they are real.  Not something I’d go chasing or betting against.  


  31. bps2002 / REE — Rare earths are the hot trade right now. China reduced export quotas by 11% yesterday. MCP has run up too much so now they’re moving onto REE. I just got my calls blasted out of the water. I was playing MCP before CNBC got ahold of it and they blasted my calls out of the water there too. I suspect you’ll hear about REE more over the next couple of weeks while they herd the lemmings over. SHZ is being hit hard as well but that doesn’t make sense other than it being the "hot trade".


  32.  REE/bps2002 – The front page of Investors Business Daily says this:
    "China said Tuesday it will cut its export quotas for rare earth minerals by more than 11% in the first half of 2011, further shrinking supplies of metals needed to make a range of high tech products."
     
    I think Reuters may also have carried the story.


  33.  REE … short squeeze / momo toy.
    stupid stocks always go up and down 14% per day, don’t they ?


  34.  For how volatile REE is, it seems to me that the options have scarily little premium.
    The 14 calls for example are only 1.70×1.75 on a stock that is up 14% today


  35. Just in case anyone is curious, spoofing the from box in an email is brain dead easy. I figured out how to do it in 9 th grade (1995). In fact, most of the Internet runs on trust. You would be really surprised how much trouble you can cause by hooking a computer with right settings up to your interweb connection.

    I think the Internet is a lot like finance. From the outside the whole system looks invincible. Once you start digging around and learning how it really works you become surprised the whole thing doesnt explode every other day!


  36.  C = 1260.97, F =1256.75
    10yr = (1.01)%,  30yr = (.99)%
    VIX = (1.66)%
    oil  (.34), gold +5.60

    Net $ = +.45%,  dx/y = (.20)%


  37.  FCX looks ready to roll over now.  Big push to blow thru 119.25 failed.  They thru a lot of fake $$ at that.


  38. Good morning,

     

    IWM 80.16,  79.26, 79.04, 78.76, 78.47, 78.29, and 77.89 and $7 Bil of POMO

     

    I anticipate seeing 78.76 again today with a probable bounce, but if it fails it could be fun !!


  39. Not good, now Japan is taking its turn to anoint the Too Big Too Fail Crowd


  40. craigzooka / trust — Amen, pass the donation plate! Now it’s time for dinner, let’s go eat


  41. Phil, I am short CCJ stock and long the Jan 17.5 calls. If I do nothing, this will just cancel out at expiration, correct? On the other hand, in all my life, I have never exercised an option early, and (lol) don’t know how….
     
    I could buy the stock, clearing the short, then sell the option. That’s probably better, wouldnt you say?


  42. The BDI is in ridiculously low territory. Like, October 2008 territory. Buyer beware.
     
    I’ve spent this morning reading a whole bunch of ‘expert’ 2011 predictions. No one knows squat. The only conclusions I can really sink my teeth into is a VIX at 17 is damn good news for option buyers, whether your buying into the inflation-sends-stocks-up meme, or heading-for-a-pullback-or-crash meme. 
     
    NJ – Secaucus to Penn station, 22 mins.


  43. Oil report is tomorrow.
    WTF with crude got a little volume and dove.


  44.  Phil, ever heard of Belleville? (near Nutley). I’ve never really been in NJ, save a drive through or day at the beach at Avon.


  45. API is today but don’t know time


  46. biodieselchris / ’11 — what’s your take on the Ag equipment manufacturers?


  47. China may by Hungarian debt
     
    probably probably all ready has been, if its news to me, has to be history in reality


  48. Love the down play by Kudlow when the dude said "rare earh elements aren’t really that rare, it’s a supply chain problem, correct?" and Kudlow mumbles "yeah, yeah" and moves on. Obviously the "hot trade".


  49. Once again the Buy the F’ing dip strategy on TNA was profitable.


  50. Phil – CPWM – is it still a short here? I was looking to short it yesterday but somehow forgot and today my mojo has been stolen!


  51. Phil:
    Would VNO or SGP make good short candidates at these prices? If so what option spreads would you suggest?
    Thanks


  52. Does anyone know of a good alert service that can send advanced option alerts? For example, if an option’s premium drops below a percent of the strike?


  53. wow look  at the derivative levels foreign banks can hold in South Korean and this is after being lowered


  54. Phil,
     
    Look at GM today.  I figured the gov with there willing pack of 12 accomplices would run it up.  To think that less than a week ago you chastised me for even considering to buy such a piece of shit like GM and sell calls.
     
    You need to start thinking like our corrupt public officials and their corrupt banking buddies.


  55. Reaching/Reza - "Catastrophes makes believers of us all" – Some guy from Atlantis or Pompeii 

    Rare Earths – LOL, you guys are all such suckers!  Everyone invests in what people say and ignores what people actually do.  China exported 2,090 tons of rare earths in November, more than double what they exported in October once they talked the price up with their first "restrictions".  Through November they exported 35,075 tons (about 120,000 tons produced in China — they use most of it to make stuff there), which was already 16% over their 30,258 ton quota for the year so it shows you what the quotas really mean.  What has gone up is the value of the exports as all this jawboning jacked the price up 171% from last year on essentially the same output.  Those guys play the US markets like a fiddle – they are probably half of that 4% that’s going short at the moment since they know they can say a single word whenever they want and drop our markets 10%.

    REE is nothing more than an E&P company that’s in the "E" stage – they don’t produce anything yet but boy were they smart in picking that name, right?   MCP is another well-named company with an amazing $4Bn market cap (more than the entire planet’s annual consumption of rare earth and China has a 95% market share) on $7M in revenues and a $23M loss for the year last year.  Rare Earth metals ARE NOT RARE – they are just difficult to extract due to their low concentration but, if anyone actually believed these prices would sustain, there could be 100 profitable companies producing hundreds of tons within a year right in the US and Canada.  This whole thing is just nonsense but it’s sexy sounding nonsense – much like ethanol was for a while (and where are those companies now?).  

    Japan/Mike – That’s fun.

    CCJ/Barf – I guess it will but you’d better check with the broker – it may not be automatic.  No sense in you paying to exercise if you don’t have to.  If you have the margin – I’d cash the calls at $40 and set a stop on the the short at $40.25 and hope for a little pullback off the $40 line to buy stock back into.  

    BDI/BDC – Yep, again hard evidence paints a very different story that is currently being ignored with a vengeance.  As to Belleville, I’ve heard of it but don’t think I’ve ever had a reason to go there.  

