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Which Way Wednesday – 1,333 or BUST!

SPY 5 MINUTEGo S&P!  

As you can see from David Fry’s chart, yesterday was a wild day and we sold that pop and made a nice day’s trading out of it but we got the hell out at the close because we know how this game is played and the gains they fail to take when the market is open – they are more than happy to manipulate after the market closes.  

Aside from the 0.6% pop in the futures (8am), they slammed the Dollar down from 76.4 yesterday morning to 75.80 now and that’s a 0.78% drop in the Dollar just to get the market back to where it was yesterday – that’s pretty pathetic folks!  Already this morning, in Member Chat, I reminded Members to play the oil futures (/QM) short off the $108.50 line and we got a nice drop back to the $108 line exactly before stopping out and now we’re back to $108.50 where we can SHORT IT AGAIN!   

See, it’s fun to play with the manipulators…  Also in chat this morning, I reminded our Members why today is "rollover day" for front-month options (the ones we own, not the ones we sold to suckers):  

It’s not Wednesdays per se but the Wednesday before expiration day that we like to adjust. This is the day (10 days to go) when front-month premiums go into rapid decline so it’s madness to hold a long put or call – if a move goes against you, you have no time to adjust or recover. It’s a time when the next month is usually a reasonable price to roll and very often that roll can be still be paid for by selling those last 10 days of premium to some other sucker. As a rule of thumb, if you are in a front-month position on the Wednesday before expiration and you don’t like it enough to roll it to the next month – it’s time to cash it out.

To that end, I’ve already sent out a note this morning with adjustments to our $25,000 Virtual Portfolio, which has been getting battered by being too bearish on the Dow and oil as well as riding the bucking bronco that is FAS!  We’ll see if the S&P breaks our heart and finally holds 1,333 today.  As you can see from our Level Chart – the RUT is near completing a 10% run off the nuclear lows of mid-March and the S&P did stop right on the 100% line yesterday so it’s all about holding it today to prove this market is not just a creation of Goldman Sach’s HFT machines and may actually have some legs.

We do believe in the long-term inflation premise that will drive the markets higher but we don’t believe that the market is pricing in enough fear and we are worried that poor earnings reports will shock the market back to reality.  Just yesterday, KB Homes (KBH) reported that they lost $1.49 per $11.70 share last quarter so housing isn’t just dead – it’s still sucking up cash!   

Monsansto (MON) was in-line this morning and we hear from BBBY, BLUD, PBY, RT and WDFC tomorrow and then STZ, MOV, PIR, PSMT, RAD, BGP and NCTY tomorrow – a nice range of consumer stocks to watch ahead of the real start to earnings season next week.   With the huge pop I see in the Nas this morning, today is a great day to buy the SQQQ May $23 calls for $3 or less – I’m excited about that one and you can probably sell the $23 puts for $1 and then, if we get a bounce, the $27 calls for $2 and then you have a free spread to protect the downside.  

We went over the Fed minutes yesterday in Member Chat and I got a very different impression of what the Fed was saying than the one the markets are running with this morning.  In the minutes, it said:  

The Manager indicated that the greater depth and liquidity of the Treasury securities market suggested that it would not be necessary to taper purchases in this market. The Manager noted that market participants appeared to have reached the same conclusion, as they generally did not seem to expect the Federal Reserve to taper its purchases of Treasury securities. In light of the Manager’s report, almost all meeting participants indicated that they saw no need to taper the pace of the Committee’s purchases of Treasury securities when its current program of asset purchases approaches its end.

I suppose the Fed is being purposely obtuse but what does the word "taper" mean?  At the beginning of the paragraph it says:

The Manager also discussed the possible benefits of gradually reducing the pace of the Federal Reserve’s purchases of Treasury securities when the current asset purchase program nears completion. As its earlier program of agency MBS purchases drew to a close, the Federal Reserve tapered its purchases during the first quarter of 2010 in order to avoid disruptions in the market for those securities. 

In other words, when QE1 ended, the Fed gradually wound down the program because (as they ultimately decided with QE2) the need for additional stimulus was still there.  Now they not only do not see the need for QE3 but they don’t even see the need to gradually end QE2 – rather they intend to pull the plug and wrap it up as soon as the last of the remaining $300Bn is distributed.  This is the clearest indication yet by the Fed that QE2 is the end and we’re on our own in the second half of 2011 but their clever use of the word "taper," which means very little to foreign investors or, apparently, the MSM analysts in this country, has everyone acting as if the punch bowl isn’t going away in 90 days.  

Portugese bond purchasers get it.  They asked for, and received, 5.1% for 6-month notes this morning, up 70% from the last sale at 3% just 45 days ago.  A move like that in US paper would cost us $300Bn a year in interest alone!  Amazingly, Scott Wapner on CNBC at 9:01 just said: "Portugal successfully auctioned off over $1Bn worth of bonds this morning and that’s giving the markets a boost."  Really Scott?  I can’t wait until the US is borrowing money at 15% – I’ll bet that will be some real rally fuel for you to report on!  

