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Which Way Wednesday – Happy Crashiversary!

Can you believe it was just 100% ago that the market collapsed?

I talked about the blood in the streets and all the fun we had in Monday's post.  The chart shows the S&P, DAX and Hang Seng all up almost exactly 100% (1,333 or bust is still our goal on the S&P) with the FTSE dragging along at 70%, the Nikkei up just 50% (although not bad for a country that is "mired in deflation") and the Shanghai isn't even trying with a 40% gain in 24 months.  The star of our show is the Bombay Sensex, which is up 125% since March 9th of 2009 but it doesn't feel like it as they were up about 160% in November.  

The Hang Seng has also pulled back about 20% since November but everyone else is catching up with even the Shangai bouncing while the Hang Seng consolidates.  Our 100% lines on the US indexes are 12,938 on the Dow, 1,333 on the S&P, 2,530 on the Nasdaq, 8,362 on the NYSE and 684 on the Russell.  The Russell is our leader, up 140% in two years (which is REALLY good for the RUT $390 Index calls we bought back on crash day for just $10!) and the Nasdaq is up 119% off their 1,265 low but we liked buying AMZN at $62.50 better than risking the basket of the index at the time and that too has worked out well with AMZN now $167 (up 167% coincidentally).  

We were already in AAPL and GOOG etc – the usual suspects as we had gone bullish the week before the crash in March of 2009 – all the crash did was flash a big SALE sign at us while we were already at the mall with cash to spend.  Most of my picks on that actual day were financials:  SKF shorts, FAS longs, XLF long, RKH long, BAC long (at $3.14!) and then some staples like GE, DIS, TGT and HOV (at 0.65!) along with the Russell, which was our "index most likely to succeed" selection.

So you can't blame us for hoping we have another nice correction – especially with values currently so stretched.  We don't want to be bearish but, when there's nothing to buy you either stay in cash or get a little short and, as much as we liked AMZN at $62.50, we have to question their true value at $167.  It's not just the price – we still like HOV at $3.87 and that's up 495% from our entry, although now, of course, we hedge…  Now we're in a market that requires a lot of hard work and due diligence to build a strong virtual portfolio – but you wouldn't know it the way others are buying stocks "hand over fist" as if it's March 9th, 2009 and the market just went on sale at 50% off, rather than March 9th, 2011 when up 100% in two years is considered a "laggard."  

As I often say – I'm not bullish or bearish – just rangeish.  One of the major ranges we have been watching (as is often discussed in Stock World Weekly) is the Dollar, as our Global Reserve Currency bangs up and down in it's channel, trying to retake the LOWS we achieved in 2007-2008, when our worthless currency (72 at the time) made us think our homes, stocks and commodities were much more valuable than they really were, which was an excellent fantasy until, of course, people actually tried to sell all the over-priced crap they had accumulated and then it all hit the fan very rapidly.  

Thank goodness we all learn from our mistakes, right?  I was being interviewed yesterday and was reminded that I was early with my May call that the World was hurtling into violent revolutions (see my musical photo essay) but it is kind of my job to be ahead of the curve and the fact of the matter is that I called this way back in December of 2009, when I wrote my "2010 Outlook – A Tale of Two Economies" in which I said:  

2010 is going to be an interesting year and it seems the majority of investors believe that we can keep living on this harshly divided planet and keep squeezing productivity gains out of the working masses even as we continue to hold wages down and drive the cost of their basic necessities higher. Even the slave owners had to provide food, clothing, shelter and medical care to their workers although I suppose we can feel good about the fact that slave owners outlawed education while we simply provide a very poor quality one – not enough for true upward mobility but certainly enough to hammer home the message that all they need is a dollar and that great American dream.

As long as we can keep the peasants from revolting we can keep partying like it’s 1999 but I do have reservations (obviously) and we will continue to exercise a degree of caution in our investing but history has taught us that the rich can indeed get richer and we have plenty of good places to focus our bullish attention as we begin this centrury’s second decade.

At the end of 2010 – nothing had changed and I told Members to just refer to the prior outlook.  What we did instead was add our "Secret Santa's Inflation Hedges for 2011" and our "Breakout Defense Part Deux – 5 More Trades that Make 500% in a Rising Market," which was the sequel to early December's "Breakout Defense – 5,000% in 5 Trades or Less," which we had to close out as we hit goal early and didn't want to risk overexposing our upside.  We have been patiently waiting to see if it's time to take another bullish round as I like to try to put up one Virtual Portfolio per month and the last set of Breakout Defense trades were from Feb 5th so tick, tick, tick but I also know not to force a decision – we need to let the market tell us which way it's going and then make our plays.  

Right now, it's ALL about the dollar and how it performs at it's current inflection point.  We are expecting that the situation in Europe will not stabilize and that the Mid-East will, which should drive money out of commodities, out of the Euro and into the dollar giving us the leg up that we're projecting in this long-range chart of the dollar.  Keep in mind this is MONTHLY so we do expect a the rise to be short-term bearish for the markets but then we like the markets again as a strong dollar is effectively giving a raise to all the workers who get paid in dollars and it even lowers the cost of outsourced labor so even our Corporate Masters won't be too upset.  


If the Dollar does not head higher at this point then doom I say — DOOM!!!  We had a major data review in last night's Member Chat covering a very wide range of socio-economic issues but I think the most telling data is the state of income spending by men, women and families – all of which shows that ALL working Americans below the top 20% are net borrowers and have been squeezed to their absolute limits in this latest round of commodity inflation.  As I pointed out earlier in the week – we have 42M people on food stamps, we have 23% of all homeowners upside-down on their mortgages – trapped in their homes, whether they can afford them or not and unless we do something for them (not with this Congress!) or unless a miracle occurs (the Administration's current plan) then every new inflationary dollar that is being charged to the consumers in one category will require an equal dollar sacrifice made in another category:


Note on this chart that the "average" family is in the top 20% (as the top 1% drags the bottom 80% up that high!) with a $63,091 pre-tax income yet they spend $49,638 a year.  Unless taxes are less than $13,493 (21.3%), this family is operating in the red!  If you raise the price of gas (and this was 2009) from $2,400 a year to $3,600 a year - where does that $1,200 come from?  Clearly no one is getting a raise, right?  Dad is lucky to have a first job – not to many second jobs to fill in the gap so cuts must be made.  Maybe you can cut that $1,200 but what about the extra $2,000 in food?  The additional $600 in health care?  The additional $1,200 in property taxes, the higher utility bills?  The American consumer is dying the death of 1,000 cuts yet the only thing I see on CNBC is more and more speculators trying to figure out where they can stick the next knife.  Beware the ides of March, Mr. Market – it's going to be rough next week!  

As I said to Members, it is very hard for us to keep things in perspective as most of us have had $500 dinners while the average American family has just $500 a month for food.  At the risk of being considered a Commie Liberal whatever, I will point out that the chart on the left is very disturbing as it shows 400 Americans having as much accumulated wealth as 160M other Americans.  That's a ratio of 400,000 to one where one day of effort by one of the Masters of America equals 1,000 years worth of labor from the bottom 50%.  

I'm not even going to bother discussing the merits of a system that can so grossly distorts the distribution of capital among the people because I know that it tends to fall on deaf (and then angry Conservative) ears but I will say that this is how revolutions begin – when those 160M people realize that to top 0.0001% are, in fact, only 400 people and, even if they aren't successful in storming the palace gates to redistribute the wealth by force – at least they will create the need for hundreds of thousands of guard jobs as we reach steady state of tension between the haves and the have nots.  

After all, who are the have nots in America?  It's the entire bottom 90%.  Forget the fact that 400 people own more of the wealth than the bottom 50% – those guys are just lazy, losers who should have tried harder, right?  They are probably some race you don't like, who believe things you don't like and vote for people you don't like and take up space in your otherwise very nice World – so screw those uneducated, immigrant bastards right.  But what about the 40% above them.  Are those "your kind of people"?  Apparently not because the bottom 90% of the people only have 28.5% of the net worth of this Great Nation, which was founded on principals of equality or some such nonsense.  

As you can see from this chart, the top 1% own 33.8% of the wealth and they have, so far, been generous enough to leave 37.3% to the next 9% (because you do still have to pay to get good help) but that only leaves 28.5% of the Nation's wealth to be distributed among the remaining 270M people which they will then use to buy food, shelter, fuel and clothing for their families.  Only Egypt and China have a greater degree of Wealth Disparity in the developed World than the United States of America and it's time our leaders got serious and make a choice between repression of the masses now or violent revolution later – $105 oil may be the tipping point that puts those "average" families over the edge in 2011.  

While we applaud Scott Walker in Wisconsin for showing us that repression can be effective in Middle America, we do worry about how it will play out on a larger scale with 40% of the US population now not working, up from 34% in 2001.  Even some of the people who are working no longer have health insurance as the number of workers covered by private health insurance has fallen from 72M in 1979 to just 50M last year while state and local coverage has remained flat.  So, even if the population didn't grow by 80M people in the past 30 years, that would still be 22M people dropping off the health rolls.  I'm sure that's OK though – they can just "tough it out" for the good of the country that takes such good care of them.  Here's a fun game – figure out what single women of various income groups should cut in order to afford this year's average 30% increase in health care costs:


It's kind of like jenga – pull out one item and try not to have the whole thing collapse on you!  The markets are kind of like that right now – a very large house of cards that is built on the premise that these women, and these men and the families above, are going to keep driving to the gas station and paying $60 a tank and keep coming up with more and more money for food and clothing and pay the extra taxes or fees to offset the cuts in Government services and accept lower wages with less benefits and give up some of their retirement and, while they're at it, hopefully stop off at Best Buy to pick up that new IPod or flat-screen TV so we can get the message out to them to vote Republican in November.  

Good luck with all that!  


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  1. Good morning! PP for today…and for those not on the left coast, the weather is sunny

    More JnJ problems….

    Johnson & Johnson’s Cordis unit gets an FDA warning letter for its cardiac stent-making operation in Puerto Rico. The bad news continues to mount for Johnson & Johnson’s (NYSE:JNJ) cardiac stent-making arm Cordis Corp., which received an FDA warning letter about a manufacturing facility in Puerto Rico. In the Feb. 16 letter, FDA officials flagged Cordis for not following uniform design specifications …

  2. Friday could be telling for the dollar as the European leaders are supposed to get together and decide on what they will do to help the PIGS… A final decision is not expected then, but the tone of the report and specifically the French and German reaction could have a strong influence on the euro. 

  3.  Phil – what do you think about selling the weekly 21 puts on INTC or the Mar 21 puts as part of the $25kp INTC trade?

  4.  Phil / VLO
    what do you think about them at this level? what is chances to slide back to $20 aria (have lots of puts sold)?

  5. CYTX/tar – not real excited about anything that has to do with stem cells.  Still too much of a risk for me.

  6. JP Morgan: Apple’s iPad 2 could cause ‘bubble burst’ for rival tablets
    By Josh Ong
    Published: 01:40 AM EST

    According to one Wall Street analyst, Apple’s soon-to-be-released iPad 2 could burst a bubble for competitors who are hoping to capitalize on the growing tablet market but remain unable to catch up.

    Analyst Mark Moskowitz of J.P. Morgan Research warned investors early Wednesday that build plans for tablet shipments from Apple’s rivals may be too high, presenting "increasing risk of a bubble burst" in the second half of 2011.