    API/Samz – Usually around 5pm.  

    Hungary/Mike – Good way to buy some friends.  

    Kudlow/Rain – Yep, just what I was saying too.  This is such BS they have to cut off the critics before people start noticing the Emperor has no clothes.  

    CPWM/Jrom – I didn’t know they were a short in the first place but they do look like one.  The more they sell the more they seem to lose so the only hope investors have is that people stop coming to their stores. 8)


  56. Phil – Time to fess up to embarassing mistakes.  For some reason I’m holding 20 DECK $70  Jan puts, paid $1.23, now .35-.40.  I’m convinced this stock is going to end up between 60 -70 by Feb Mar, but that’s not going to help me by opex.  I was thinking about converting it to a vertical by selling the $75 Jan puts for .95 (I can’t sell naked puts or calls), and using that to buy something in Feb or March.  Also, you mentioned maybe using ratio backspreads to fix some of the 1050 p positions.   Do you have a suggestion for DECK?  Thx.


  57. rainman
    Etrade will do it but it is confused with other news bites on eveything you watch or trade. My solution was more screens with option chains on those you need to watch. Not that hard if you use a desktop computer.


  58. Phil,
    Would MON be a short into earnings on Jan 6??
     
    thanks


  59. REE
    Don’t buy the bites,they were $2 July 10 and $10.25 Monday!


  60. The Free Money and Inflation printing crime continues.
    How comes the pass a long of the higher commodity prices to the end user us.  Next will be higher taxes.
     
    We pay for the bailout, then the makes us pay again and again and again.


  61. Shorting RETIS --On my last post, I meant SPG (Simon Ppty Grp). My bad ;)


  62. VNO, SPG/Reza – I wouldn’t short VNO because they are possibly breaking our of a channel.    SPG is over their channel and BXP is too so it doesn’t seem like the CRE sector is a very good short at the moment, whether they deserve it or not.  

    Alerts/Rain – I know you can set TOS to alerts you for pretty much whatever you want/   Not sure if they Email or Text but it does alert you on screen.  

    S. Korea/Mike – Like Japan, they are fighting not to be taken over by China.  

    GM/Exec – I still feel the same way.  Just because they are up 3% doesn’t mean they are suddenly a buy, does it?  

    DECK/Rdn – I’d sell the $75 puts for .95 and you can use that to roll to March $70 puts at $2.85 (looking to sell Feb $70s for $1.40 later) or just roll to the Feb $70 puts for now yourself at $1.40.  If you take the cheaper position, you just have to watch that $80 line and add another 1/2x to the Feb puts if they break below so you are set up for a 1.5x roll on the putters. 

    MON/Harip – I like them, they were a top choice of mine when they got sold off a few months ago and I think they may have gotten ahead of themselves but I see no reason to short them.  CAT is kind of in the same space and much sillier at $95 than MON is at $67.  I like CAT too but at least I’d be more comfortable shorting them on a bet that they don’t just plow through $100 without a pullback to $90 or less.  CAT Feb $90 puts are $2.50, I can see getting $1 out of those.  


  63. mike
    A way of looking at commodities is uses. Copper, lumber, cement effect building prices and today total cost of building is over actual value. The fed plan is bust so comdity and labor must come back in line to stimulate investment. Those prices must come down 50%.


  64. Phil / emperor — I like when the emeror has no clothes when I’m selling the clothes! +80% in 10wks by buying the F’ing dips and sell the F’in pops! Using buy-write strategties no less (buy and hold would be about 30%). Having said that, I’ve never said "investment" and "Rare Earth" in the same sentence (until now :-D I do better with story stocks like that than economic/political ones like oil and the indexes for the short term gambling. It’s likely REE is off my radar now though as I like to sell into the excitement!


  65.  REE MCP rare earths.   The jokers trading this stuff don’t care about what you said Phil.  They just see a chart moving up in patterns they like, so in they jump !


  66. At the open: Dow +0.14% to 11592. S&P +0.15% to 1260. Nasdaq -0.1% to 2667.
    Treasurys: 30-year +0.29%. 10-yr +0.07%. 5-yr +0.09%.
    Commodities: Crude -0.15% to $91.35. Gold +0.16% to $1407.80.
    Currencies: Euro +0.21% vs. dollar. Yen +0.49%. Pound +0.34%

    10:00 AM On the hour: Dow +0.34%. 10-yr +0.01%. Euro +0.12% vs. dollar. Crude -0.3% to $91.22. Gold +0.06% to $1406.40.

    11:00 AM On the hour: Dow +0.22%. 10-yr +0.08%. Euro +0.16% vs. dollar. Crude -0.13% to $91.37. Gold +0.45% to $1411.90.

    11:10 AM The Fed buys $5.387B in Treasurys in today’s open market operation, of $21.8B submitted by dealers, in the first of two bond events today (the last Treasury auction of the year, a seven-year sale, closes at 1 p.m.). Yields have flattened out on the day. 

    12:00 PM On the hour: Dow +0.24%. 10-yr +0.3%. Euro +0.56% vs. dollar. Crude -0.36% to $91.16. Gold +0.47% to $1412.20. 

    It’s a sugar high as the commodity rallies 0.7% to $0.3464/pound – a 30-year top in New York – with floods expected to cut output in Australia, the No. 3 exporter. In other softs: coffee +0.4%, wheat +0.2%, rough rice +3.6%. But soybeans -0.4%.

    A rose for every thorn:  Robert Shiller says the drop in the latest Case-Shiller home price index was worse than expected, and the economy will face "serious reasons to worry" if house prices continue to fall at the current rate. Shiller thinks a panicked Congress would issue another home-buyer tax credit or other emergency measure to stop the fall.   See – things are so bad, they’re good!  

    A spending splurge from upper-income Americans led the way to strong self-reported consumer spending during Christmas week 2010, Gallup says – $183/day on average during the week ending Dec. 26, up from $126 Y/Y. This could explain the dichotomy between data showing stronger consumer spending despite weakening confidence

    OPEC appears unlikely to stop the oil rally, helping to prepare the way for $100/barrel oil. The cartel will not move as long as it remains to be seen whether prices are responding to short-term weather conditions or longer-term demand and monetary issues. "The Fed has in a sense been pushing the speculators," one oil watcher says. "OPEC can very well argue it’s not its role to add more oil." 