Speaking of rallies – Corn makes another new high which is pushing meat to all-time highs while our switch to ethanol (why eat what you can burn?) has dropped our stockpiles to the lowest level in 4 years.  We are pretty much a drought away from The Grapes of Wrath in America at this point…  

Meat is at all-time highs, so obviously feed usage isn’t likely to be rationed,” said Frank Cholly Sr., a senior strategist at Lind-Waldock, a broker in Chicago. “The ethanol grind isn’t likely to slow down as long as they’re profitable, so corn prices have to go higher.” 

Corn futures for May delivery rose 6.5 cents, or 0.9 percent, to settle at $7.6675 a bushel at 1:15 p.m. on the Chicago Board of Trade, the highest closing price on record for a contract closest to expiration. Earlier, the commodity reached $7.7075, the highest since July 3, 2008 (2 months before everything collapsed). Corn has more than doubled in the past year. U.S. supplies on Aug. 31 may drop to 589 million bushels, less than the USDA’s March estimate of 675 million, according to the average estimate of 30 analysts in a Bloomberg News survey. The government will update its projection for domestic and global stockpiles on April 8. The U.S. is the world’s largest producer, exporter and user.

Chinese beef consumption is driving Global corn demand as an entire United States’ worth of Chinamen are now dining at McDonalds and having steaks for dinner instead of chicken or port.  We have not only exported our jobs but our lifestyle and it’s not something China is likely to be sending back!  Of course, much of China’s progress is the result of the country reinvesting 50% of its GDP into new capital stock and Nouriel Roubini predicts a very hard landing for China within 3 years.  "China is rife with overinvestment in physical capital, infrastructure and property." Roubini says,  "To a visitor, this is evident in brand-new empty airports and bullet trains (which will reduce the need for the 45 planned airports), highways to nowhere, massive new government buildings, ghost towns and brand new aluminum smelters kept closed to prevent global prices from plunging."

It will take two decades of reforms to change the incentive to overinvest. Traditional explanations of the high savings rate (lack of a social safety net, limited public services, aging of the population, underdevelopment of consumer finance, etc.) are only part of the puzzle—the rest is the household sector’s sub-50% share of GDP. Several Chinese policies have led to a massive transfer of income from politically weak households to the politically powerful corporates: a weak currency makes imports expensive, low interest rates on deposits and low lending rates for corporates and developers amount to a tax on savings and labor repression has caused wages to grow much less than productivity.  

Whoever said that China would never be able to practice Capitalism at the same level as America – it sounds like they have it down perfectly!

 


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  1.  Oil lines:
    R3 – 109.73
    R2 – 109.16
    R1 – 108.63 (close enough Phil!)
    PP – 108.06
    S1 – 107-53
    S2 – 106.96
    S3 – 106.43
    Good Luck!



  2.  Updated silver chart – up to $40 we go. Just one stop until there…
    http://lemoyne-mappingthemarket.blogspot.com/2011/04/silver-resistance-line.html


  3.  Phil
    Whats your gut feeling today?
    If we break above 1333 on the S&P, are you abandoning your shorts?
    Is it then up up and up? If so, I am not seeing it, with all thats going on in the world , unless its all priced in.
    Do you think AAPL stays here till may
    Still reading you from India….got a Tata photon drive for internet now!!!


  4. PP for today, but do they really matter when AH trading messes things up?


  5. how much POMO today?


  6. Phil – Were those GLL calls just an overnight play? Should I just take the loss at the open or hold through the day?


  7. Phil:
    http://finance.yahoo.com/news/This-Teen-Retailer-Stock-wscheats-1517504500.html?x=0&.v=1
     
    It seems like the kids of the top 1% don’t seem to mind paying extra for their coveted sexually revealing outfits! Pretty robust outlook by ANF.


  8. Yup, nothing to see here, no inflation, move along…
    http://ftalphaville.ft.com/blog/2011/04/06/538081/qeased-commodities-chart-du-jour/ 


  9. What happened to all the traders…
    http://www.ritholtz.com/blog/2011/04/stocks-up-volume-down-2/
    I am guessing this doesn’t take into account the 5 trillions shares traded by HFT in the first 5 minutes every day… 


  10. We do not learn from our mistakes…
    http://www.ritholtz.com/blog/2011/04/the-warning-2/ 


  11. Pharm- what do you think of BTX?


  12. Good morning!  

    Nice $108.50 open on oil at the bell, nice to short the futures off that line and also I like USO WEEKLY $43 puts at .27 to play for a disappointing inventory as well as DUG May $25 calls at $1.85 as a longer-term play on oil falling.  If you want to be brave, you can buy a big chunk of DUG $25s with a tight stop ($1.60) and the plan would be to sell the $26 calls (now $1.40) at $1.85 and then you have a large, free hedge on oil.  So let’s say you buy $1,850 worth (10 contracts) and you are risking $250 but, if it works, you have a free $1,000 spread and all the cash back in your pocket.  