    "In our view, the technical and form factor improvements of the iPad 2 stand to make it tougher for the first generation of competitive offerings to play catch-up, meaning actual shipments could fall well short of plan," Moskowitz wrote.

    Using discounted build plan estimates to project tablet shipments for the year, the analyst claims that tablet makers will build approximately 65.1 million tablets in 2011. When compared against J.P. Morgan’s estimates of 47.9 million tablets sold this year, companies could find themselves with as much as 51 percent oversupply in a worst case scenario.

    Apple is expected to maintain the lion’s share of the tablet market. Moskowitz estimates that Apple could see nearly 100 percent sales growth year over year, resulting in more than 29 million iPads sold worldwide in 2011.

    According to Moskowitz, component suppliers could stand the most to lose from a bubble burst. "Based on our research inputs, tablet makers eager to emulate Apple’s meteoric start are trying to secure components with inflated build plans," Moskowitz noted. "Of note, glass displays, processors, and, to a lesser extent, NAND Flash are the components that could be most at risk."

    Moskowitz has a "favorable view of Apple’s products and operating model," but acknowledges that "Apple is not for everyone." However, holdouts hoping for an alternative to Apple’s iPad may be "underwhelmed" by rival offerings.

    "Aside from Motorola’s Xoom and HP’s TouchPad (which does not have a price tag yet), the competitive offerings appear to be light on attraction, in our view," said Moskowitz.

    J.P. Morgan maintains an Overweight rating on Apple with a price target of $450.

    Initial Wall Street response to the unveiling of the iPad 2 last week has been favorable. In general, analysts were impressed by what were seen as "evolutionary" upgrades to the device and the thinner and lighter form factor. At the time, Moskowitz admitted that his firm’s forecast of Apple holding 68 percent market share in 2011 "may be conservative" in light of the iPad 2.

  7. Took out my AAPL Mar 11 $355 callers in the initial splash down on the open, looking to recover later Made 40% Profit from yesterday afternoon!

  8. maybe the wrong thing to do but i bought back the short SAM calls for .20

  9. Hello Phil, How would you recommend playing FNSR, JDSU and their friends (buy, short, stay away)?

  10. VLO / Tcha – Check out the correlation between the crack spread, VLO and TSO.
    Right now, the crack spread is around 20 which is at least  50% higher than average. As it reverses to normal, we should expect some weakness in both VLO and TSO for example. In addition, their input cost is going higher. There are other factors such as diesel shortages in other part of the world, but the correlation is there and will have an impact.

  11. Good morning!

    I hope everyone has their disaster hedges because I am starting to lean that way again.  Trade of the day would be our beloved DIA March $120.75 puts, now .90 and we also have another chance to short oil futures at that $105 line (very tight stops over the line) and I still like USO April puts but now the $40 puts are $1.03 and looking like the best play so yes to rolling to them and doubling down if you are in the old trade.  

    In the $25KP, I like 10 of those for $1,030 as a new entry.  

    Also in the $25KP, we should be fully covered on FAS with 10 March $30 calls (now $2.15) and 10 March $31 calls (now $1.45).

    We had earnings plays in the $25KP on FMCN and the 4 April $28 calls are now $2.35 ($940) and the 5 short March $27 calls are $2.30 ($1,150) so down a little bit but we’ll hang tight as  the market is weak.  

    We also had a $25KP play on SAM and the 3 June $100 calls are still $2 ($600) while the 3 short March $95 calls are .20 ($60) so let’s just take that $540 and run as that was a $360 spread so we’re up $180 (50%) and that’s good enough for a day trade and we’ll just play another one later.  

    Levels all the same but today we’re trying not to blow them.   Gotta play it by ear.

    Be careful out there!  

  12. QQQQ at S1 already. Bounce or go through…. 

  13. Pharm – hope you get to enjoy some of that sun (finally);
    The PP chart is different this morning. What’s up wit dat?

  14. Phil,
    Thoughts on fnsr?? Is it time to dip a toe in? I thought someone had very favorable opinion on fnsr couple of weeks ago.

  15. The games they play with the dollar to move this market is unreal.

  16. harip
    It was Rein. It was very compelling, but, obviously, not compelling enough!

  17. Fosters, MolsonCoors TAP and SAM all missed.  Whats happening to the beer market, one of my favorite beverages?

  18. Shadowtrader posted a different set of PPs for some reason.


    Anyone get the fill on FMCN?  SAM is gonna be a wait and see, cause the fills are not happening at a credit.

  19. SAM/Phil – missed the June 100 calls at 2 bucks, they’re now around 1.25 so I’ll stay in the position for a while.

  20. snow, the spread on the open was $1.10-2.30, so not sure that $2 would fill either way.

  21. dclark41
    Have you got a fill yet on putter roll? I am offering .55 to roll to the 2013 35p
    Looks like we will have to wait to get any where near the numbers Phil stated for the sales of c&p’s

  22. big buy in AAPL, look at the vol spike. misprint?

  23. OPK – Nice.  Now we are gonna need to DD in here, but luckily we got near the offering..  Opko Health priced a 27 mln share common stock offering at $3.75/share

  24. Pharm -
    FMCN – I just filled a few minutes ago, not sure I want them though with the stock at 30.49

  25. JNJ/Pharm – What a catastrophe those guys are becoming!  

    Don’t blame the Dollar for this rally, it’s stuck under 77 at the moment.  

    PIGS/StJ – Meeting is over the weekend but then there’s another one on the 25th or something so very easy for them to not do anything this weekend but agree to bring it up at the next meeting.  

    INTC/Kmaus – Was I going to sell $21 puts?  Not worth the risk at the moment to tie up all that margin.  We went very bearish on FAS instead and we’ll see how that goes as we sold $4K of calls so if the market tanks, we’ll be happy enough and if it pops – then we’ll be glad we have our longs.  

    VLO/Tcha – Way too high but I like them too much to short them.  TSO is also high at $23.39 and they suck.  An April $24/22 bear put spread is .94 and .66 in the money so not a bad way to play for a double.  

    Gross/Abel – Now that’s interesting!  

    IPad/High – Yes, I did think the projections for industry sales were running a bit hot and the SOX are down another 2% today, dragging the Nasdaq (down 0.62%) but not so much as AAPL is also down just 0.6% so hard to call on that one.  

    SAM/Morx – Exactly the right call – nice job! 

    Overall, I’m not big on jumping under the falling knives at the moment – reviewing last night’s data made me decide we are pretty much feasting on a pie crust of a market that has nothing inside but pain for the bottom 90% of society and, if that crust breaks, even those of us in the top 10% are going to get sucked down with the masses.  

    FNSR/Alik, Harip – Rein liked them last month and we looked at the Sept $39/55 bull call spread with the short $39 puts for net $1 and I said at the time that the worst case is you own them for net $40 so let’s look at that:  Now the $39/55 bull call spread is $1 and the $39 puts are $13.50 but they can be rolled out to the 2013 $35 puts even and the $35 calls are fetching $6 so that drops the net to $29 with the stock at $26 so not terrible and a move over $30 needs to be covered.   That’s not bad for a worst case scenario, right?  Now, as a new entry, you can sell 2012 $25 puts for $4.60 and pick up the 2013 $35 calls for $6 and you’re in for net $1.40 and then you wait.  

    Dollar/Exec – Not so bad today.  How could it be with Europe such a mess?  Still, under 77 not making Japan happy.  

    Beer/Stock – Turns out you don’t NEED it – especially not the fancy stuff.  

    SAM/$25KP, Pharm, Snow – Then take out the caller for .20 and wait.  Lots of time on the longs. 

  26. I didn’t include the FMCN yesterday, b’c I did not get the fill, and I wasn’t sure anyone else did either when I asked.  That being said, I will put it in the spreadsheet.

  27. Phil I need some clarification, reg your FAS trades.  Your opening comment is "We should be fully covered on FAS with 10 March 30 calls and 10 March 31 calls."  To me that sounds like an instruction to buy calls. Yet when I look at Pharm’s spread sheet, the March 7 and 8 instructions are "Sell to open."  Please clarfiy for me what is going on here…

  28. Holy cow!  I made a stupid mistake yesterday.  I wanted to sell CHK $17.50 2013 puts.  The IB platform must have defaulted to the front month ATM option.  I didn’t look carefully and submitted the order.  So, I actually sold CHK $33 March puts for $0.99.  But I am pleasantly surprised that CHK is now up 3%.
    Do you think I should sit tight?  Or take the money and run?

  29. QQQQ at pivot now, bounced right off S1 at 9:45. AAPL is not helping right now…. 

  30.  Phil: Medium term TLT
    I have started scaling into buying Jan 13 TLT puts (94) sellling near term 89′s.  As I collect premium when near terms decay does it make more sense to consider that premium as reduction in cost of the longs or to use that premium gained to roll the longs up like a mattress play?  TIA

  31. Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    9:30 Hearing: FY’2010 Government Finances
    10:00 Wholesale Trade
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $21B, 10-Year Note Auction
    1:30 PM Hearing: Treasury Budget (Geithner)

    At the open: Dow -0.06% to 12207. S&P -0.17% to 1320. Nasdaq -0.37% to 2756.
    Treasurys: 30-year +0.18%. 10-yr +0.21%. 5-yr +0.16%.
    Commodities: Crude +0.48% to $105.52. Gold +0.53% to $1434.70.
    Currencies: Euro +0.06% vs. dollar. Yen +0.01%. Pound +0.14%.

    10:00 AM On the hour: Dow -0.26%. 10-yr +0.21%. Euro flat vs. dollar. Crude +0.23% to $105.26. Gold +0.27% to $1431.10. 

    MBA Mortgage Applications: +15.5% vs. -6.5% last week. Thirty-year fixed mortgage rate increased to 4.93% from 4.84%. - These are starting to just be random numbers

    Jan. Wholesale Trade (.pdf): Inventories +1.1% to $436.9B vs. consensus of +0.9%, +1.3% (revised from +1%) in Dec. Sales +3.4% to $387B. Inventory-to-sales ratio decreased to 1.13 from 1.16 in Dec. 

    EIA Petroleum Inventories: Crude +2.52M vs. consensus of +0.6M. Gasoline -5.5M vs. consensus of -1.5M. Distillates -3.97M vs. consensus of -1.2M. Futures +0.3% to $105.3.

    The two-year bull market is one of the most powerful in U.S. history. That’s not news, but Mark Hulbert explains why it matters: "To the extent this bull market continues into its third year of life, it will be venturing even further than it already has beyond what many of the historical norms would suggest we can rightfully expect." 

    Some of the scenarios – such as falls in stock prices and GDP – for the EU’s new stress tests are actually more benign than last year’s failed version. "It was a joke last time, why is it not going to be a fudge this time," says an analyst. 

    Portuguese bond yields jump to a record as it sells €1B in 2 year notes. The paper was moved, but at a rate of nearly 6%, compared to 4.1% at last September’s sale. The euro sinks on the news, but rebounds sharply, +0.2% at $1.3934. Stoxx 50 +0.6%

    Greek unemployment jumps to 14.8% in December from 13.9% in November, and already above the peak estimated by the government for 2011. Greek shares are slightly higher today after plummeting 3.8% yesterday as Moody’s downgraded the banks. Premarket: NBG +1.7%

    Thailand raises its benchmark interest rate 25 basis points to 2.5%. It’s the 5th hike since June as the central bank tries to get ahead of what are currently benign inflation readings. Shares retreat, -1.6%. Thai ETFs THD, TTF are flat YTD. 