    What oil shortage?  Petrobas (PBR +1.21%) declares two Brazilian offshore oil fields to be "comercially viable," with 8.3B recoverable barrels of oil. The first, named Lula, will be Brazil’s first "supergiant" oil field, i.e. one with a recoverable volume greater than 5B barrels.   This is a brand new 3-year GLOBAL supply of oil!  

    More patriotic American companies selling our manufacturers out for a quick buck:  Boeing (BA) and Airbus’ (EADSY.PK) stranglehold on the civilian aircraft market is challenged by a new trend – multinationals teaming with Chinese companies not just for access to China, but to compete worldwide. GE and GM are among the firms cutting such deals.

    ICE Trust, the world’s largest clearinghouse for credit default swaps, cites “significant changes” to proposed regulations devised to bring transparency to the derivatives market in deciding to withdraw its application, NYT reports.

    From disastrously failed acquisition attempts to ill-advised bidding tactics, the Deal Professor presents the lowlights of 2010 deal making.

    Evoking historical precedent and a few tea leaves, S&P’s Sam Stovall thinks the odds favor a rising stock market next month. The market typically performs better in January than in the rest of the year, and posts strong gains during a president’s third year in office. Stovall expects a favorable showing in January and in Q1, with cyclical sectors outpacing defensive ones.

    Sears (SHLD +5.9%) leads all S&P stocks despite a lack of news. Yesterday, it announced a partnership with Sonic Solutions (SNIC +1.5%) to launch its online movie download service. Sympathy strength with BJ’s Wholesale (BJ +6.7%) takeover rumors could be at work, and Briefing.com notes that the stock has very high short-interest, at ~32% of the float. 

    Freeport-McMoRan Copper & Gold (FCX +0.6%) follows through on its plan to hike its annual dividend, declaring a $0.50 dividend for Feb. 1, roughly 67% higher than previously. (PR

    Is anyone out there bearish on GM? ConvergEx Group initiates coverage at Buy with a $43 target, joining a Pamplona-like rush to sing the stock’s praises. Shares +1.6% to $35.87; GM is up 6% over the past week. 

    Three lunchtime reads:
    1) Hussman: A Fed-induced speculative blowoff
    2) Curiously weak consumer confidence
    3) Three stocks that soared in 2010

    From Hussman (very important read!):  

    The key event related to QE2 wasn’t its formal announcement, but was instead the Op-Ed piece that Ben Bernanke published a few days later in the Washington Post, which essentially advanced the argument that the Fed was targeting a "wealth effect" in stocks and other risky assets, in hopes of getting people to consume off of that perceived wealth. At that moment, Bernanke unleashed a speculative bubble in risky assets, and a selloff in safe ones. This has rewarded risk-seeking and punished risk-aversion, but it has also unfortunately driven the markets into an overvalued, overbought, overbullish, rising-yields condition that has historically ended in steep and abrupt losses.  


  67. Speaking of not "the jokers". Looks like "they" are sending SHLD up 6.4% as it becomes the next Netflix story.


  68. Korea / Phil & Mike – "S. Korea/Mike – Like Japan, they are fighting not to be taken over by China." Absolutely right, Phil – although it’s taken them time to shift gears from the anti-corporate americanism of the past decade or so and realize what will happen if the american hegemony goes away. Not a welcome idea.


  69. Hi Phil, et al.
    Scott Brown from Sabrient here returning from Christmas visit with my kids in Texas.  Talk about your jet lag and plain worn out :) .
    Happy Holidays to all and best wishes on the New Year.
    I am looking at January with Dark Horse having several performing buy/writes to roll.
    WRLD purchase 10/28 at $41.67 with $1.90 on $45 caller and a sweet $5.30 on the $45 putter…..stock at $53.82 for now.
    VECO purchase 8/25 at $31.93, already bagged $1.80 on the Oct $32 buy/write and rolled to Jan with $5.80 on $32 caller and another sweet $3.90 on the $32 putter……stock at $43.47 for now.
    WFR purchase 8/11/10 at $10.31 with Jan $11 caller for $1.02 and Jan $11 putter for $1.67……..stock at $10.98 for now.
    GCI purchase 7/26 at $14.52 with Jan $15 caller for $1.75 and Jan $15 putter for $2.25……stock at $15.11 for now.
    Other than that. for January ….just GME purchase 7/23 at $19.92, bagged $1 on Sept caller already and now have Jan $20 caller at $1.19…….stock $22.53 for now.
    and IOC naked Jan $85 caller for $2.90…….stock at $73.06 for now.
    Any thoughts or ideas always appreciated.
    Phil, I know you want to talk today so just let me know a good time to call.
    Thanks,
    Scott 


  70. Phil
    Is there a good (Acceptable) number for the ratio of margin to possible gains, when selling puts?
    Gain/ Margin =?
    For example MRK if I sell the feb 35 10 @.60 contracts puts possible gain is about $600.00
    Margin is 6000.
    Thanks


  71.  Isn’t it funny how I say something here at noon and an hour later it’s almost verbatim Jon Najarian’s afternoon spot on CNBC? 

    Value/Shadow – Oh, what a quaint and old-fashioned concept that is…

    Good way to play it Rain.

    Dollar broke 80.50 at 11:10, once again into EU close and is now 80.23.  CAC closed up 0.8%, DAX up 0.34% and FTSE down 0.2%.

    Jokers/Cap – I know.  It’s a problem trying to talk about value investing in a momentum environment but I’m enjoying my last 3 days as a naysayer before I turn over a new leaf in 2011 and jump on the nearest bandwagon….  

    SHLD/Rain – Yep, as I said yesterday, it’s amazing what buying a $700M company can do for you.  Added $4Bn to SHLD’s market cap already and another $20Bn+ to go before they get to NFLX’s p/e.  

    7-year note auction was the total opposite of yesterday with tremendous demand bid to cover of 2.86 at a low rate (which I missed).  So that has hurled TBT back to $38.25 and the dollar is now at 80!  This could not have gone better if they had planned it….  


  72.  Big sell order in FCX


  73.  50,000 share sell order in FCX.  
    2/3 got picked up in one chunk at 119.02.
    That was a big sale … and buy


  74. Phil
    Based on todays action with the dollar down will next week be a time to expect TBT to fall?


  75.  S Korea/Snow – We are all going to have to adjust to a World that is owned by China.  

    Talking/Scott – Oh anytime after the close.  As to rolling, it’s a bit early as the Jan contracts still have a lot of premium and the low VIX makes for poor rolling so best to keep the protection as is through next week where we see how things hold up under volume conditions (assuming we get some).