    I mentioned the SQQQ May $23s above and those are right at $3 so I really like them with SQQQ at $25.15, the $23 puts are .80 but you want to get at least $1 and if they don’t go up to $1, then you don’t need them to cover, right?  

    The only level we care about today is whether or not the S&P holds 1,333 and it’s looking good actually with the S&P opening at 1,338 but this is right where we topped out yesterday at 1pm and the volume this morning is just 15M on the Dow in the first 10 minutes so pretty meaningless where they open – it’s where we finish that counts.  

    If we do hold the S&P today, it’s time to go long on the Dow and we’ll deal with that later as it’s a big if – although it might not feel like it now, at the open.  

    I sent out $25KP adjustments earlier and we’ll watch and wait on FAS but XLF looks like its pinning $16.50 and that’s FAS $31 so no need to pay premiums earlier than we have to roll.  

    It’s going to be a crazy day but what else is new?  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    8:00 2011 Financial Markets Conference
    8:30 Chicago Fed Midwest Manufacturing Index
    10:30 EIA Petroleum Inventories
    3:00 PM Hearing: Community Banking 

    At the open: Dow +0.28% to 12428. S&P +0.34% to 1337. Nasdaq +0.56% to 2807.
    Treasurys: 30-year -0.1%. 10-yr -0.16%. 5-yr -0.1%.
    Commodities: Crude +0.28% to $108.64. Gold +0.61% to $1461.40.
    Currencies: Euro +0.45% vs. dollar. Yen -0.53%. Pound -0.19%.

    Market Preview: Futures point to a strong open, with benchmark S&P +0.6% and gold futures hitting a record high ($1461.30/oz. for June delivery). American Superconductor down nearly 50% premarket after cutting its outlook yesterday, and Monsanto -1%despite an earnings beatLater: EIA petroleum.

    Sixty stocks in the S&P 500 hit 52-week highs yesterday. National Semiconductor (NSM) is the leader after its proposed buyout by Texas Instruments (TXN), but some of the others might be more interesting, including Netflix (NFLX), Priceline.com (PCLN), Moody’s (MCO), Chevron (CVX) and AT&T (T). 

    MBA Mortgage Applications: -2% vs. -7.5% last week. Thirty-year fixed mortgage rate increased slightly to 4.93% from 4.92%.

    One day ahead of an expected ECB interest rate hike, the euro hits levels not seen since early 2010, pushing through $1.43 before falling back a bit. Euro currently buys $1.4292. YTD: FXE +6.5%EU +8.2%,EUO -12.7%

    Fears of monetary tightening in the EU and U.S. – particularly in the EU – should be faded, says Marc Chandler. Tomorrow’s hike from the ECB may be a tasty buy the rumor, sell the news moment, with the possibility of a euro sell-off unless Trichet indicates a series of increases.

    Portugal manages to sell €1.05B of 6 and 12 month bills, but pays a sharply higher rate than the last time it came to market, the 6 month bill yielding 5.1% from 3%, and the 12 month jumping to 5.9% from 4.3%. 

    U.K. shop-price inflation, a private survey of consumer prices,falls for the first time in 4 months. the Y/Y rate dropping to 2.4% in March from 2.7% the previous month. At levels not seen since 2009, cable drops sharply on the news, now buying $1.6313. Shares are at multi-year highs, +0.7%.

    Against expectations for a small increase, U.K. industrial production falls 1.2% in February, the most since August 2009. The ONS blames a sharp drop in oil and gas extraction. One day after rocketing higher against the euro, cable gives up nearly all of its gains.

    Ireland nixes chatter a cut in the interest rate on its bailout loan may come this week, saying not to expect any action until June. What’s left of the Irish banking system continues its powerful run since more government capital injections were announced. IRE +6.1%AIB +5.1%.

    Swiss inflation rises a faster than expected 0.6% in March, bringing the Y/Y rate to 1% as a strong franc fails to insulate the country from percolating world inflation. The swissie shoots higher, sitting near record levels against the greenback, now buying $1.0916.FXF +13.5% Y/Y. 

    Rising along with the entire commodity group, gold touches another record, currently at $1,458/oz. "Unrest in (MENA) and the debt crisis in euro-zone peripherals, coupled with the weak U.S. dollar and still loose monetary policy of western central banks, are fueling speculation," writes Commerzbank. 

    Expanding its product team by 1/3 and setting up a trading office in Shanghai, Citi (C) gets set for continuation of the commodity boom. "People are looking at commodities as an asset class for diversification," says an asset manager (unsure if that quote was from yesterday or 2008).