    Like Ben Bernanke’s 60 Minutes appearance, critics shake their head at BOJ Gov. Shirakawa’s what me worry WSJ interview. "If the BOJ does not feel any obligation to be accountable … it would not surprise us if it loses its independence," say two university professors. 

    Oil is down slightly this morning but its recent run-up is far from over. Saudi Arabia, OPEC’s largest producer, has a ‘Day of Rage’ planned for Friday, and SocGen says in a ‘worst-case scenario,’ serious Saudi unrest could send crude above $200/barrel. (see also)

    Perhaps talking his book, Citi’s William Buiter dismisses concerns that an oil shock is on the way that could crimp this "golden period" of global growth. "Oil-producing states … want to sell oil … don’t extrapolate from political unrest to supply interruptions." 

    Peking University economist Li Yining thinks China ought to buy the dip when it comes to gold. Not just any adviser, many of Li’s former students are top government officials, but the head of China’s FX reserves believes the gold market is too small to handle government purchases. 

    Finisar (FNSR) -37% premarket after saying yesterday that orders have fallen dramatically in China as part of an ‘industry wide phenomenon.’ With no end in sight, FNSR expects to miss FQ4 forecasts. Rivals’ shares suffering too: JDSU -12.5%, CIEN -5%, OCLR -12.2%. (FNSR Q3 earningsChina Dangdang (DANG): Q4 EPS of $0.03 beats by $0.01. Revenue of $107.7M (+58.7% Y/Y) beats by $1.3M. Shares -2% premarket. 

    American Eagle Outfitters (AEO): Q4 EPS of $0.44 beats by $0.01. Revenue of $916M (-4.2% Y/Y) misses by $4.5M. Shares +1.4% premarket. (PR)

    Dynegy (DYN) shareholders are probably kicking themselves for rejecting Icahn’s buyout offer: In an SEC filing late yesterday, Dynegy (DYN) said it faces ‘likely covenant non-compliance,’ is trying to amend its credit facility and may have to file for bankruptcy. This follows a larger-than-expected Q4 loss. Shares -6%

  32.  Nice, cwan; Wish I had made the same mistake, now I’m faced with the same question.

  33. DIA 120.75 puts – do you have an on/off line?

  34. davew
    No I did not. Not sure what I am doing at this point. Not thrilled about what I read from the conference call and I don’t like this market. Even though, under normal circumstances, I think this is a very positive sector to be invested in there is just too much world uncertainty for me to have real conviction on anything. In addition, I don’t like it when even the CEO doesn’t have a clue about the actions of one of his largest customers (in this case China). On the other hand there are still some out there who are trying to prop them up.

  35. FMCN/Pharm – Well if NO ONE got it, I suppose we can drop it as it’s silly to track something nobody has so have people speak now or forever hold their piece.  

    FAS/Jerconn – It is the short calls from yesterday.  That’s covering our long calls.  How would buying calls cover long calls?

    CHK/Cwan – Sure, don’t look a gift horse in the mouth.  Only 8 trading days to expiration so as long as you stop out even – enjoy the ride.  

    TLT/Lincoln – I’d just keep reducing the long basis so you always know what you are in for (net) and, hopefully, that clues you in as to when it’s a good time to take profits.  

    DIA/Morx – Well back to .80 is our favorite entry so not yet!  I think, starting from .90, I’d go DD at .70 for a .80 avg and then stop at .60.

    Oil report was strange with a big draw on products but a build in crude which probably means refiners were unwilling to buy new barrels at $105 but were happy to crack their old barrels and send them out the door at $3 per gallon ($120 per barrel).  Expirations are not until probably Tues, 23rd so still time for shenanigans on the NYMEX but next week we should get a sell off if nothing blows up in Saudi Arabia.  

  36. own the FMCN spread—please please pretty please keep track of it

  37. Phil:
    Even though the demonstrations scheduled in Saudi Arabia probably won’t turn into much of anything, is it worth risking a DD on the $40 USO puts now rather than waiting until next Monday?

  38.  Phil & Pharm
    I’m starting to look for a replacement for JNJ in my portfolio – and would like a dividend payer. What do you think of AZN? Would you prefer this or ABT?

  39.  Phil, yes I got FMCN at a few pennies less than intended…

  40. Phil, just let you know that your page got problem with ie8. It stuck on 8:38am Phamboy’s comment.

  41. DXD is low enough to make a good disaster hedge:  The April $18 calls are just .85  and that can be partially offset by selling the DIA March $118.75 puts for .50.  That’s 11,875 on the Dow which is 300 points down, which would put the DXD’s $1 in the money so, unless the Dow falls more than 400 points by next Friday, then you are left with a net .35 spread and you can sell April whatevers to cover that for free insurance.  As the moment, I’d grab the DXD calls and sell the puts (or maybe lower ones) later as I still expect a dip. 

    Always remember – you can sell ANYTHING you REALLY, REALLY want to own on a pullback to offset.  

  42. Phil, even though Pharm lists the FAS trades from yesterday as "pairs," it is not at all clear from the spread sheet what long calls they are covering.  IN fact, I still don’t know, and I have been trying to follow the $25K "religiously."  I know this is the kind of stuff you don’t like reviewing, and I don’t blame you, but I think a little more clarification is in order here…

  43. And QQQQ back at S1… Man, it’s bouncing right between PP and S1 since this morning.  

  44. I got filled on FMCN

  45. SQQQ April $26/30 bull call spread is $1.20 and that’s good, straight coverage with a $2.80 upside (233%). 

  46.  I’m long some UNG; it’s up .72 at the moment.  But my trading pages has the following notation: "UNITED STS NAT GAS FD LP UNIT 1 FOR 2 REVERSE SPLIT INTO UNI"  with no price change.  Anyone know what it means?

  47.  Zero – They just did a reverse split on UNG (2 for 1). You can see that it went from $5 and change to $10 and change.

  48. dclark41
    FNSR  I agree with you on weak performance by the CEO on the call. Hopefully this is a short term (couple of quarters) impact and we get a rebound.  I did get a fill on the putters, not a great morning here as I did have 20 contracts on BCS and short puts. I’ll wait to see what happens over the next few days before I make any further moves.

  49.  PHil, USO
    I had already 30 contracts of the APR 38 puts…(net .71) so I would be DD to 60 plus 10 for the 25K…? You feel strongly about it I surmise?

  50. I will delete my 2nd post for IE8 users…not sure why.

  51. davew
    I am sorry for your loss. I had significantly less so not as painful, but nonetheless it still feels like I got kicked in the teeth last night. It just seems you never know what’s going to come around the corner in this market. I am trying to lower my risk overall and get balanced as Phil says. Good luck with FNSR!

  52. OK, that fixed it for IE* users.  Wasn’t in the 2nd post, but rather JNJ is causing internet problems as well!!!!  :)

  53. Pharmboy, it works now.  Thx.

  54.  Stj: Thanks.
    Does anyone think that Charlie Sheen is channelling Cramer in this video?  He may have a future on CNBC.

  55. Covers FAS 25KP/Jerconn – someone more articulate will probably beat me to it, but when you cover, you’re covering a long position, ie something you’ve purchased rather than sold. You’ll notice the FAS long position is those 20 April 32 calls. Phil advised covering half a day or so ago by selling 10 March 30 calls. Then today he suggested bringing that up to full cover by selling 10 more March calls, the 31s (hope I didn’t reverse those, but anyway…). That protects your long position and puts some cash in your hand.

  56. The letters are much prettier on ie8 than they show on Firefox, I keep using ie8.

  57. Phil / Site lock    Just got into comment section now.   Site was locked with Pharm’s opening comment???

  58. FMCN/Savi – No problem, just wanted to make sure we weren’t wasting our time.  If people who fill don’t speak up – how are we going to know?  

    USO/DC – My premise is that they won’t amount to anything and oil will be down nicely on Monday but it is, of course, a risky position and should be entered lightly as we may be pressing this one into July whatevers down the road.  

    AZN or ABT/Deano – I would defer to Pharm on that one but I do still like BSX at $7.81 as you can sell the 2013 $7.50 puts and calls for $3.10, which is net $4.71/6.10 with a 59% upside if called away below the current price – who needs a dividend?  BSX is $11Bn and JNJ is $166Bn so if people decide to re-allocate just some of their JNJ money to other players in the device sector – BSX could get themselves a nice windfall.   Nice case made for and against BSX in SA

    IE/Bob – Did it get unstuck?

    FAS/Jercon – We discussed those to death yesterday.  I’m sorry but we only had one open position and then we sold calls to cover it – it’s not all that complicated.  Pharm’s sheet shows 20 Long calls at net $3.12 and then, right next to it, it lists 10 calls sold to open at $1.45 and $1.50.  Even as I type this I feel silly pointing it out because it’s right there – if that isn’t clear then this Portfolio is going to be way too complex for you to follow, I think.  What is the expectation here – that we are going to make 300% in a year using options 101 trading for beginners and that every trade is going to be a straightforward buy or sell that can be followed by people with 2 days experience?  This is hard stuff – I will mention in the next write up that there is an assumption of some prerequisite knowledge of options trading to follow this portfolio – maybe that will cut down on the confusion.  We do plenty of very simple trades every day – these are not going to be them!  

    UNG/ZZ – They are splitting today so I’d sell and buy new stuff tomorrow.  

    11:00 AM On the hour: Dow -0.4%. 10-yr +0.21%. Euro +0.1% vs. dollar. Crude +0.47% to $105.51. Gold +0.36% to $1432.40.

    I guess bad love is better than no love at all:  Millionaire investors would rather get bad advice than no advice at all from their financial advisers, a survey says. Little more than half of households polled would change advisers for getting bad advice, while nearly three-quarters said their biggest insult was not returning a phone call within 12 hours. 

    President Obama makes it official and nominates Commerce Secretary Gary Locke as ambassador to China – the first Chinese-American who would hold the post. Locke would replace Jon Huntsman, the former Utah governor considering a 2012 GOP presidential run; analysts expect U.S. Trade Representative Ron Kirk to take over Commerce.


  59.  EDZ hedge – I put on the Jan 2012 $17/25 call spread and sold the $16 puts as a disaster hedge a few weeks ago.  It doesn’t seem to be tracking the market well right now, and I’m guessing its because a number of emerging market countries sell oil and this is good for them (for now).  This is a long term hedge, so my sense is to leave it on and it will eventually be a good hedge.  In the meantime I’m doing some of the shorter-term hedges listed above to protect me better in the short run against the downturn.  I put too much emphasis on EDZ to protect me through the Middle East stuff and it doesn’t seem to be responding for now.  Does this make sense?

  60. Hi Phil, I had some problems loading your site this morning, tried on two different computers and had the same problem did not get further than Pharm’s PP report. Restarted one computer and I think we are in business. So all OK.
    read your comments on FNSR have not many plays dropping 15$ in one day. Fortunatelly I am always carefull with my option plays hold only two plays. I was thinking to wait a day or two to let the dust sattle before taking any drastic steps.
    Bought the Sept 73 call for 10.20 now 1.60 and sold the Mar 43 call for 3.21 now 0 and sold the Jun 38 putter for 3.10 now 12.70. I think we still have many moons to go on this one. What do you think?