    Speaking of volume – 33M on the Dow at 1:10 isn’t volume, it’s 2 days of AAPL trading!  

    Dollar down 1% since yesterday and markets up 0.5% – not a good relationship (was 2:1 the other way) for the bulls.  

    Ratio/QC – I think you want to have a clear path to 10% a month.  This is 5% as it’s just a bad time to sell puts but also, think about what risk you take here.   You collect $650 (now .65) and tie up $6,000.  That’s fine if you REALLY WANT to buy MRK and are picking up some cash waiting for a pullback.  As a trade, you always have to figure your risk is a 20% move in the stock so about $30 on MRK would cost you $5.  If you sell those puts 6 times a year, you only collect $3.30 so you risk $5 to make $3.30 – a negative risk/reward ratio and, obviously, if you consistently take negative risk/reward ratios then, over time, your are more likely to lose than to win.  If you want to get paid not to own MRK, then selling the 2012 $30 puts for $1.75 gives you a net $28.25 entry (22% off) and returns $1,750 on what TOS says is $2,500 of net margin because it’s much more out of the money.  That means that even if MRK falls 25%, you still have a roll to 2x the 2013 $20 puts (now .85) ahead of you and still less margin than the Feb $35 puts.  

    Meanwhile, CCJ punching new highs.  

    TBT/Shadow – I still like them at $37.50.  This auction was obviously engineered for maximum impact with yesterday’s setting very low expectations and this one now getting everyone all excited.  Short-term, anything can happen but, long-term – we have to borrow $2Tn, Europe needs $1Tn, Japan needs $1Tn and where will all this cash come from in the end?  Once people start questioning the risk, it will take much higher rates to entice them to play. 


  76. Pharm / AEN – up big yesterday.  don’t see any news.  I’m going to raise my stops and hold on.  let me know if you have any thoughts.  Thx. 


  77.  C = 1262.37, F =1258.25
    10yr = (2.96)%,  30yr = (2.31)%
    VIX (2.40)%

    NET $ = +.87%,  dx/y = (.54)%


  78. Anybody, 
    What is a PM account? (as per Phil’s comments…) I gather it has to do with margin requierments but not sure exactly…
    Thanks 


  79. Korea  & China – China will likely undergo a phase change of some sort in the next 4 years or so….this link:
    http://www.rjkoehler.com/2010/11/02/will-china-need-to-follow-koreas-example/
    says it very well, especially Robert’s final paragraph: "So, according to economists at Morgan Stanley (and probably shared by economists elsewhere) China will reach this “inflection point” when its’ PPP (purchase power parity) per capita GDP hits $7,000 just like Korea and Japan.  At this point, China will need to make its choice and either make some fundamental changes to its growth model and allow it to slow down to a more manageable 4% a year pace or try to use economic smoke and mirrors to try and maintain its 8% a year growth rate and potentially set itself up for an unwelcome crash.  Today, China’s PPP per capita GDP is $4,000 so China (and the world economy) has 3-5 years."
     
    In the meanwhile, the change of public opinion in Korea is amusing:
    http://www.rjkoehler.com/2010/12/06/more-koreans-dislike-china-like-america/


  80.  1:00 PM On the hour: Dow +0.4%. 10-yr +0.64%. Euro +0.82% vs. dollar. Crude -0.16% to $91.34. Gold +0.53% to $1413.10. 

    The Treasury auctions $29B in seven-year notes at 2.83% (.pdf), the highest yield since April. Bid-to-cover ratio of 2.86, vs. a recent 2.96; indirect bidders take 64.2%, vs. a recent 49.9%. Direct bidders take 4.6%, vs. a recent 9.1%.

    And they’re off: Treasurys rally after a seven-year note auction that benefited from a heavy indirect bid and many traders back at their desks, especially in Europe and Australia. The 30-year yield -0.07 to 4.46%; 10-year -0.09 to 3.4%; 5-year -0.08 to 2.09%; 2-year -0.06 to 0.68%.

    As part of an effort to limit the amount of rare earth minerals it exports, China cracks down on illegal mines that account for as much as half of the world’s supplies. The availability of illicit riches from these metals has created the gangs, crime, and citizen intimidation familiar to the drug trade. 

    Isn’t it amazing how this week Rare Earth mining is one of our top global concerns.  Keep in mind that MCP does no actual mining as they shut down their mine two years ago as there was no profitable demand and all of their sales are just off the old stockpile they had laying around.  Now they are going to re-open and their stock is up 200% this year and I defy you to show me a scrap of paper that shows they can make $40M in profits in the next 5 years to justify a forward p/e of 100 to their $4Bn market cap….


  81. Phil, 
    You had mentioned there was going to be a place on the site for front month premium plays? I can’t seem to find it…
    Thanks


  82. Phil
    Who is going to loan $4T? China doesn’t have that much. How do we extrapolate the end?
    JRW
    Your our pivot man, got a theory?


  83.  I’m taking a stab at shorting the $185 AMZN January calls at $4.00.  The run up seems forced on low volume.  


  84. Looks like a huge block of DECK just traded 300,000+ shares in one minute.


  85. Phil,
    That is what I thought as well regarding earning more premium before the roll but always like confirming with you.
    Thanks.


  86. shadow / theory

    Well, I haven’t made a trade all day, started late; we’re in the channel so a break above IWM 79.02 or below 78.75 to EOD. They are doing their best to trash the dollar, but not moving stocks up that much; maybe a fall !! PS, there’s an uptrending support line now at 78.89, so a break of that would be my short entry !!


  87. JRW
    Thanks waiting as well. I have trend lines on the 5  and 2 day pointing to 78.90 tomorrow AM, I am sure we go up or down then but which way?


  88. Hi Phil — happy holiday — I have been away — just want your opinion on adjust short call Feb Rut  770, and some tza hedge Jan 23 short put and april 25 short put. thx


  89. Phil, any ideas how to play MOS?  They’re soaring today, don’t know why…


  90. DECK failing the 20 dma after the big block trade.


  91.  Phil / MCP … clearly we should be shorting it in some fashion.   Selling calls and buying puts.


  92.  AIG drifting lower as news driblles out regarding its silly valuation …. a long way to fall from here !


  93. Phil / Hussman — Thanks for the link. I used to check Hussman’s site on a regular basis but haven’t been there in awhile (probably since joining here). I liked the following the best :-)
     
    We focus on valuation models where the deviation from fair value is strongly correlated with subsequent market returns over the following 5-10 years. We hear a lot of "valuation" calls from analysts who seem to believe it is unnecessary to subject their models to historical tests. But investors should demand no less than a 7th grade math teacher does – "Please show your work." We’re certainly open to alternative models that have a testable historical record. We’re not interested in making a bullish case or a bearish case – our objective is to estimate prospective returns accurately. From where we stand, the evidence is presently not encouraging.
     