    With Chinese shares up nearly every day for the last 2 months (a 12% run), Macquarie declares it safe to go in the water, raising China to market-weight from underweight, as it expects monetary tightening to end soon. China +1.2%. China ETFs here.

    A secret assessment of the Fukushima plant prepared by the NRC says measures being used to cool the reactors make them more vulnerable to aftershocks as well as increase the chance of explosions. "This paints a very different picture (from Japanese reports), and suggests that things are a lot worse," says a nuclear engineer.

    Moody’s puts Toyota (TM -0.8%) on review for a possible credit downgrade, citing the likely financial impact of Japan’s earthquake and tsunami. Moody’s is also monitoring the disasters’ impact on Honda (HMC-2%) and Nissan (NSANY.PK). 

    “We have been slow to make decisions, we have had surprises where we should not," John Chambers (CSCO +1.6%tells employees, but the "we" is Chambers and not anyone else, Doug McIntyre writes. Cisco has become a "schizophrenic collection" of unrelated products, and if Chambers doesn’t break it up, "it will show that, in his late age, he has no intention to repair the company." 


  13. Stephen Moore of the WSJ is a buffoon…
    http://www.ritholtz.com/blog/2011/04/stephen-moore%E2%80%99s-ode-to-the-american-workers-his-policies-harm/
    Why do we keep on having these guys on TV. Great stuff for future rants Phil! 


  14. Steve Moore – Even a Buffoon would take offense to that comparison…. :)


  15. What is the symbol on TOS for the oil futures trade?   Phil should I just hold on to my 25 April 41 USO contracts?
    Average price 1.40, no.18.  Do you see any chance of hitting below 105 on oil in the next 10 days?
    Thanks.


  16. Dollar rejected at 76 – commodities flying.  This is about the EU rate hike tomorrow.  Euro at $1.43, Pound $1.628 and 85.29 Yen to the Dollar Japan should be thrilled as they are way down to the Euro since the Quake.  

    Oil just popped $109 so that’s our new shorting line but they may be going for $110 into inventories so very tight stops, of course.  

    CNBC still spinning that the Fed minutes did not preclude QE3 – Maybe I’m misinterpreting – either that or EVERYBODY else is wrong?  

    By the way – please see yesterday’s comments for my ranting on what BS this all is and how this is just a spike at the top of the range etc., etc. because I really don’t want to be saying it all 2 days in a row.  Thanks!  

    Gut/Maya – Funny you should ask – see above.  I would stay away from AAPL for now.  Earnings will probably be spectacular but, if they are going to $500, you can afford to get back in at $365.  

    POMO/Jabob – $2.5Bn today, $7.5Bn tomorrow, none Friday and Monday is $8.5Bn and none Tuesday as the schedule ends (new one out Tues at 2pm).  

    GLL/CC – Yep, they did not work.  You can hold today and hope for a pullback but that’s it and with the ECB tightening (maybe) tomorrow, it’s a tough hold although you could say all that is baked in and the dollar comes back unless the ECB sounds ultra-hawkish tomorrow morning.   I’d say if oil sells off after inventories, then the GLLs are worth chancing but it’s a risky trade, of course.  

    ANF/StJ – That is some strange business!  The stores are like secret clubs with no windows around here – they may as well have bouncers and put up ropes….

    10:00 AM On the hour: Dow +0.29%. 10-yr -0.14%. Euro +0.49% vs. dollar. Crude +0.55% to $108.94. Gold +0.68% to $1462.40.

    Talking down the Dollar at 9:55:   Atlanta Fed President Dennis Lockhart says he does not see the need to raise rates before the end of the year amid a fragile economic recovery. He expects commodity prices to stabilize, and underlying inflation trends to remain subdued: "Inflation expectations short term are reflecting gasoline price movements… but longer term, they’re more stable and… reasonably healthy."

    "Current interest rates make it possible to conclude that the damage caused by the rejection of the austerity plan is irreparable," says a statement by Portugal’s finance ministry in the wake of today’s debt auction. All that’s left is a formal request for EU aid.


  17. $25KP adjustments – you mentioned these were send out to members.. but i have not seen or received any $25KP info yet. can this be posted here or check if sent to all members? thank you.


  18. Commodities StJ – Yep, that’s about the size of it, the largest rise in commodities since the economy was destroyed in the 70s, now eclipsing the time the economy was destroyed in 2008 (but that’s ancient history so we can’t expect people to remember that).  

    Fed/Jabob – See above.  I’m sorry but my read is 100% different from everything else I’m hearing.  I think the Fed very clearly said they are done in the minutes and this reaction by the markets is certainly not going to make them think that’s a bad decision.  