  61. All – Get stopped out on the DIA Puts? In at $0.80, trailing $0.05 stop at $0.96.  I am considering re-loading the honey pot.

  62. FAS is on the CRAZY train today!

  63. Phil,
      I placed a stop on the FAS 30 calls that were sold in the 25K and, just as you described in one of yesterday’s posts regarding your dislike of hard stops, the bots took me out at $2.50. Lesson learned.
      Would you recommend re-selling the FAS Mar 30 calls today? Assuming so, would the $2.15 level you mentioned in an earlier post today still be applicable?

  64. Just a note for IE8 users, and copy/paste….put it in notepad and copy from there b’f copying into the text box.  I don’t use IE8, but sometimes the formats get carried over and IE does not like the code.  My bad, but just for future reference for copying external info into the chat (myself included).

  65. Phil,
    Nice call on the DIA puts

  66. PHIL
    I had problems reading the comments this morning and coudn,t do any of todays 25kp trades.  Uso is now 1.08 …is it ok to pay that much

  67. pharmboy
    Thanks for finding the problem, I first noticed the problem stopping in your comment over the weekend.

  68. Apparently no shortage of demand for treasuries… Based on this article you can expect good auctions this week! 

  69.  copper falling off a cliff.

  70. IWM levels 83.76, 83.03, 82.82, 82.56, 82.00, 81.86, 81.60, 81.43, 81.20, 80.96

  71. Phil/Sam:
    Have  5 positions,not 3, of SAM.Closed today Mar. $95 C at $.15 (sold at $2.70). June $100 C were bought at $.3.70,now $1.40. Does it make sense to sell Mar. $90 C at $.65 or April $90 C at $2.40 or just close it out with a one day profit of $.25. thank you.

  72. Phil, the USO trade is getting away from me… I got a fill on selling the 30 38 Puts (.48) but not on buying for 1.03 the 40′s… Don’t want to chase should I stick to 1.03? 

  73. Here is Tuesdays CraigBot3000 report.  These are all the trades made from tuesday 00:00:01 to 23:59:59

  74.  Pharmboy,  I sent you an email with the CraigBot3000 report for Tuesday.  So far we still dont have any loosing trades but statistics says we should get one soon.  In my backtesting the longest streak of winnning trades was 7.  We are now up to 10 consecutive winners.  I only backtested for 1 year using 1minute candles.  So my guess is that with live tick data the Expert Advisor must work slightly more efficiently.  Or we are just getting really lucky.

  75. Amatta, how about rolling yours up to the 40s, and sell some weeklys or even March that expire in 8d?  I think that is what Phil said.

    I still like USO April puts but now the $40 puts are $1.03 and looking like the best play so yes to rolling to them and doubling down if you are in the old trade. 

  76.  Oh snap, you posted it while I was writing my next post.  Thanks :) .  If I am sitting at my computer when a trade fires I will post it here.  So other people can join in the fun.  2 trades have fired today, one at 3am and one at 9am, both winners, for $105 and $59.  I will send the wednesday report some time tomorrow morning so we can see how it goes.

  77. Shadowfax
    Thanks for the IWM levels

  78. Pharmboy
    I dont have the the old USO trade in the 25kp.  is it Ok to buy the 40 puts at $1.03 as a new trade for the 25kp

  79. Wow, nice VIX plunge.

  80. USO/cnar – yes, the USO trade is for the 25Kp.  It is also in the spreadsheet and Phil mentioned it in the above line to amatta.

  81.  USO/Amatta – We didn’t have USO in the $25KP before today (not since our Feb trade closed).  I had said at the time that the April $38 puts were too risky for it but now that those went the wrong way, I am liking the entry for the $25KP at the $40 puts.  As I often say, the best way to trade our picks is to wait for the ones that go against us and we decide to DD on or roll – THAT should be your initial entry and you’ll be 20% ahead of the game!  In the $25KP, we’re buying 10 contracts, you are already at 30, which is a lot and then 60 will mean you hold a pretty big position betting on oil going down with civil war in Libya and a day of rage in Saudi Arabia scheduled for this Friday and next.  We’re prepared to roll and DD twice from here – what are you going to do?  

    IE8/Pharm – When pasting text, I almost always use the little "Paste from Word" button on the top of the comment box.  That generally takes out the crap that screws things up.  

    Sheen/ZZ – LOL.  He looks like a meth guy to me.  I think the interesting thing is he’s kind of tapping into the frustration with "everything" that many people are feeling right now.

    EDZ/Rev – It’s still a good long-term disaster hedge and it’s working fine as it doesn’t need to go up if the rest of the market is still up – if the market drops and EDZ doesn’t head up – THEN it’s a problem.  As the are now down to $4, you may want to buy back some of the the Jan $25 calls.  You could, for example, buy back 1/2 and sell 1/2 the March $21 calls for .60 as those are .65 out of the money and very rollable and you collect .60 in premium in 8 days vs $4 in 317 days.  

    FNSR/Yodi – You had a $73/43 bear calendar spread?  That seems very extreme…  I assume you mean 43 and it’s the same as I said earlier about a similar position – Congratulations, you own FSLR at net $44 – now what are you going to do?  You can roll the putter to the 2013 $35s ($13.75) and just leave it at that or you can buy some calls and hope things turn around more than that but that’s about it – the downside to selling short puts is potential long-term ownership.  

    DIA/Manimal – That’s exactly the way to play it on a day trade.  Take the dimes when you can – there’s always something else to trade if this one gets away.  

    "THEY" are still trying to bust us higher.  The selling has tailed off so we’ll see how far the bulls can push it now.   We’re still watching the $32 line on FAS and if we are staying above there for 15 mins (through 12:15), then we will have to capitulate on the 10 short $30 puts, now $2.55 in the $25KP – not looking good for us at the moment.  

  82. wow FAS  at 32

  83. Phil/ARO – ARO reports Thursday after the close.  They are up this morning and have been up historically the last 8 years in March an average of 12%.  Any opinions on a trade?

  84. Craig, very nice so far… 10 in a row! But I have to say, I am puzzled by the timing of the trades. I don’t get buy signals where you get them (not surprising we all have our own charts) and actually sometimes the system seems to buy in a downtrend on a 1 minute chart! For example, that 9:22 AM trade yesterday at 1.3875. The euro made a low of 1.3860 at 9:52 AM and then reversed. Got a buy signal at 9:56 AM on my chart. I guess why change it if it works….

  85. The sharks are at it again.  If they really wanted to create a wealth affect, why all the gyrations?  FAS has a ridiculous chart today.  Maybe the state AGs in Washington gave up on trying to go after them- 

  86. Phil / roll — you’re on a ROLL today in PHILosophy, liked your 7:08 (yesterdays chat) SLW roll thoughts, USO @ 11:59, FNSR @ 10:14, Thanks!

  87. Re-selling/Kevin – No, I would look at selling the $32 calls, now $1.25  but not if we’re over $32 on the FAS – better to be 1/2 covered with the $31 calls for now.  

    USO/Cnar – I would not chase it.  We could easily go back to $1 on a bounce. 

    Treasuries/StJ – We’ll see another one at 1pm. 

    FCX was a winner from this level the other day ($48.50).  The weekly $50 calls are .35 and make a nice bounce play as they were $1.50 yesterday so hoping they get back to .50 is not greedy.

  88. Pharm, 
    Do you know what is going on with AVNR? I have that terrible buy-write that I was considering killling after months of working it out, but today it’s coming back 8%… I can’t find any news aside from them participating on a three conferences in March..

  89. Phil on FNSR Typo 37/43 spread with 38 Jun putter short Thanks for the congratulation but it would be 31.70 not 44$ still a fat price as you can buy tham today at 25.90

  90.  Al Jazeera reports [three hours ago] that Libyan defense minister arrived in Cairo with message from Gaddafi, no info in respect of who he is meeting.  A deal to break the stalemate and stop the carnage?

  91. Snow – thanks for your explanation – it was more than eloquent enough. In my experience (admittedly limited), a "cover" can be either a short or a long position – if the initial transaction was short, then you can "cover" that with a long position – and that was the source of my confusion.  Anyway, thanks for the explanation. 
    And Phil – it seems to me that you are the kind of genius who tries hard to relate to us slower neophytes, but doesn’t always succeed. Anyway, for the last week or so I have been trading AGQ, SLW, SVM and LNG options much more profitably than you pros have been trading FAS, so perhaps you are correct that the 25K is not for me – but it’s interesting following you plus I learn a lot, so I’ll keep trying!  Thanks for your patience…

  92. @Stjeanluc,  I dont mind revealing the buy signal, and its much simpler than you can imagine.  Its just a trailing stop 38pips below the market.  If the market hits the stop, that is my buy signal.

  93. SAM/Dflam – I’d wait and go for $2.  Earnings weren’t that bad – they missed .90 per share by .03 on 3% less revenues and the CEO seems happy enough about it.  Big overreaction I think.  

    Nice Q chart StJ:

    USO/Amatta – Chasing oil is not usually a good idea.  At least give them a chance to test $105 again before giving up.

    Craigbot Rules!  Nicely done Craig.  

    USO/Cnar – If we fail $105 on this run then yes. 

    Oh no – just 2 mins left and FAS failed to hold it!  Now they have to get back over and hold for another 15 mins to get rid of us…

  94. Phil – That’s how I like to play it. You can’t go broke taking a profit. That’s what my Dad always said (however I think he stole that quote).
    Question – DIA’s are back below our original entry. Thoughts on playing this one again with the same strategy? In at $0.80, DD at $0.70 and stop at $0.60?

  95. Here’s to hoping we just survived the squeeze before the next big leg down!

  96. Craig, simple indeed! However, sounds risky when dealing with "special" situation. For example, when the job report is released every month and we get crazy girations, you could hit that trailing stop, get a buy signal and you could find yourself in a 100 pips hole in a hurry!

  97. Phil
    Boy FAS just doesn’t like $32. ……..Ooops…..or does it?

  98. Phil / Gross   Puzzled at the lack of mkt reaction to Gross exiting long Treasuries?  Thought he was THE heavy hitter outside the global Feds?  If he isn’t a trigger for bond vigilantes, who is?

  99.  @StJeanluc, 24pip stoploss.

  100. FAS breaks

  101. Phil / RUT  Do you advise shorting at this $825 level.  The domestic focus of the component cos seem to represent the highest risk given your analysis of our moribund economy.

  102.  Pharm
    Any comment on AZN vs ABT as a replacement for JNJ? Thanks,

  103. Since I’m relatively new here.  Maybe someone can share a little more info on the bots being discussed.  I assume you have setup/developed your own trading program or buy/sell alerts.  While I assume the algorithms are your (not to share) maybe you could state what tools you use to set the bots up (assuming it’s not fully programmed …which I can do).  Also, do you have automatic sells/buys or just manually operate from the alerts.   BTW, I’m a seasoned developer and would like nothing more to ultimately develop apps that work/make profitable trades recommendations.

  104. Phil
    FMCN. 25kp .. Didnt get the original play .  is it ok to Buy The 4 Apr 28 C and sell 5 March 28 C for $ 0.50 credit instead of selling the march 27 C.  As a new entry?