    Oh, and get off the Rare Earths trade already!  The new trade is uranium! (where the real rarity is)…


  94. Phil, 
    CMG, I have had success shorting calls on it during the last few months, however not without a lot of nailbitting… I feel they are on a definite downward trend now (yesterday’s head and shoulder chart seems pretty convincing to me). What would be a good play to limit risk?
    Thanks


  95.  Well-worth spending .60 to roll DIA $115.75 weekly puts up to $116.75 weekly puts if you plan to stick with them overnight.  Those puts are .80 in the money so worth spending .60 on the move but, of course, worse if the Dow breaks higher.  

    PM/Amatta – Portfolio Margin.  I think I had a link to an explanation in yesterday’s post.  

    Monthly Income Plays/Amatta – Note the tab at the top for "Income Trader" – he’ll be starting in Jan as will "All About Trends" and "Sabrient" will be adding chat participation under their own posts as well.  

    The end/Shadow – Well it can all work with hyperinflation but it’s a tough balancing act although, so far, the test run is working well as rates are low despite dumping $4Tn in this year.  They only have to do about $40Tn more and everyone is out of debt.   At the moment that’s 70% of global GDP and we ran about 7% this year so they have to double it up 3 times without impacting rates to get us all out of debt by 2015 (assuming we don’t borrow any more between now and then).  As long as all that goes smoothly, there’s nothing to worry about! 8)

    VLO $23.50!  Congrats to all who waited that one out.  

    MOS making all-time high.

    No problem Scott.  Seems I have a thing at 4 so anytime after 5 is going to be good for me.  

    RUT/Gucci – Welcome back!  I’d go 2x the Jan 800s ($10.60) just to take some premium and then see what you have to do to make the other $20 (or whatever the net is) on a roll.  Also, you should be prepared to sell 800 puts to cover if they move over 795 with tight stops on that line.  Pick up a few bucks doing that and you build up a nice rolling fund.  On TZA, you sold Jan $23 puts?  Ouch!  I’d just roll those to 2x the Feb $16 puts at $2.10 and hope for the best.  The same momentum cover of the short RUT 800 puts will protect those as well.  

    MOS/Jercon – Just part of the general idiocy.  Tempting though it may be – I don’t think it’s a good idea to load up with shorts until we see some volume coming back.  With just 37M shares traded on the Dow at 2pm, they could make the charts paint happy faces if they wanted to.   

    If you want an upside play.  LVS is no more stupid than any other MoMo stock but they are down 11% in 3 months vs WYNN, who are flat.  We shorted WYNN at the top but we can play LVS to hold $45 with 2x the March $40/45 bull call spreads at $3, selling the WYNN 2012 $70 puts for $6.  TOS says net $7 in margin to make $10 if LVS holds $45 (and we can run consecutive BCS’s if they pay off) so not a bad deal and WYNN down 30% would not be a bad buy anyway.  

    MCP/Cap – They are BS but so is NFLX and GM and AIG and CMG etc, etc. so, until we see some rational behavior in the markets, I am hesitant to get any shorted as we’re 3 of 5 over our tops.  

    Oops, almost forgot POT $153 again!  

    Uranium/Rain – Oh you won’t hear me say a bad word about that.  I was Mr. CCJ under $20 – a ridiculously low price at the time.

    Pound touching $1.55, Euro back to $1.32, 81.6 Yen to the Dollar – so much for Japan’s little rally.  Dollar holding 80 but barely at the moment.  TBT bounced off $37.50, good for the next 5% round trip to $39.


  96.  Anyone up for taking on Gel’s currency trading comments?
    Aussie looking mighty extended - 
    By all account there housing bubble is even more insane than ours with Price to Income levels that are sky high.


  97. amatta/PM Account, 
    please see yesterday 11:47 am’s post.


  98. rainman
    REE was up 14% now down to 10%, selling to suckers was the reason and the plan worked. FAKE!


  99. Cap / MCP — I’d like to see the thought process that goes into shorting a MoMo stock like that. I never have the luck or the balls with that unless I jump on after someone like Citron says there is something wrong with them (even though, obviously there is, as there is with NFLX, DECK, CMG, etc.), or the technicals roll over and confirm before I jump on. Even CMG is coming back from its head and shoulders break. I got out of MCP at $34, considered shorting it when I got out but didn’t have the nads. There was a nice technical break below the 50 MA at earnings but, crap, it’s up nearly 100% since then and they’re getting every second story on CNBC the last couple days!


  100. Phil / DF – do you like them for a new play?  I know you responded last week to a member’s existing position.  SVU rebounding but still near low.  worth a play?  


  101. Phil, do you like shorting the nikkei futures (NKD) right now? Seems like they should head a bit lower tonight  with the Yen rocketing up


  102.  10yr = (3.85)%,  30yr = (2.79)% so buying of our bonds today


  103. Phil / CCJ — What is your take on them now? Looks extended now (pretty technicals though). Any other uranium plays to look at?


  104. Inverted_pyramid_2010-12-26_1542 

    To illustrate how much debt worldwide is out there against real capital, look at the following chart.

     

    Credit_bubble_2010-12-14_1657

     So bottom line, the income supporting these assets are suspect and after a next flirt with high inflation we collapse into a debt destruction spiral.  Happy New Year.


  105. Mike – didnt need the net or to do any math to see that… All I had to do was look at my TBT position getting destroyed…lol…


  106. PhiL/ VLO $23.50?
    What’s the significene of $23.50 on VLO. Is it  a sell target? In this market ,do you still advocate rolling  up for  $.50 per $1.00 strike? than k you.


  107. JRW
    Great sumary!


  108.  Rainman .. MCP & momo shorts.
     
    Its a bit difficult to explain as it is a combination of fundamentals, technicals, feel and no fear trading.
    Regarding MCP … based on what we know and see right now, I would say 50 is toppy.  It traded to 55 yesterday, and maybe it gets there again, maybe not.  Given that, a strategy of selling calls at 55, 60 or 65, and being ready to roll them higher if necessary, is risky, but also potentially profitable.  Also taking a stab at shorting extreme intraday moves (if borrowable), and trying to leg into some put spreads w/ your profits.
     