    Traders/StJ – Another frightful chart.  I’m pretty sure, at this point, it’s just us…  

    That’s a good video StJ!  

    Oh yay!  Die Nasdaq, die!!! Wheeeeeee!  


  19.  have this awful feeling that as soon as i capitulate everything is going to tank -
    we need a member poll of those capitulating.
    no need to reassure me Phil – I dug my own hole


  20. QQQ can die.   CRIS lives on!!!


  21. Phil
    What was the official roll on GMCR ?
    Thanks


  22. Phil- I was an idiot and thought UAL would participate in this rally…. Obviously there is a negative correlation btw oil and the airlines. I have the Sept 30$ UAL calls for a cost of 1.19, would you double down here, leave it alone, or throw in the towel and close the position? Thx


  23. $25KP update – yikes! just found gmail had dropped this into spam folder.  Grrrr…


  24. Moore/StJ, 1020 – Thank goodness Barry has time to deal with that BS or I would really feel compelled to.  Of course he says oil manipulation is "my thing" so I guess it all works out…  

    Speaking of oil, back to $108.67 with 10 mins to inventories – somebody was nervous.  They are expecting a pretty big draw, at least 3M net barrels or they are going to be disappointed.  

    Oil/Lori – I’m using /QM futures.  On USO, the Apr $41 puts (I assume) are just .14 so not much to be done with them at the moment.  We rolled out to May and sold Aprils in the $25KP but it’s a bit late now.  Pretty much, you’ll be looking at a new trade but you can makes some use of your puts by selling the Apr $43 puts for .65 and buying the June $41 puts for $1.33 so you are effectively selling your $41 puts for .65 rather than .14 and they become a buffer to help you stay delta neutral to the short Apr $43 puts which, of course, can be rolled to May $40 puts (now .55) if you have to but hopefully you’ll get away clean and make a new sale to pay for the rest of your long puts.  

    $25KP adjustments/Scott – Check Member Management and make sure your Email Preferences are set to get my Alerts.  Meanwhile, all Alerts come from posts and I try to do all $25KP Alerts from the most recent $25KP post which is, of course, under the Portfolio Tab at the top of the page.  

     LOL – BUILD in oil of 2Mb and gasoline down 200Kb and distillates up 200Kb so major disappointment! 


  25. Hi Phil do you adjust CMG or wait  at this point thx


  26. Pharm:
    CRIS! Nice! Bought on last dip. Thank you.


  27. Pharm,
     
    I am loving the move in CRIS and I love the company’s long term prospects.  I am in with a 50% increase on a position less than 2% of my portfolio.  I should probably take some gains here but when you read the literature on CRIS and the way they are targeting cancer signaling mechanism’s to combat the disease, it seems that this company has a unique and perhaps extraordinary approach to fighting the disease.  It may sound greedy but I think they have a long run ahead of them that may take place over many years to come. Since it is such a small portion of my portfolio, I am considering sticking with the position long term.  Your thoughts??


  28.  Phil, do you ever look at the McClellan Oscillator?


  29. Finally, USO takes a downturn!  Generally its Oil down, USO up. 


  30.  Phil – Thanks! Nice MoMo on USO put .


  31. CSCO finally rising from the dead!!


  32.  Phil – Any thoughts on ECB tomorrow?  While I have a lot of time on my may DUG Bull Call Spread, I’m hearing if rates go up, oil may rocket higher.


  33. Phil,
     By the way – please see yesterday’s comments for my ranting on what BS this all is and how this is just a spike at the top of the range etc., etc. because I really don’t want to be saying it all 2 days in a row.  Thanks!
    We have been here before and why I still wanted to balance (not capitulate) on my short stance… we always seem to be going against the current (BS and all)-- in January we fought the market until capitulating way higher on the DIA puts and losing a bundle. 
     
    Maybe it’s me, but I keep seeing that even though we move past some stated levels, there’s something else always to 


  34. Phil – if it cost .60c to roll long FAS May 31s down to 30s is that a wise thing?


  35. Phil
     
    A thought re the word "Taper"  in the Fed minutes
     
    I think the word "when" in the last sentence of the Fed comments is the confusion about a "new" QE starting or and an end to the present program.
    One could interpret the sentence to mean they will keep the same amount of QE flowing "when" this one ends.
    They could have used the word "as" if they were talking about not tapering the current program.
     
    Probably meant to leave one confused so half the people interpret it one way and half the other — hence no reaction.
     
     
    In light of the Manager’s report, almost all meeting participants indicated that they saw no need to taper the pace of the Committee’s purchases of Treasury securities when its current program of asset purchases approaches its end.


  36. Phil,
     
    What’s you thoughts on TBT?  Was thinking it might be a good buy if interest rates rise.


  37.  Phil, I’m still short 40 FAS weekly 30 calls in the 25KP (missed the roll to the April 31 calls it seems). Also short 40 weekly 31 calls. Should i roll the 30 callers to the April 31 callers (got more expensive today)?