  105. Never mind about the "bot" info, I found information on creating my own.  Thanks

  106.  FAS/Matt – Actually it seems that the banks are wearing the regulators down and the "settlement" is starting to look more like another bailout than a fine.  Now I’m a cynic and I say "why do they need another bailout – things must be worse than they seem" and the housing delinquency data we looked at last night indicates that is likely the case (my quick math indicated $100Bn of unbooked losses in just Nevada and Arizona) so it’s just the same pig with different lipstick as far as I can tell.  

    Philosophy/Rain – Well, when I have time I do strive to illuminate.  8-)

    FNSR/Yodi – But so what if you REALLY want them long-term.  With the artificial it’s a 1x entry at a low price and now you can flip it to a buy/write for 2x a lower price than you hedged to before.  Unless you are totally giving up on the company, then it should be considered nice to get a good entry opportunity on a misstep.  Things happen to companies (BP, RIG, AAPL, MEE, PFE, BA) and, as long as you stick to playing stocks you REALLY want to have in your portfolio long-term, then your portfolio will be full of really good companies that you happened to pick up when they were cheapest and everyone will think you are some kind of market-timing genius.  

    I often say, luck is just a matter of being in the right place at the right time.  Our strategies are meant to keep us in the right place as often as possible so that, when the right time does come along – we’re right there to take advantage of it!  

    Gaddafi/ZZ – I think his people are bailing on him now, there’s clearly no good outcome to staying with him.  

    Patience/Jercon – Don’t take it personally, sometimes I’m in the mood and sometimes I’m not.  I will continue to do my best to relay my logic for what we’re doing in the portfolio as that’s the main point – to understand why we trade things and what signals we look for for entries and exits.  

    38pips/Craig – TradeBot says they will now make sure to hit 39pips in the future!   8-)

    DIA/Manimal – Don’t forget that if you do DD at .70 then it’s 1/2 out at .80 (unless we fly through it) so you get back to 1x with the lower basis.  The Dow is outperforming at the moment and that is because IBM is up 3%, adding 40 Dow points by iteself.  There is nothing at all impressive going on otherwise with half the Dow down and half up and only WMT, T, MRK, JPM, and HD are up even 1% so that’s still DE-FENSE!, not a rally by any stretch.  

    That’s another reason I don’t believe in hard stops.  When something like FAS gets to my stop, it’s a signal for me to spend 10-15 minutes figuring out WHY it’s at my stop and then to decide if I really want to give up or if I want to roll or DD.  It’s silly to set a stop at 10am and then at 1pm let it trigger without making use of 3 hours of new information.  So, knowing that the Dow is only positive because of a 40-point goose from IBM, who are only up because Gang of 12 Members have jacked up their price target to $200 (everything is $200 this week) in what looks to me like a very transparent attempt to goose the Dow  - what do you think?  

    Gross/Tusca – He’s been whittling down for months so no major surprise.  Plus, as we noted in charts last week – there is no one buying TBills but the Fed anyway.  They may as well end the charade now and just have Bernanke write Geithner a check directly.  

  107. @jjflash,  I am pretty sure that I am the only one on here developing (having developed) one.  The client I use is called MetaTrader4.
    Here is a link to a book about the api for how the client talks to whatever broker you have.  As far as i know, this is only available for FX.  I was a developer as well so I can tell you that its really not that hard.

    I have to go to class now, but I will be back this evening and catch up on any any automated trading questions.

  108. Phil, 39 pips would be perfect, to make sure my system breaks you would need to hit 37pips then shoot straight up, that way I never get to buy :)

  109. Speak of the Devils:  

    11:00 AM On the hour: Dow -0.4%. 10-yr +0.21%. Euro +0.1% vs. dollar. Crude +0.47% to $105.51. Gold +0.36% to $1432.40. 

    11:23 AM The Fed buys $6.69B in Treasurys maturing 2015-2016, of $35.474B offered by dealers (monetization watch: $5.1B toward three-year notes issued Feb. 17), and notes hold today’s gains: 30-year yield -0.02 to 4.65%, 10-year -0.02 to 3.535%; 5-year -0.02 to 2.195%; 2-year -0.02 to 0.7%. 

    12:00 PM On the hour: Dow +0.24%. 10-yr +0.09%. Euro +0.04% vs. dollar. Crude -0.28% to $104.73. Gold +0.13% to $1429.10.

    Pimco confirms that it’s unloaded all U.S. government holdings, including Treasurys, in the Total Return Fund, the world’s biggest bond fund. The holdings were at 12%, now zero; maybe Bill Gross isn’t just talking his book. (Zero Hedge: No QE3?

    Dubai and Qatar led Middle East stock markets higher today (about 2% each), amid continuing concerns about Libya’s infrastructure as more explosions are reported around oil facilities in a new offensive from Gaddafi loyalists. Brent crude rises 2% to top $115/barrel. The cost to insure the region decreased as credit-default swap spreads narrowed.

    The iPad 2 launch has had its effect on key tablet-makers’ stocks – MMI down 10% since, AAPL near its all-time high – but Brett Arends wonders why the media is uncritically buying Steve Jobs’ contention that the iPad 2 is cheaper, despite apples-to-apples spec comparisons where the Motorola Xoom is the same price, or even cheaper, depending on subsidies and usage. 

    Three lunchtime reads:
    1) As oil muddies outlook, Fed policy less certain
    2) It’s pretty obvious how China can achieve price stability
    3) Fourth-quarter earnings outperform – thanks to fattening margins

  110. Phil I am with others shorts holding APPL long Apr 355 pd 11.20 now 10.95 and 340 pd 29.98 now 33.20 Question is it better to roll them to say Jun when the stock is down or what?? thanks

  111. Phil / DIN  This is one of my favourite shorts.  Applebees sucks for value and their clientele is the class being crushed by the economy and now gas prices.  I-hop is will soon run out of diabetics to serve at affordable prices!

  112. Clock starts again on FAS at 12:50 but, oops, blown at 12:51….   I generally look at the 10 min candles rather than obsessing and what I want to see is 2 consecutive candle bodies fully above the line so really 20 minutes but, if I notice the cross, then around 15 mins I’ll have my finger on the trigger.   Keep in mind if someone is faking a breakout (flushing stops) then holding something that is heavily traded up for 15 mins is VERY expensive and if someone is willing to commit that much money to something then it’s probably a good idea not to mess with them anyway but, on the other hand, ANYONE can cause a 5-10 minute spike in almost anything.  The less time you do it for the less time other fund managers have to take advantage of your generosity but 15-20 mins means a lot of big boys have had time to have meeting (at least on the phone) and have decided NOT to sell into that particular excitement and that sets us up for a real move up.  

    RUT/Tusca – I would have liked to see them run up to 840 again but yes, I think they are now very vulnerable to inflation, especially if wages begin to rise.  TZA is still fun at $38.46 and you can pick up the April $36/41 bull call spread for $2 and sell the March $36 puts for .71 for net $1.29 on the $5 spread.  You can also just sell BA May $65 puts for $1.32 to make it a .68 spread and your worst case is getting a 10% discount on BA. 

    Bots/JJ – Well Craig is talking about an automated trading platform and I hope he will write up a weekend post summarizing what he’s up to.  When I talk about bots, I’m talking about the various trading programs used by the investment houses.  I used to do consulting work on systems designs and, it’s a long story, but my observations led to the 5% rule, which is what we go by a lot in setting targets (see comments in linked article on salvage plays in the strategy section for more detailed descriptions).  

    FMCN/Cnar – That wasn’t really the point of the play.  We went for the quick earnings crush and didn’t get is so, rather than tie up cash in a grind out, you are better off just waiting for a new trade.  

    Oh look, the Treasury auction went off FANTASTIC!  $21Bn in 10-year notes at 3.499% with a 3.32 bid to cover.  You would think Rick Santelli’s wife just gave birth the the Messiah, he’s so excited!   Bad for TBT (ie. another chance to get in at $38.50).  


  113. Phil, the banks are also close to having the debit card transaction fee limit postponed.  They say it will cost them $16B.  So the cynic in me says, they are talking about giving dividends and doing buybacks and yet they can’t afford $16B to give back to their customers?  They must really be in a perilous state or simply have irrepressible greed.  Most likely, both.

  114. @craigzooka, thanks for the info! 

  115. jjflash and craigzooka
    I have developed TOS Strategies which you can then turn into "Complex Formulas" which the TOS servers will execute.  It’s really primitive and poorly documented but it does work.
    Your strategy must be fairly short as TOS has a limit on the size of the program they will execute.

  116. Hehehe.. out even on my ill timed FAZ ‘investment’.  Helps having dry powder.  Will wait and see before getting back in.
    Craigzooka, I’m halfway through a program that will use IB’s Java API for trading.  Little things like 3 kids under 6 and a full time job have been major obstacles to me finishing it.  But I’m making it flexible so that it will have the ability to quickly plug in additional algorithms based on new trading ideas and tweak the existing ones to keep up with changes in the real bots’ algorithms.

  117. Mid-day charts with PP and S/R lines for indices and oil. Some lines are thicker because of the disparity between calculations. Might indicate stronger lines.. 

  118. BONDs don’t lie for a short term trend, and remember the last time someone got out being short then what happened (NFLX)….what is Gross buying?….the EU bonds who pay a premium compared to ours?


    Denno – AZN or ABT.  How about cash for now?  ABT has gone up since my writeup, but I still think they come down with the market.  GSK is my preference, as is MRK.  I am not feeling it for anything except a few smaller biotechs.

    AVNR – no idea, and they are down the street from where I work.  If you are slightly down, up or even…then I say move on.  No pharma in their right mind is gonna buy them.

  119. Auction / Phil – Damn, that repo reports this morning was smack on the money! Got to find a way to get that on a regular basis to play TBT. IMHO, the line for TBT is more like $38. 

  120.  Pharm – I think GILD has found a little mojo.  But, I agree with you as they always find a way to F it up so I’ve sold a bunch of calls in my retirement account but i still own some leaps.  Do you think GILD can get their sh$#t  together?

  121. GILD might just make it to fill that gap to $45 from eon ago.  Gotta love manipulation.  DCTH, just pushing it around like melted butter.

  122. 37/Craig – Well they want you to Buy, it’s just a question of getting you to do it at the wrong time.  If they don’t get retail investors to pull the trigger and spend the cash – then what is there to steal?  Anyway, you parameters look good and you are certainly getting a good, volatile testing environment.  

    AAPL/Yodi – I do not understand your trade.  Are both long?  If so, take the money on the $340s and you can leave the $355s if you want to speculate bullish but I wouldn’t play AAPL at all right now other than a long, deep, artificial buy/write or maybe selling front-month calls against longer calls for income.  

    DIN/Tusca – You don’t like IHOP?  Actually, your logic is compelling.  I keep wondering if lack of healthcare will force lifestyle choices.  You have the 50 dma at $53.79 to key off of on short plays and it looks like a clean shot down to $45 if they break so good idea.   I like the June $60s for $2.80, selling the March $55s for $1.20 and then, hopefully, the April $55s for $2 or better (now $2.70) and then you have a free bearish spread. 

    Banks/Matt – Something is rotten in that sector.  

    Oil very useful, StJ – thanks! 

    SPY also key to watch

    TBT/StJ – That would be better and great call on the auction.  Let’s take that seriously next time and make a play out of it.  