    Its not for everyone, of course, but the strategy has worked pretty well for me overall, although have had some challenging episodes w/ CMG and PCLN for example, but have been able to adjust successfully.  Some of these names have made me some very good $$


  109.  For example MCP.
     
    I shorted near the top yesterday … small amount of shares, and also sold small amount of $60 calls for about $2.
    I have since covered, only position is one short $55 call where I am slightly in the money.
     
    I try to determine price levels where I should be comfortable being short the stock, and sell options there or higher.
     
    Some I cover quickly for 30-50% profits; some I try to ride into expiration.


  110.  interesting watching FCX trade today (and flatline for hours).  It seems to me it is reacting to how the rare metals are trading.  Weird.


  111. Nice trades CAP,  can you post those trades next time when you have time?  Thx


  112. Phil/GM
     
    Of course it doesn’t make it a buy…..the stock and the company is total crap.  If it had to stand alone without the governments assistance it wouldn’t last a day.  My point is….everything is so rigged any more that it has become predictable. 
     
    What is funny, is the fact that in the old days, when a company would pump or release some BS information, the CEO’s had to worry about getting dragged in front of some congressional panel and given an anal exam by some elitest…..Johnny Cockran wanna be politican.  Now a days, it’s standard operating proceedure for the government with the assistence of their investment banking wing to fictiously spin everything.
     
    So the other day when my buddy suggested that we should buy GM and sell calls because "they" would never let it drop below the IPO price since that might give the elusion that the GM scam is a scam, he was probably dead right.


  113. Are the markets open Friday?


  114. One lesson learned in 2010 was Listen to The Lloyd. Phil and I had a discussion here about betting on SPY 125 by year end (GS’ "prediction").  That trade worked out quite nicely for me so I’ll be hanging on his every word next year!


  115.  CMG/Amatta – LOL, I would think you would be glad to be done with them.  See I like to short stocks when they are ridiculously overpriced, not when they are just overpriced.  I was gung-ho shorting CMG from $240 up because it was a solid 33% over the $180 line I thought it should have topped out at and I was willing to discuss shorting and rolling for as long as it took at that point.  Now we’re down at $222 and I’d rather see them make another run to $240 first.  Also, the VIX is lower now so short selling calls isn’t as much fun and I don’t like buying puts at the best of times BUT if you want to go short.  I’d sell the 2012 $260 calls for $23 and take the Feb $220/200 bear put spread for $7 and if you make $3 then nice and you can do it again or if you get popped, you can roll to a longer, higher put and sell more, working your way into a a strong short position over time.  I will tell you in advance though, you need conviction to play this!

    Australia/Samz – I wouldn’t bet against a commodity exporter – especially one right near China.  Australia exported $40Bn to China last year (balanced trade) with 22M people and we exported about $70Bn with 310M people and a $226Bn trade deficit.  So you are going to short the Aussie to the Dollar?  No thanks…

    DF/Terra – Not as much as I did at $7.50 but sure, I like them as a not going BK play.  At $8.60 we’d be thrilled to see $15 and make $6.40 so why not just go for the 2013 $7.50/12.50 bull call spread at $1.70 and sell the $7.50 puts for $1.60 for net .10 on the $5 spread and worst case is you own them for net $7.60.  Margin should be about $2.30 to make $5 in 2 years if all goes well.  SVU may be riskier than DF as GAP actually did go BK so I’d stay off that one. 

    NKD/Jrom – They are already down 60 from midnight but if the Yen crosses below 81.5 (now 81.66) then I think playing them below the 10,350 line (with tight stops of course) is worth a toss.  

    CCJ/Rain – They’re kind of like ABX for me – why mess around when you can own the best and biggest?  They are short-term stretched but still a long-term buy so if you are initiating, I’d buy the 2013 $40/55 bull call spread for $5 and sell the Feb $40s for $2.20.  If you have to roll, you have 22 months and $15 of cushion (and of course buy 1/4x more calls if they break $42, and more at $44, etc…) and, if not, once you get the basis down to zero you can use additional sales to buy back the 2013 callers and then to roll your calls lower, etc…  

    By the way, that’s a hedge fund-type trade.  A lot of people have asked Greg about it and we can’t take on very many but if you can manage a trade like that by yourself, you don’t need to have someone else manage your money.  I’m perfectly happy to teach this to anyone who wants to learn – hedge funds are for people who don’t have the time or inclination to manage their own money.  Keep in mind, a lot of people make many millions a year so it pays for them to pay someone else to stare at a computer all day for them while they go out and make money but, for those of us who do have the time to monitor our investments – there is nothing magical that will go on in a hedge fund that I won’t be showing you how to do here day after day…

    I like the debt funnel JRW.  It’s funny how it’s so out of control that it’s better just not to think about it…

    VLO/Dflam – Just a new high and over 50% up from our entry point ($16.50).  That is about where I lose interest although it’s still a good long-term stock and a good inflation hedge.  As to rolling – always on a play you intend to stick with.  

    MoMo/Rain – Keep in mind that Cap is an aggressive trader.  Those of us who have PM accounts and a lot of experience and patience enjoy putting our foot down on value when a stock gets particularly silly (for a quick tutorial on the difference between not very silly and very silly, click here).  If I think POT is getting very silly at $150, for example, then I may want to sell the Jan $150s for $6.75 and the ordinary margin on that is net $30 and PM not much better as it’s on the money.  So short-term, I’m looking at making a quick $675 on $3,000 – that’s 20% so fine for a month and not too bad for 2 if I have to roll to the Feb $160 calls (now $5.50).  So I look at that and I look up to the June $180 calls (now $6) and with PM that is just $900 so my % is improving even as my time stretches.  Even in ordinary margin TOS lists the June $180 short calls at just $1,500K net.  That’s my decision process in shorting POT at $150 – I don’t really care if they go to $150 or $160 or even $170, as long as they don’t go 30% higher by June.  If you don’t think 3 or 4 moves ahead then every starting move you make is going to be scary…. 

    Good examples Cap!  

    GM/Exec – Maybe but, to me, it’s still not a reason to tie up cash in a company I don’t believe in long-term. 

    Friday/Grant – Yep, full session.  That’s going to be interesting, to say the least.