  38. Phil,
    Speaking of shorts, I have the following next week expiration shorts to see what you see as a roll or wait for sa potential pullback (I guess if S&P is below 1333):
    SLW short 42 Calls (sold for $2.10) 
    WYNN 125 Calls (sold for $3.75)
    1000 long TZA (net 42.60) covered by 10 next week 39 Calls (sold for $3).  
    OPEN 100 C’s (net 2.40) 
    Thanks


  39.  the bottom line is the fed is out to devalue the dollar – we have known this for months - 
    it’s going to jack up stock, create inflation, and make our companies more competitive - 
    yes, it is going to end very badly but not necessarily for stocks -
    I would think that once qe2  ends and rates start going up – everyone’s margins would get squeezed – but who the hell knows with the way we are printing money -
    Bottom line is we have inflation – it’s not bad for stocks necessarily and 
    I have been fighting the fed for months by being short – which is just idiotic on my part.
    I am guilty of conflating a negative outlook for the country/economy with a negative outlook for stocks -
    They just are not the same – don’t let you macro view cloud your investing decision too much or make sure your turn your macro views into investable ideas – i lost a ton of money by conflating these two things and i would rather be rich than right! Although apparently not by looking at my actions.


  40. IWM at lows of the day!


  41. Wow, look at NFLX rejection from 250 to 240!


  42. TBT back near $38 – At least one group of traders is a little realistic.  

    Berkshire getting slammed as now they are questioning stocks Charlie Munger bought!

    Capitulating/Samz – Look what oil did right after inventories.  It got bad news, it shot up and now it’s dropping hard.  That is the hyperspeed version of how a market drops.  Before it drops they spike it up to trigger as much covering as they can because when you capitulate – what are you doing?  You are buying at the top, becoming the bag-holder for all the people who jammed the market up on you.  That’s why you should never be more than 60/40 or, at worst, 70/30 bullish or bearish and capitulation should be moving towards 50/50 and then gradually to 60/40 – by reinvesting your winning side in more winning side plays.  Even if you are 70/30 bearish and the market jumps up to the point where you lose 1/2 of you longs (35%), you are still going to double up on your hedges (better if you have some aggressive disaster hedges) and that’s + 30% so what have you lose for being "horribly wrong"?  Just 5% overall.  By scaling into positions, we are most heavily invested after a big move against us and, in that final round, we either get our payoff or it is time to capitulate and take more bets on the other side.  

    Dollar slapped down again to 75.725 – that’s saving oil and the indexes at the moment.  Euro on the march at $1.433.

    Oops, TZOO fall down go boom!  

    GMCR/QC – See above directions for finding $25KP update.  

    UAL/Jrom – I’d sell the May $23 for .92 and roll the $30s down to the $25s for about the same.

    Spam/Scott – You need to see if you have a "white list" you can add us to.  

    CMG/Gucci – What’s your position and basis?  

    McClellan/Rustle – Sure, why? 

    You’re welcome JJ – those are fun when they work.  I think the ECB hike is more than baked in already and rising rates are usually growth negative and that’s not good for oil prices (in a real world, of course).  

    Balance/Amatta – Well the Dow is the big laggard and you can play the DDM July $60/65 bull call spread at $2.70 and sell the DIA Sept $110 puts for $1.95 for net .85 on the $5 spread and there’s your bet that the Dow doesn’t go below 11,000 by September.  I do not in any way shape or form endorse this trade at this time as I do not feel the Dow is going to continue higher before it pulls back but I am sick and tired of you asking for an upside trade so this is here completely against my better judgment to shut you up so please don’t come back to me in September and tell me you lost your ass on this trade which I "recommended" for you. 

    FAS/Morx – No.  .50 per $1 is the most you should offer.  

    When/Ban – Yes but the when is a definite date.  They are talking about $300Bn at $80Bn a month (as of that meeting) and that’s about 3 months from now.  Of course they are trying to be vague but I don’t see "half" the people one way and half the other – so far I see EVERYBODY interpreting this as QE3 and I think they are all nuts.  

    TBT/Exec – $36.50 is our buy point, $37 is good too and you can still sell puts that net that out in various months but, if you are patient, we’ll probably be back there again as the thing goes up and down like a jackhammer.  

    Rolls/Amatta:

    • SLW I would roll along (not until last minute of course). 
    • WYNN same. 
    • TZA we discussed.  Your net is now $39.60 and TZA is at $33 so you can sell Jan $35s for $8 and reduce to $31.60 as that puts 20% back in your pocket right now and then you wait and see what happens.  If you get called away, it’s another $3,400 gained (10%) and, if not, you pull another 20% off the table and see if you get called away next year.  That’s assuming you don’t want to sell puts, of course.  
    • OPEN you shouldn’t be in as it’s yet another MoMo that kills you every time.  No biggie though as the $100 calls are $11.30 and will probably finish at $10 or less and you can roll those to the May $110 calls, now $9.30 for $1 and you still have net $1.40 if they expire worthless.  