  123. Good morning from LA,

    Last Friday’s levels are still intact; strong support trend line now at IWM 81.86 and confluence at 80.52 (a break below is a bad thing)

    IWM resistance on the way up 82.12, 82.37, 82.61, 82.82 and 83.27 

    Mixed signals everywhere this morning, which fits the last couple of weeks really. On S&P the upper trendline of the symmetrical triangle is at 1330 dead and a break of that level with confidence will give a pattern target of 1381, which is almost exactly at the 78.6% fib retracement of the bear market and a popular target for the end of the wave up since July last year. An IHS has formed that may get us through triangle resistance:

    Good hunting !!

  124. LOL Jo……IF big pharma wants revenue growth, then GILD is a nice fit into JNJ/BMY who have the HIV franchises.  MRK is done with its spree for awhile.  VRTX, though, I wonder.  Their CF drug, as well as HCV drug are gonna be big time players.  MRK has a HCV drug as well, so some competition ahead of VRTX, but someone is gonna like them. The Jan13 $50s on VRTX are moving…..

  125. Ha!  It’s 1:45pm and they already have everything doji-d up.  What WILL they do with themselves?  If you said, "take us down" give yourself 5 points!

  126. $105 oil yet again – must be Christmas!  

    1:00 PM On the hour: Dow +0.08%. 10-yr +0.34%. Euro -0.03% vs. dollar. Crude -0.71% to $104.27. Gold +0.18% to $1429.80. 

    The Treasury sells $21B in reopened 10-year notes at 3.499% (.pdf). Bid-to-cover ratio of 3.32, vs. a recent 3.08; indirect bidders take 53%, vs. a recent 45.3%. Direct bidders take 6.5%, vs. a recent 10%. 

    Treasurys add to gains after a strong 10-year note auction: the 30-year yield -0.04 to 4.62%; 10-year -0.06 to 3.49%; 5-year -0.06 to 2.16%; 2-year -0.03 to 0.7%. 

    Microsoft (MSFT) will try to arrest its browser market-share drop by releasing Internet Explorer 9 March 14 at South by Southwest Interactive. The design (popular in testing) shows Microsoft going minimalist with an interface more like Google Chrome (GOOG) and – maybe more important – leapfrogging other browsers in using hardware acceleration for page rendering. 

    On that last Item, Steve Ballmer said he is very happy with the new product:

  127. Phil, I know you like them long term, but got to tell you CSCO looks like a broken stock now. The last 4 quarters have led to 20% declines every time. Once they retraced 100%, but 2 other times only about 50%. And no move up so far from the last one – quite the contrary. I fear that one more bad quarter and some investors will lose patience which could lead to a blood bath! These guys are not expensive relative to earnings, but not cheap relative to sales. I wonder if they are not more hurt than they say by a couple of factors:
    1. They have a lot of "public" clients like big telcos that are mostly government owned in many countries. These guys are not spending money now.
    2. The competitions has caught up and passed them.
    3. They don’t sell pretty stuff retail like an AAPL for example.
    Not saying that they will disappear, but their performance over the last 12 months in this "bullish" environment is not encouraging. They have a ton of cash, but they don’t do anything with it either because they don’t see any synergy with anyone or they thing everything is too expensive (compared to them, everything is). Paying a dividend reminds me of Microsoft and we know how well they did since then (at least they are up though). That is one company in dire need of a good quarter. Next earning date should be another nice "ratio" day as we could see some violent move either way.

  128. Hola JRW!  Nice chart.  

    I was going to say let’s buy back the DIA March $122.75 puts we shorted but once again I forgot that they were the 3/31 puts so not really worth it.  But, since I do want to get a little more bearish, let’s commit $1 ($800) to roll up the 8 May $122 puts at $3.80 to 8 May $124 puts at $4.80 in the $25KP.  

  129. CSCO/StJ – Well in now way do I see them as a short-term play but I do think I’d be glad to have them in my portfolio in 20 years.  They sell expensive back-end office equipment and they picked the wrong time to roll out the new line but, if we stay in the right place, it will be the right time again one day. 

    Credit Suisse sees a stock opportunity in Libya’s chaos: Overseas Shipbuilding Group (OSG +1.3%) has tankers in the right place at the right time and could benefit as the rates paid to shippers rise. Disruptions in Libyan oil shipments means Europe will depend increasingly on oil deliveries from West Africa and the Arabian Gulf.

    From Barry:  "SEC Budget vs. Wall Street Spending":


    The White House has proposed that the Securities and Exchange Commission should get a 28% budget increase for fiscal year 2012 to $1.4 billion.
    Lots of Wall Street sycophants have criticized this number, including members of the House of Representatives — they want to slash the proposed SEC budget by nearly 30%.
    Last moth, Halah Touryalai put the $1.4 SEC billion budget into context, comparing it versus the following Wall Street spendings:
    1. Bank of America spent over $2 billion on marketing in 2010.
    2. JPMorgan’s litigation reserves: $4 billion (Q3 2010)
    3. Goldman Sachs Q4 2010 compensation and benefits: $2.3 billion
    4. Note that Goldman Sach’s $550million fine last year was about HALF of the SEC’s proposed budget.
    5. JPM spent $1.2 billion in Q4 2010 on technology, communications and equipment expenses.
    6. As a reward for Bank of America’s purchase of Merrill Lynch’s rotting carcass, the government gave it a $20 billlion TARP loan.
    7. Citi’s marketing and advertising cost the bank $1.6 billion in 2010.
    8. The SEC now must regulate hedge funds, manage their registration, etc. In Q4 2010, the hedge fund industry added $149 billion in new assets.
    9. AIG recieved loans, guarantees and bailouts worth $185 billion dollars.
    10. Cheers! Americans spent $4.7 billion on beer, wine and liquor in the month of December 2010.
    As we have noted many times in the past, the SEC has been kept defective as a matter of policy.


  130.  Hey guys & girls … been busy; not much in the way of new ideas or insights.
    Lot of folks think a big move is brewing but don’t know which way.
    I don’t know, what will the catalyst be ?   
    Libya ? — looks like Col Sheen, er Khadafy, is hanging on.
    Saudi ?
    AAPL ?  what if IPad 2 delays or bombs.  Sell side loves it, but stuff I have been reading suggests its a modest upgrade and camera specs are speculated to be poor (and AAPL has not released them .. I went to store to ask, they knew nothing)

  131. Phil and everyone interested in what I am doing.  I will do a write up of everything I have done this weekend.  Once I do get it written up where should I send it?  Also, what format would you like the writeup in?  I dont want to send you something that will have all the formatting screwed up when it gets posted to the site.

  132.  Phil, MESSIAH
    ROTF!! You almost made me spit out my coffee into my brand new MacBook Pro! 

  133. Hey Phil, IF oil tanks in regards to being bearish somewhat…won’t the market shoot up?  I know bonds don’t like a rising market….but just a counter-trend thought for short term….

  134. CSCO / Phil – I hope you are right, but there was a time when Unisys, NCR and others were selling expensive back-office equipment. That didn’t go so well! And I am not making straight comparisons because I think that CSCO is better run, but still. 

  135. DYN / Phil – Don’t give up on Icahn yet. He seems to be winning control of the board over Seneca Capital which owns 9.7% and opposed his $5.50 offer. A new board was supposed to have one seat each for Icahn and Seneca reps but now it looks like Icahn will get two. Dynegy is in technical default on some of its debt so the situation is not as dire as it seems. The balance sheet actually looks ok and they have serious assets. It’s not like their product is suddenly obsolete, either. The big variable is economic growth which is out of their control. An interesting story and not a PSW play but there’s money to be made there or Icahn, Seneca, and Blackrock wouldn’t have waded in so deep.

  136. Oil – you know, I’ve read on more than a couple sites that the day of rage was cancelled for lack of participation… Whether the lack of participation is from Gov’t intimidation or not is another story.  Im planning on shorting tomorrow night (hoping there is a pop going into Friday) and I think Friday will surprise people to the downside…. Just a gut feeling.There is a lot of fear in the oil market which could get us up to 110, but I really think we are going dooooooooown 

  137.  FWIW Difficult to track positions
    I notice several people mention hard to follow positions, (FAS) with numerous adjustments. Rather than a chronological listing of trades I have set up glorified "T" accounts for each underlying.  Then I just keep recording the buys (debits) and sells (credits) with a running balance of what my net is for the overall trade and can then keep track of max gain/loss, roi, breakeven etc.

  138. DYN (cont. ) should have said "may go into technical default later in the year"

  139. Phil clarification on my AAPL are as follows 3x Aprl 355 c long pd 11.20 now 10.70 against 3x Aprl 360 c short rec 9.42 now 8.32.   2x Aprl 340 c long pd 21.43 now 19.70 against 1x Aprl 360c  short rec 9.42 now  8.32and 1x Aprl 380 c short rec 5.75 now 2.38.  I used to have the long callers way out and have been rolling against them but now my shorts are obviously catching up with the longs. That is why I was thinking of rolling the longs further out in to the year.

  140. Hey Cap!  Day of rage on Friday right after our evening prayers – let’s meet up!  8-)

    Write-up/Craig – Remind me after hours and I’ll have Ilene hook you up with author rights.  

    LOL Amatta.  

    Oil/Pharm – AFTER the commodity correction takes us down, THEN I think we head up.  That’s the dip we’ll want to buy into.  

    CSCO/StJ – I don’t think CSCO really has that kind of competition on the backbone stuff.  Only time will tell but, from my understanding, there’s no comparison on performance – it’s just a question of getting people in the mood to pay for it.  

    DYN/Pak – Just a stay away for me but very surprising how things turned so sour on them.  

    Day of rage cancelled/Jrom – Oh man, now my whole weekend is shot!  

    Kinect/StJ – Yeah, there’s one they certainly got right.  

    Tracking/Lincoln – I think I may have mentioned in the past that PowerOptions does a great job of spread tracking but it does cost money. 

    Copper/StJ – Oh I’ve been saying that for over a year – got tired of talking about what nonsense the copper market is.  

    2:00 PM On the hour: Dow +0.06%. 10-yr +0.54%. Euro +0.05% vs. dollar. Crude -0.66% to $104.33. Gold +0.2% to $1430.10.

    IBM (IBM +2.4%) bucks the trend of tumbling tech stocks, climbing sharply after the company says it should earn "at least" $20/share in 2015 and several analysts raised target prices on the shares. “We believe there is ample flexibility for IBM to beat this target,” one analyst says of the 2015 goal, “and expect investors to place a larger premium on IBM’s earnings stream as confidence in this goal increases.”

    Warren Buffett’s (BRK.A) big bet on Chinese auto manufacturer BYD could backfire, according to a Reuters investigation. Several troubling aspects of BYD’s business, including a record of stealing designs from rivals, call into question whether Buffett’s investment will pay off in the long run.

  141.  Day of Rage … is the meetup in Saudi or Wisconsin ?   :>)
    cancelled ??   what do I do w/ all that rage ?

  142.  I understand that today is a futures contract rollover day … my futures buddies say this creates some craziness

  143. Phil – wanted to take a minute to thank you for the education I’ve received from the site.  I have participated with some of the 25KP suggestions and the management of positions is starting to finally sink into my very thick skull.  Only regret is that I have the dreaded J-O-B that forces me to be more lurker than a participant alongside all the other great members that contribute on a consistent basis.