    SPY/Mr M – Yes we are up 2.5 points on SPY since 11/8 but I think you may be glossing over the fact that we dropped 6 points pretty much for the entire next week after we had that conversation.  Don’t delude yourself that it is some sure thing to listen to Blankfien – had they blown the 50 dma on that drop, there would be no way we’re hitting that goal now.  I did however pick the FAS Jan $23.33/27 bull call spread paired with the short $21.67 puts at $1.50 for net .40 on that spread in the comment just above it so would Lloyd or me have made you more money if you listened to both?


  116. Grant / open — yes.


  117. The channel on IWM is now between 78.88 and 79.00; a break in either direction should be a nice move !!  Still no position on my part 8-)


  118. Phil / Income Trader:  Just noticed that new tab and the two initial posts. Nice. That should be a great addition to PSW.


  119. hi Phil-- sorry I am confuse, I have short Feb RUT 770, you want me to roll to Jan 2011 800 or Jan 2012 800 and sell jan 2011 put to cover if RUT gover 795 right?


  120. Phil – touché, not comparing your advice to Lloyd’s, just making light of the market rigging. I was looking for a fun Hail Mary spread for EOY and I can’t sell naked in my IRA so the 123/125 SPY calendar was a good fire-and-forget bet.


  121.  JRW. IWM broke the 78.88 


  122. Mucho Gracias JRW! Made a quick $50 bucks by selling TF right when it hit 78.87.


  123. Justice Dept making comments on derivatives late day
     
    Talk is cheap though


  124.  Phil, re: Income Trader- just looked at the first articles- interesting stuff. I left a comment over there-perhaps you will follow up- cannot read the posted screen shots.


  125.  VLO … that’s some move


  126. Phil / CCJ — I’d love to learn the strategy you’re describing and don’t see why I wouldn’t be able to manage it myself. So you’ve bought a $15 spread for $5 which gives you a potential 200% return as CCJ moves up. You also sell the Feb 40′s for $2.20 to reduce your cost/risk if CCJ doesn’t rise above $42.20. Rinse and repeat…  I think I understand that much.
     
    I not clear on how the buying 1/4x every $2 increase fits in though. Is the $2 significant and are the calls you’re buying ATM?
     
    The last part, when your rolling your callers down (after you’re at zero cost and bought back the short side of the bull spread, and now have free calls), aren’t you essentially entering into in a bear call spread? Is the idea to keep rolling the longs down using the short premium in order to force the longs ITM?
     
    Gotta run (I’ll check back later or in the morning) but you’ve piqued my interest and I’ll be looking forward to an answer. Thanks Phil!


  127. An after-hours question — I’m looking for help with asset management, very broadly defined -- that is, someone with real insight and intelligence on everything from real estate to international taxation issues to equities to life insurance to options, and who would be able to provide holistic advice across all sorts of asset classes. As context, I’m a former securities analyst and hedge fund manager, so I have a decent handle on the world of finance. But I know that there’s a whole lot that I don’t know about personal finance, and I know that I don’t have the time or inclination to figure out the intricacies of what I don’t know. I’m not interested in a joker who’s looking to dump some sort of high-commission crap on me; or (not to sound cynical, but anyway) a shyster who thinks that I’ll be a buyer of his newly minted MBA/CFA/CFP-speak; or, really, someone who knows less than I know.
    I’m guessing that these sorts of financial advisors exist, but I wouldn’t know where to look — and I’d detest the hit-or-miss (primarily miss, I’m thinking) process of finding someone good. And what better venue to query than PSW? Any leads/ideas much appreciated; offline at kmailings at gmail might be best. Many thanks in advance.


  128. China Hopes To Double Value Of Yuan to Dollar Over Ten Years


  129. JR,
     
    I like that Tom’s Shell sign. 
     
    If the gas prices keep creaping up, we may get that double dip.  Wasn’t it the gas prices that triggered the last big sell off?


  130.  Income Trader/Never – Yeah, I like his stuff a lot.  Very nice system.  We have a few new people starting in Jan that will be available for comments as well so feel free to chat with them!   I was just on the phone with Scott (Sabrient) and he’s got a great app version of his gold-level membership we’ll be able to play with once Matt works out the bugs – great data well presented.  Scott and his team will also be available for chat starting in January.  

    RUT/Gucci – I’m suggesting the naked Jan 2011 $800s as they are pure premium and expire in 3 weeks.  Once you burn that off you can sell something else.  Yes to selling the Jan 2011 $800 puts as a momentum play over the line.  

    IRA/Mr M – I still liked the FAS better.  I see logical reasons XLF should be higher (was $14.50 at the time) but not so much the S&P.  

    Justice/Mike – What they are saying (because they work for Obama and not the banks) is that the rules are a joke and will do nothing to curtail abuses.  That’s totally true but they have no power to do anything about it.  In other words, business as usual – a few unenforceable regulations are passed and the Banksters continue to rape and pillage our nation at will.  

    Screen shots/Pstas – Just tell them they need to make the images larger.  670 is the width I use when posting but they can go bigger and they will just bleed over the edges.  

    CCJ/Rain – The $2 is just an approximation but it’s saying that you will need to buy more long calls to cover the eventual roll of callers you sell who go in the money and buying 25% more per $2 should end you up with 2x on a $8 move up and then you can roll the callers to 2x a higher strike.  When you are successful with the sold put, then you can invest a little bit of the money into improving your long position.  So if you have the CCJ 2013 $40/55 BCS and your premise is you want to be in CCJ long-term, then once you have a free trade you can take your next $2 and roll the $40s down to the $35s and then the $30s etc.  Keep paying $2 to roll down $5 and you’ll have a nice business.  Of course, once you get to $30, the next roll is more but that’s when you stop and enjoy whatever is left, maybe sell a few more calls when you think things look toppy, etc…  This is like planning a chess match – it all sounds good until the other guy makes a move you don’t expect – then you need a new plan.  The idea is to have a general plan with expected parameters and just deal with anything that deviates from your plan along the way.  

    Asset management/Kimisk – So many to choose from, so few who are actually worth a damn….  8)

    China/Mike – Interesting.   So China wants the goods they export to be 100% more expensive in 10 years after adjusting for inflation?  I’ll be curious to see how that plays out!  More likely, it’s an attempt to throw something else at the dollar to get it to fail the 80 line because they are having a hell of a time keeping the markets up even after driving it down 2.5% this month.  