    11:00 AM On the hour: Dow +0.4%. 10-yr -0.24%. Euro +0.87% vs. dollar. Crude +0.07% to $108.42. Gold +0.49% to $1459.60.

    EIA Petroleum Inventories: Crude +1.95M vs. consensus of +1.6M. Gasoline -0.36M vs. consensus of -1.7M. Distillates +0.2M vs. consensus of -0.3M. Futures +0.25% to $108.64

    "The surge in oil prices since the end of last year is already doing significant damage to the economy," says Mark Zandi. A recent poll has 71% of Americans cutting back spending to balance the hike in energy costs. May crude has its eye on $109/bl. USO +1.0%OIL +1.0%

    Even Joe LaVorgna sounds like he’s getting ready to cut U.S. GDP: "We are currently projecting +3.8% on Q1 real GDP growth, but we are worried that in light of recent weakness in Feb. construction spending and March unit motor vehicle sales, we are about one percentage point too high." But that adjustment would still place his GDP at the optimistic end of the forecast range

    The green across the commodity screen has the Canadian dollar surging again, blowing through the $1.04 level and headed towards its epic late-2007 high of $1.09. Canadian STIR futures aren’t expecting sharply higher rates as the BoC may feel the strong loonie is doing the job for them. FXC +0.6%.

    Not being left out of the commodity currency party, the aussie is up sharply, hitting an all-time high of $104.34; FXA +0.8%. The flipside of these currency rallies – the dollar is getting beat with the ugly stick,UUP -0.5%, hitting the low point since its creation. UDN +0.4%.

    Warren Buffett reportedly warned employees last year not to invest in companies that Berkshire Hathaway (BRK.A) might invest in, suggesting that David Sokol didn’t follow directions when he invested in Lubrizol (LZ) shortly before he urged Buffett to buy the company. Also, Charlie Munger says he owned shares of BYD before Berkshire invested in the Chinese automaker in 2008. 


  43. Samz3700- lol, nice! I think you must be my twin brother from another mother b/c that is pretty much what I believe and have been doing. I drank some kool aid today though and went long oil at 108.225. Im thinking it goes past 109 again today. This will make up for the long /dx position I have……


  44. CRIS – I think it is prudent to take a 1/4 off here, and buy back on any pull back.  One bit of bad news, and they sell off in a jiffy,. only for us to get back in.  This is the way to play the biotechs at this point. 

    CERS – another round buying at 2.93, no more (2.97 currently).

    ARRY – spiked up yesterday to 3.42.  I expect them to move to $4.


  45.  I wonder if this is what a top feels like? Choppy choppy low volume action. Also, very strange synchronized plummet in big internet names just now (BIDU, TZOO, NFLX, etc). Being careful getting super committed to anything now. We could be basing and break out higher, or could be bouncing along the top ready for a fall….will be interesting to see which way we go. But, for the gamblers out there, the IWM April 85 puts at 1.00. An interesting value if we reverse soon, and even better if we reverse today! :)  


  46. Tx Pharm for CRIS


  47. Phil, I never got a roll on EGLE to may, makes sense going further out now doesn’t it? 


  48.  Amatta if you like EGLE why not go all the way out to Sept?


  49. hi sorry your backspread on CMG-- 5  April 240 short out,  5 April 270 short call and 4 long june 290call-- (0.75, 8.50, 12.12) — I was thinking still have time for next week to roll the april 270 short call or should I go ahead and roll to next month at higher strike. thx


  50. Phil:  In the 25kp, I love the way we have managed our FAS position. Even though the position is not moving in our favor, we still manage to make some money by selling weekly calls.  We are also holding DIA puts. Is there a reason you chose DIA instead of QQQ or IWM? The indicies are very much correlated. If we had chosen, QQQ or IWM, since they have weekly’s available, we might be able to sell weekly puts and manage that position, the same way we are managing our FAS position.  Would you consider switching the DIA puts to QQQ/IWM or is there a reason for preferring DIA? Apologize in advance if its a stupid Q.


  51. McClellan/Rustle – Sure, why?
     
    I’ve been following it for the last few months and noticed how accurate it’s been for the short term.  Right now it’s showing a very overbought market.  Was wondering even if we break those lines by a little today, do we start getting more bullish or is that reason to start getting more bearish?


  52.  etrading signals – Phil likes trading DIAs because he knows them VERY well, and can trade them easily without too much calculation. You will notice other people, like JRW, know and trade IWM. Its just a matter of picking one index options and being familiar with them.