  144. SMAs crossed at 80.15 like a road block!

  145.  POT getting hammered. Down to nearly 55 now. Will make 120k+ options at 55 strike worthless next week. Been setting myself up for the drop to 55 for 2 weeks now. Going perfectly as planned.

  146. nice trade mampcsA!
    POT was the right one to pick!

  147. Kinect / Phil – By the way, I don’t know if any of you have tried the exercise games on the Kinect (I tried Your Shape) but it’s pretty good. I felt all of my 47 years when I was done! Need to stay away from PSW and my charts more! 

  148. Good trade mampcsA. Look at the trend in grain prices and it makes sense. Wheat and oats have been clobered and only corn is holding so far, but probably because of ethanol. 

  149. Congrats to the oil futures traders – what a friggin’ day!  

    AAPL/Yodi – That’s a mess!  How do you know what to root for?  OK so it looks like:

    • 3 Apr $355/360 bull call spreads at $1.78, now $2.38 – up .60
    • 1 Apr $340/360 bull call spreads at $12.01, now $11.38 – down .63
    • 1 Apr $340/380 bull call spread at $15.68, now $17.32 – up $1.64

    So you are ahead but AAPL is way below target at $352 and, unless you are not at all worried about the market then why not just get the hell out with a small profit and be happy?  There’s no particular catalyst to take AAPL up to $360 and there is certainly a danger of a sell-off with all the news out there.  You have $2,900 tied up in two positions with no real protection so just walk away and think of a brand-new spread you can really get behind, not trying to "roll" 6 legs of these positions.  

    As a new AAPL trade, the March $355 calls pay well at $4.10 so then the question is what to cover with.  The Oct $415s are $12.65 so you can buy one of those for $1,265 and sell the calls for $410 and you are in for net $855 with a $4,000 margin on the spread.  If all goes well, you pick up $410 against $855 cash in the next 8 days and you then sell Apr $370s (now $4.60) for about $4 and that’s another $400 and your margin drops to $3,500.  If AAPL flies higher, you DD the longs as they pop $360 for maybe $1,400 more and then you have a positive delta to the caller and you can roll the caller to 2x a much higher strike and, if they go up another $10, you can add another long and roll the callers to 1.5x something higher but, hopefully, the trade stays simple and you make $400 a month.  

    Craziness/Cap – That explains the flatlining we’re getting.  The majors are pinning.  

    Thanks Chuck!  Don’t worry, it is our most sacred goal to help you build up a nice reserve of what the holy men call "FU Money" to fix that whole "job" thing that I hear so many bad things about…  8-)

    POT/Mampcs – Oh that is funny.  I love to see those Ags break down because so many people like to tell me I’m wrong about that sector because "it’s different." 

    Kinect/StJ – I’m waiting for this Xmas – My kids already have the Wii and I hate to be one of those parents that buys them everything that comes out so I make them suffer.  

  150.  By the way, i don’t have 120k options :-) But i do have a bunch of 55 calls i sold and 60 puts i bought. The 120k options is the current open interest on POT at the 55 strike. I’ve been observing that there is a tendency to pin these MOMO stocks close to where max options expire worthless (someone here had an explaination for this a while ago). Been trying it out for a month now on POT and it worked great. Just an experiment though to see if it really works.

  151. Phil
    INTC making a move ……. thoughts?


  153. Looks like we are done going up, if 82.12 fails major support and a new cross it will be a quick TZA trade. Otherwise cash is king.

  154. mampcsA / pin — That’d be the "max pain theory".

  155. Phil,
    Don’t be too quick to grant Balmer credit.
    Kinect, is actually hardware made by an Israeli company called PrimeSense

  156.  Phil:
    As members are always alert to novel and intriguing indicators, I was wondering what correlations you have found between market movements and the number of comments you receive daily on PSW.  Is there anything in it?

  157. phil,
    Any strong thoughts on the reason behind FXI’s  recent surge (approaching Jan hi of 44.85)? Fundamental news has tended to be on the negative side.

  158. Missed a fill on the USO’s although they did trade at my bid of 1.03 this afternoon. Schwab really sucks I can’t wait to get out of that damned broker and into TOS…

  159. Phil, keep the DIA 120.75′s overnight? (bought 10 @ .85) 

  160. amatta
    All brokers suck! Schwab and etrade suck for options but great for stock. TOS has issues also although costs sound good for lots of trades, the rest are buyer beware.

  161.  Amatta, i believe you were also int the USO 38 puts from before like me. I doubled down on them earlier this week and rolled them to the 40 puts today and doubled down again at 1.03 (ended up with 40 contracts at net 1.17). The puts are now 1.2 and I sold 30 of them at 1.2, so now have the same position as the 25KP (10 at 1.05 or so). Just FYI. You might want to do something along these lines so that we can position ourselves for 2 more rolls and DD as Phil mentioned before.

  162. INTC/Willie – About time they woke up!  

    3:00 PM On the hour: Dow +0.08%. 10-yr +0.46%. Euro -0.02% vs. dollar. Crude -0.78% to $104.20. Gold +0.12% to $1428.90.

    The Ceridian-UCLA Pulse of Commerce Index fell 1.5% on a seasonally adjusted basis in February, after falling 0.3% in January. PCI results over the past two months suggest a small decline in industrial production when that data is released by the Federal Reserve on March 17.

    Joseph Stiglitz says EU governments implementing austerity budgets will undermine the economic recovery and may usher in a “lost half-decade” similar to Japan in the 1990s. “In Japan, where they tried to balance the budget too early… went in for another lost half-decade. Europe is really facing exactly the same kind of risk." 

    Exxon Mobil (XOM -0.5%) CEO Rex Tillerson says the run-up in oil prices reflects perceived risk in energy markets rather than supply shortages: "We have had no difficulty replacing Libyan crude." He also doesn’t think the jump is hurting the U.S. economy just yet, but it’s "getting close." 

    Fertilizer stocks have enjoyed a strong run, but Citigroup downgrades the sector, believing that all the good news is priced in and momentum generated by improving farm commodity prices could slow. Even if crop prices climb further, "the incremental dollar may be invested elsewhere, such as in new machinery or land.” POT -5.1%, MOS -3.3%.

    China Says Property Demand Driven by ‘Unreasonable’ SpeculationChina’s rising property market in the past few years was driven in part by “unreasonable” demand from speculators, according to Qi Ji, Vice Minister of Housing and Urban-Rural Development. “The government’s property curbs are targeted principally at those who don’t have an immediate need for housing as accommodation,” Qi said in a press briefing in Beijing today. “Our basic aim is to direct the limited supply of housing to those who need it the most.”

    China’s Debt Burden Limits Policy Leeway. New Chinese government figures show its national debt load remains low compared with other major economies. But including the debts of local governments and many parts of the state-owned banking sector, as many economists say is proper, shows the constraints facing Beijing in the fight against inflation, its top economic priority. Adding up the official debt data from these other parts of the government as well as from state banks and estimated debt of asset-management companies puts China’s total government liabilities at $3.55 trillion, equivalent to 59% of GDP.

    Latest Directives From the Chinese Ministry of Truth, March 2-7, 2011. The following examples of censorship instructions, issued to the media and/or Internet companies by various central (and sometimes local) government authorities, have been leaked and distributed online. Chinese journalists and bloggers often refer to those instructions as “Directives from the Ministry of Truth.” CDT has collected the selections we translate here from a variety of sources and has checked them against official Chinese media reports to confirm their implementation. State Council Information Office: In China 94% Are Unhappy; Top-Heavy Concentration of Wealth March 7, 2011 From the State Council Information Office: All websites are requested to immediately remove the story “In China 94% Are Unhappy; Top-Heavy Concentration of Wealth” and related information. Forums, blogs, micro-blogs, and other interactive spaces are not to discuss the matter.

    BofA(BAC) is ‘Very Active Seller’ Of Commercial Real Estate, Risk Chief Says. Bank of America Corp. (BAC), the biggest U.S. lender, is a “very active seller” of commercial real estate as the firm seeks to limit losses on assets accumulated through acquisitions, Chief Risk Officer Bruce Thompson said. Commercial real estate loans in the core portfolio fell 28 percent in 2010 to $48 billion at the end of the year

    An Open Letter From an Egyptian CEOThe following is an open letter written by the CEO of a large company based in Egypt. He is not being named out of retribution fears and concerns for his safety … The situation worsening … the military is barely holding on … anarchy extending … and the original young demonstrators are marginalized already. The economic meltdown is huge. If I may make some suggestions …

    Michigan Workers Jam Capital to Protest Union Plan. In a scene reminiscent of Wisconsin, hundreds of pro-union protesters jammed the Michigan state Capitol on Tuesday to oppose a bill that would give emergency managers authority to break labor deals to revive failing schools and cities.

    Welfare State: Handouts Make Up One-Third of U.S. Wages. Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement. Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.

    Finisar(FNSR) Sees Weak Q4, Shares PlummetNetwork equipment maker Finisar Corp forecast a dismal fourth quarter, blaming a surprise inventory pile-up at telecom equipment makers in China, and its shares plunged 38 percent in extended trading. The lower-than-expected outlook casts a pall of gloom on the fiber optics sector, which surged last year as wireless carriers built new LTE networks and invested in optical switches to carry a surge in wireless traffic. Finisar sells components to manufacturers of fiber optic switches that are used to manage and unclog telecom networks. Shares of larger rival JDS Uniphase(JDSU) fell 15 percent to $21.50. Oplink Communications(OPLK) slipped 11 percent, while Occlaro(OCLR) was down 14 pct at $14.31. The weak outlook from Finisar marks the second bad news for the sector in as many days, after fiber optics switch maker Ciena surprised investors with a weak second-quarter outlook. . "Things that we had forecast only at the end of last year…all of a sudden have been reduced dramatically," a Finisar executive said in a conference call with analysts. The company expects reduced order rates and capacity demands in the fourth quarter, but said it would be surprised if the inventory correction lasted three quarters. It added the problem is an industry-wide one now and was not limited to just one customer in China.

    Texas Instruments(TXN) Earnings Target Misses Street. Texas Instruments Inc issued a current-quarter earnings target that was slightly below Wall Street estimates, blaming weaker-than-expected demand last month for chips used in personal computers. Shares in TI, which brings in 15 percent of its revenue from the PC market, fell almost 1 percent in after-hours trade, canceling almost all of their gains during regular trading.

  163. Phil, as a hedge I am only left with 15 SDS April 23 Puts (I closed the 20 calls and rolled down 20 24 puts to the 23′s). Should I just add more short puts here to manage just one position or would you rather I go with one of the other disaster hedges?

  164. Look at your favorite index – IWM. DIA on a 5min chart with Heikin Ashi bars.
    Wish I had noticed earlier – could’ve made a bunch …..

  165. Good question about the DIA’s amatta. I’ve got 100 my second time around and I’m debating taking the gain or keeping as a hedge to my AAPL calls.