    Gas/Exec – Among other things.  Don’t forget that the market went up as oil topped $100 because Bush dumped a $168Bn stimulus right in people’s wallets over 3 months – then we had a MASSIVE collapse.  It was a last-gasp bit of fakery to allow the Gang of 12 to sell off all their overpriced stocks and commodity to the bag-holders who rushed into the market based on a fantasy that government stimulus would solve everything and Chinese demand would keep driving things higher while the major banks were too big to fail.  Gosh, it’s hard to believe people ever believed that kind of crap, isn’t it?  8)


  131. Phil, 
    I have been burned by the bearish stance during the last month or so… I am trying to get some of the upside hedges in. I like the SSO which is still playable (actually a little better entry on the 30/42 bullish spread (Net 9.25 versus 10.40). On the put side, I assume it was the Jan 11 SPX 1185? (which is now only 3.4), I would have to sell instead the Feb which is $11.00 that would put me on the play at net credit of $1.75. My question is, what would I be put if the SPX goes below the 1185? It is not the SPY you are buying… as it is the actual index… so what is the put to risk? 
    Thanks


  132. Phil,
    I bought PFE last summer @ 14.75 and sold the 2012 $12.50 puts and calls for nearly $5. The puts have only $0.43 left and the calls are $5.20. The 2013 calls are the same price as the 2012′s, so I don’t see anything I can do with them at this point. I am thinking of rolling the 12.50 puts up to maybe the 2012 17.50′s for $2.00 since I would only gain $0.50 by going with the 2013 12.50′s.  Obviously this was originally a conservative trade on a dividend payer, but any other suggestions?


  133. Everyone
    READ ILENE’s lastest post on EUROPE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


  134. Europe failing, dominos anyone?


  135. Japan is down 1.25% other indexes are down, what next?


  136.  From the Europe post …. beware TBT?
     
    "On the one hand, Treasury bond yields ought to rise … On the other hand, since the Federal Reserve is the buyer of 75% of the debt the Treasury Department issues, the Fed ought to be able to squeeze yields whichever way it wants to—which is exactly what it seems to have done: During 2010, the 10-year Treasury bond yield fluctuated between 2.41% (in October) and 4.01% (in April); today as I write it’s at 3.50% even. (Source is here.)

    "This would seem to prove that the Fed has the yield curve well in hand—therefore, if this really is the case, then the Treasury bond market is useless as a sign of anything. Just like the equities market, Treasuries are a rigged game that signify nothing."
     
    http://gonzalolira.blogspot.com/2010/12/lull-before-storm-whats-coming-in-2011.html


  137.  Are the 
    Spanish sovereign bond spreads a good indicator of when the trouble come? Where can I track them?


  138.  Good morning!

    Busy data day today:

    Tursday’s economic calendar:
    8:30 Initial Jobless Claims
    9:45 Chicago PMI
    10:00 Pending Home Sales
    10:30 EIA Natural Gas Inventory
    11:00 KC Fed Manufacturing
    11:00 EIA Petroleum Inventories
    3:00 PM USDA Ag. Prices
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet 

    Finally getting a dip on oil, hitting $90.60 in pre-markets but we’ll see if it sticks.  Oil inventories not until 11 and I’m out of here at 12:30 for a meeting, probably won’t be back before the close.

    SPX/Amatta – I like the above flip to AAPL 2013 $175 short puts ($8) better now as a long-term play.  For the short-term, on the SPX, yes you are "buying" the S&P at 1,185 so you lose every penny that the S&P falls below that strike.  If the S&P falls 125 points (10%) to 1,135 then those short puts will cost you $50 each!  Of course they can be rolled but they are very risky plays as a sharp move in the S&P down can run your margin up very fast.  Like the VIX, you end up "owning" nothing, it’s a bet on the strike with a cash settlement.  

    PFE/RJ – Well you are in for net (about) $9.75/11.13 and PFE is at $17.60 and the put/call combo is $5.60 for net $12 so you are up 23% with .50 (5%) more to gain.  That risk/reward makes no sense for another year, right?   You can spend $1.60 to roll the puts and calls up to the $15s and that ups your potential remaining gain to about 15% so a bit more worthwhile but it also increases your risk a bit.  Since I think you like PFE, how about rolling the callers to 2x the $15 calls at $3.05 (+$1) buying back the puts (-.44) and buying another round of stock (-$17.60).  That’s net $17.04 out of pocket and then you are in the covered $15s at net $13.39 so you are making $3.22 to the upside on the same overall margin you were looking for $2.75 on but now you get 2x the dividends, which is another 4.6%.  IF PFE takes a nice dip, THEN you can sell another round of puts but this play is good for 18% on 2x vs 23% on 1x and you’ve still got nice coverage and the flexibility to sell another $2 put (1x) to add another 8% down the road.  

    Europe/Shadow – Scary place!

    Speaking of scary places – Israel confirms find of 16 Trillion cubic feet of Nat Gas!  Possibly good for 1.7Bn barrels of oil and 122Tcf of nat gas down the road – about 1/2 of the US total reserves.  This sucks actually because now it is in the financial interests of Israel and their neighbors to ratchet up the tension any time the price of oil takes a dip…

    Meanwhile, how’s that peak oil theory coming along with Israel potentially coming on-line with 4Mbd down the road?  

    TBT/JVest – Yes, but the underlying assumption is that everyone is OK with the Fed buying over $1Tn of TBills a year and, if they scare away the other bidders, then $1.5Tn.  Just buying TBills doesn’t keep rates down, if people don’t want the dollar, then corporations and municipalities will have to pay more and banks will need more because they are not idiots that lend $200K for 30 years at 5% when inflation is 7% no matter what the Fed gives them money for so there are many, many ways this whole thing can fly apart at the seams…

    Spanish bonds/Yshen – I’d be interested in a good tracker on those.  They are a nice leading indicator for the next potential round of the EU crisis.  


  139. Does anyone know why some ETF’s not offer March options.  Example TZA


  140. lol Phil, that Ratio Oil Exploration in Israel reminds me of Canadian Bre-X.  They too had a huge gold find in Indonesia.  Stock went from pennies to above $300.  Ended in pennies though….


  141. Phil:
    Can you critique this move: I own (in IRA) RIG at $57.05 covered with the $60 Jan’11 at $5.88. I want to keep RIG. Considering selling the stock and buying the Jan 2012 $65 at $10.05 calls and rolling the old callers to Jan $72.5 at $6.11.  This way I have my original investment out for something else and the profit in a pretty safe play that can make an additional $3.94 on the spread. Thank you.


  142.  Phil, 
    Anything to do with the USO’s from the 1050 now that they are back from the dead?
    Thanks


  143. dclark41/RIG
    I don’t think your broker will allow a vertical spread in an IRA account. If they do,let me know