  166. SAM making a nice recovery.  Very nice play Phil….

  167. Highlander, what is your take on AAPL with today’s move? I am naked now on the Mar 355′s (closed the weekly 360′s today). Would you sell this week’s 355′s against the longs (as per your previous comment about the release of the Ipad not happening until Friday 5pm). BTW, But doesn’t the market always get ahead of itself and runup before announcements? 
    Thanks for your insight…

  168. Oil $103.97!  Wheeeeeeeeeeeeeeeeeeeee!!! 

    Kinect/High – No way was I giving him credit.  Credit the board of Directors who forced him to give autonomy to divisions (where there are many bright people at MSFT) who are now, finally, getting a few things right.  

    Damn, the AVERAGE net worth of the Forbes 400 is $3.5Bn!  

    Comments/ZZ – I think it’s more a gage of volatility (real volatility, not the BS VIX measure) than of any kind of market direction.  When things are popping or dropping, we get more comments.  

    FXI/8800 – There have been some huge, concentrated up moves in the China indexes and that has driven FXI up in a few strong gaps.  I’m pretty sure they are exhausted at $45 and we did an FXP play yesterday I think (and see above news for many reasons why).  

    DIA/Amatta – Yes, I would stick with the $120.75 puts, now .90 as we are still happy to DD on a spike up in the morning at .70 and, of course, maybe this is just window dressing for the futures expiration and we’re off a cliff tomorrow morning…

    Nice USO adjustments Mampcs!  

    SDS/Amatta – That depends on how much protection you need.  At the moment, the April $23 puts are $2.25 so that puts about $3K in your pocket if SDS heads north.  They can roll to the Sept $20 puts (now $1.75) so not a lot of worry unless the S&P goes up 7% more (over 1,400) so it’s just a matter of whether you feel you need more protection.  In which case, I do like my morning disaster hedges better than SDS as a protection play.  

  169. Amatta has some nice brokers

  170. HOV – what do do about these in the $25KP?

  171. SAM – That was $2 so I don’t want to hear any whining from the greedy people! 

  172. HOV/Scott – Well they were up again today so we’ll see.  

    Well, that was a fun day!  

    Later all…

  173. Phil, in the confusion reg FAS this morning, I bought rather than sold (as I mentioned earlier, I thought your instructions were to buy). Worked out well, FAS up slightly by the end of the day and I sold for a profit.  Just thought I’d let you know…

  174.  Thanks cnar… Yes this bastards at Schwab have cost me dearly…. today it was $1,200 on those unfilled USO’s… 

  175. FAS/Jercon – As the saying goes: "I’d rather be lucky than right."  

    At the close: Dow -0.01% to 12213. S&P -0.14% to 1320. Nasdaq -0.51% to 2752.
    Treasurys: 30-year +0.66%. 10-yr +0.45%. 5-yr +0.28%.
    Commodities: Crude -0.93% to $104.04. Gold +0.16% to $1429.50.

    Currencies: Euro -0.01% vs. dollar. Yen -0.04%. Pound +0.28%

    Market recap: Stocks finished lower after chopping along in a narrow range, unable to sustain any upward push even though oil prices pulled back. Downward guidance from Finistar and Texas Instruments sank tech stocks. Copper dropped nearly 3% on concerns that Chinese demand is waning as stockpiles build. NYSE declining issues led advancers three to two.

    New Zealand cuts its benchmark interest rate 50 basis points to 2.5%, citing growth concerns in the wake of the Christchurch earthquake. The kiwi plummets but quickly bounces back as the move was not totally unexpected. Kiwi ETF: BNZ -0.1%. Shares ETF: ENZL -0.7%.

    Microsoft (MSFT -0.1%) sells more than 10M Kinect motion-sensing game system units worldwide in just over four months, making it the fastest-selling consumer device ever. Although sales appear to be slowing a bit, the big user base has the potential to breathe new life into the Xbox platform and broaden its audience beyond hardcore gamers.

    No news is bad news for Nvidia (NVDA -2.2%), as shares slide following a company presentation that was upbeat but failed to update financial targets. Nvidia is still seen as well-positioned to gain from major tech trends; J.P. Morgan had even issued a mea culpa for its prior bearish view, "as the company significantly improved its technology and product roll-outs in the second half of last year." 

    Molycorp (MCP): Q4 EPS of -$0.03 beats by $0.04. Revenue of $21.7M (+886% Y/Y) beats by $8.3M. Shares +4.8% AH. (PR

  176. Mampcs/ Anybody
    where do you see the actual number of options for each expiration.. is it level II quotes? I am on shwab but only Open Interest and volume is apparently what I can see..

  177. Phil--great call on HRB!

  178.  Amatta, It’s the same as open interest.

  179. Chinese Ministry of Truth / Phil – "Four legs good, two legs better!"
    Peak Oil – Read the article which doesn’t refute the basic premise of a finite amount and declining production but is more hopeful for our ability to switch to alternatives than the documentary I saw ("Crude Awakening"). The film itself was somewhere between there and the doomers, just knew I needed to balance it out as all the experts were in agreement. Wanted to hear another point of view. Conclusion on long-term outlook for oil: very expensive  – you might have to cut back on those $500 dinners you’re so fond of ;-) ) (is that a double chin?)

  180. amatta – Don’t know which platform you’re using but you want to look for Open Interest.

  181.  HRB is flying after a big earnings beat.  Great call Phil.  

  182.  Hey Phil, this is Craig,  I am reminding you to hook me up with author rights :) .  Thanks in advance.

  183. Amatta
    Things I learned about various brokers
    Tradestation has great graphs and tools but sucks at options.  They are also very strict about option rights.   The only thing I was allowed to do was covered calls and that was after begging.  Tradestation was originally designed for futures and equitiies.  Customer service is weak.  the reps are not experienced traders or investors.
    If you open up a TOS account do it thru TOS not ameritrade.  Different commission rates. 
    TOS was designed for options.  Customer service is excellent compared to others I have had.
    Noble trading.  Graphics are weak compared to tradestation.  commissions are ok but negotiate before opening.  shoot for at least 1.00 per option contract.   Liberal with option rights.   Software was created for BofA,  Customer Service was good.

  184.  Phil:  I’ve been short the energy complex this week, principally on the basis of your [over] supply concerns, which a few days of further research seem to indicate were justified.  So I’m in.  This could be a long run down; what would you have to see to get long [or at least neutral] again? 

  185.  Anyone want to come up with suggestions to place bets in both directions on SPY, playing for a breakdown (say below 131) or a breakout (above 133).
    Cause I think one is coming soon …
    Would love some good spread or other ideas for hedging this.
    My brain is too fried to think this thru for myself right now !  LOL

  186. thanks for walking thru the options regarding my SLW play, i just needed to understand the risk with adjusting the play.  looks like best to leave it alone and wait for the profits.
    as far as the FXI play, i end up with it after trying to adjust it back in dec/jan when FXI was falling.  it was a long uncovered bullish play from 2010 (jan2012 45 calls at 4.26), i sold the may 45 calls for$1.02 to hedge the position thinking FXI would continue to decrease until the oil corrects, but  FXI started back up in mar. i guess the middle east crisis is over. 
    i was thinking to sell the may 45 calls at 1.50 (loss of 0.50) and buy the apr.45 calls for 1 (delta 0.44 and theta 0.02) and then continue to roll it up to apr.46 if FXI continues up

  187. Cap:  Consider buying a Spy April 132 straddle,  debit 5.92,  breakeven at weeks 1   129.28, 134.67
    week 2  127.95. 136.00         week3     127.00,  136.91       week   4    126.47, 137.52

  188. Cap:  adding a sale of a longer (such as Sept) straddle, or strangle to help offset the cost

  189. Tommyt  /  phils has mentioned his hedge fund a few times on here can anyone tell me where to go to get info on investing in it./thanks

  190. SORRY

    thanks for walking thru the options regarding my SLW play, i just needed to understand the risk with adjusting the play.  looks like best to leave it alone and wait for the profits.
    as far as the FXI play, i end up with it after trying to adjust it back in dec/jan when FXI was falling.  it was a long uncovered bullish play from 2010 (jan2012 45 calls at 4.26), i sold the may 45 calls for$1.02 to hedge the position thinking FXI would continue to decrease until the oil corrects, but  FXI started back up in mar. i guess the middle east crisis is over. 
    i was thinking to buying back the may 45 calls at 1.50 (loss of 0.50) and selling the apr.45 calls for 1 (delta 0.44 and theta 0.02) and then continue to roll it up to apr.46 if FXI continues up

  191. amatta,
    action today indicates APL can be pinned @$350 this Fri but depends on soft.flat market. Anticipation of weekend sales of i-pad 2 may force AAPL up but traders know that Fri is also beginning of Spring break for many kids who might otherwise be in AAPL stores.If AAPL pins on Fri and sales are strong over weekend than Mon should see a pump in AAPL price and a good selling opportunity since (as pointed out by Phil) between Mon’s preliminary  i-pad 2 sales and AAPL Earnings (projected on 4/19) there will be little to no news to support stock’s price!!

  192. Tommy – For Phil’s hedge fund you have to contact greg.  He’s admin at  

  193. Nice move Wisconsin….G.O.P. Tactic Ends Stalemate in Wisconsin Union Fight

  194. HGSI gets FDA approval…..first lupus drug in many, many years.  $35K/yr for treatments.

  195. Phil – just found out that this in app subscription cut Apple is now demanding only applies to publishers. Not sure what this means for something like a newsletter (publisher = newspapers and magazines?) Something to think about…

  196. Wisconsin – Law will be immediately challenged and will undoubtedly land in the state supreme court. The procedural claim is that stripping unions of bargaining rights has no fiscal impact and the 3/5 quorum is only required for bills that do have a fiscal impact. Interesting approach by the Republicans since they’ve held all along that they need to strip bargaining rights from the unions in order to balance the budget.
    On a more enlightened note, Illinois has outlawed state executions. Given the built-in inequities and numerous overturned convictions, there is no longer any faith in the capital punishment system. I hope the other 34 states that continue to execute will soon reconsider.

  197.  Pharm, I have had my eye on HGSI – but just could never pull the trigger.  35k year may seem like a lot of money unless you have Lupus – the question becomes, is it a moral right to have this new drug?

  198.  Heard on macro: "For the time being, and until it stops working, selling the rips in China and buying the dips in the US, feels like the easiest way to make money in this choppy period."

  199.  Wall Street Journal – Is is just me or has anyone else noticed the WSJ getting bashed a lot for poor journalism.  I’ve seen 3 blogs bash them in the past couple of days for three different stories that were off the mark with their shoddy reporting.     

  200. It is interesting to see the same republicans who filibuster everything that comes from the Obama administration go with the “nuclear” option when faced with similar tactics in Wisconsin. I guess they will not hesitate to do the same if they ever regain control of the senate and do away with the 60% “majority” as needed. If you cannot convince people, disenfranchise them or simply change the rules. It is disheartening!

  201.  thanks humvee; will look at it. 
    meanwhile, futures are down tonite.

  202.  oil futures back up : /  the only thing positive about that is maybe we get another shorting opportunity tomorrow…..  : )

  203. Jo – approval was a forgone conclusion…The question was how much is built into the stock.  CLDA went to $30 on a depression drug (another one).  They are a $4B stock now, so……what else do they have in the pipe…I smell an article!


    Futures, yeah, they are Cap 1% almost.  Asia is getting another haircut.

  204. Phil,
    I am hoping you are writing about our "Democratic" process in Wisconsin. I am sure Republicans will  announce pay and benefit cuts for all legislators, since they too are paid with tax payer money.