  53. I think the MoMos were dumped to scare up cash to save the indexes.   That was a strange and synchronized move…

    EGLE/Amatta – Sure, if you are in April $4s, you’re just buying a new trade anyway as they are down to .05 so you want to go for Sept $3.50s at .55 and if you can sell May $20s for .20 or better, I would do that to cover.  

    And what Hanna said!  

    CMG/Gucci – There’s no reason to pay $9.50 for a call that’s only $5.70 in the money with 9 days to go.  Let the premium die – that’s what this trade is all about.  Just keep your eye on the roll you want, to the May $290s (now $10), which is a .50 credit but figure the real roll should be closer to $4 so once it gets to about $2.50 it becomes worth making sure the roll doesn’t get away but it’s very possible CMG tanks $5 and you don’t have to do anything.  

    DIA/Etrad – At the time, the Dow was looking weak and we had the April covers and the 4/30 covers to sell but it didn’t work out.  Don’t forget QQQ and IWM are both up way more than the Dow since then – we were counting on the Dow being weakest and it has been and, if we get a proper drop, they will be fine.  

    Speaking of companies who have way too much money:  BlackRock (BLK), already the world’s biggest asset manager,plans to double its $300B in U.S. retail business by 2014 with a huge expansion into old-line mutual funds and related offerings. Analysts agree the company (with some $3.6T in total AUM worldwide) now has a relatively smaller profile in U.S. retail. 

     "This is shaping up to be one of the most successful episodes of intervention ever," says a currency strategist reflecting on the 7% decline in yen/dollar since the G-7 took action. Sharply lower against all major currencies today, the dollar is clinging to unchanged vs. the yen at ¥85.22. FXY -0.7%

    Research from Bloomberg New Energy Finance suggests large solar-panel projects may surge over the next two years – with prices competitive with coal, and dropping by 50% to $1.45/watt to build by 2020. "We are already in this phase change and are very close to grid parity," says one CEO. 


  54.  Phil, looks like you missed my question :-)
     

    Phil, I’m still short 40 FAS weekly 30 calls in the 25KP (missed the roll to the April 31 calls it seems). Also short 40 weekly 31 calls. Should i roll the 30 callers to the April 31 callers (got more expensive today)?

     


  55. Phil,  Wow, so you think we go below 11,000 by September? a 12% correction? with inflation coming and all?
    Regarding MoMo’s, I have actually as I mentioned after much pain, done well with them (only on WYNN I am down overall, made money on NFLX, CMG, OPEN, BIDU)… Before I would panic as my positions were too big. Now I enter with 1 or 2 calls, and roll and DD if necessary…so thanks for those lessons. 


  56. PHIL
    Good Morning, USO 25kp. I,m long 20 May 41 Puts at $1.39 now $0.82, haven’t been able to sell any covers yet, any suggestions? Thank you


  57. DEPO – Sept 7.5/12.5 BCS paired with the 7.5 P can be bought for 1.10 for the $5 spread.  The CEO quit (for personal reasons) and I think they are trying to sell the company.  For easy math, at $9/share, 55M shares, that is $500M.  Neurontin was a $3.5B/yr drug.  U do the math.


  58. Phil:
    " Research from Bloomberg New Energy Finance suggests large solar-panel projects may surge over the next two years – with prices competitive with coal, and dropping by 50% to $1.45/watt to build by 2020. "We are already in this phase change and are very close to grid parity," says one CEO."  FROM ABOVE.

     
    What do you think of this comment. SPWRA may be gearing up for another run? Or is there anyone else you like in this sector? Thanks


  59. XES – taking a larger than usual knock. could this be a leading indicator for what’s to come with USO?


  60. I am buying shares of DEPO at 8.87.


  61. PLX – start accumulating stock in here.  Small lots.  they are at bottom.  Remember when we did this with CRIS.  Ok!


  62. I made 100.00 shorting CLF from yesterday’s high. Taking the $ and running. with my luck it’ll go lower :)


  63. Phil:
    Great call on SQQQ. NICE!


  64. Sometimes I feel like shopping….the past few days appear to have kicked me into high gear…..

     

    BSDM – now they are taking a haircut.  There was a GIG buy at 3.80.  They better hold it there, and then it will be time to DD our our entry and/or selling the Aug $5 Ps.


  65. Oh noooooooo – even LULU is falling!  Gosh, the way they drop 5% in an hour you would almost think that maybe these MoMo stocks aren’t really worth the money.  Nah, that would be crazy…   

    Mclellan/Rustle – I think it’s A great indicator but never fall in love with any single indicator.  In addition to money flows I watch MACD, Volume, RSI, and the moving averages on most of my charts and I like to see them all get into line before I decide it’s a trend.  

    Good point on DIA, Hannah.  With any index you use as a hedge (that you will be making quick decisions on) it is far, far better to get familiar with one index than to flip around to whatever you think is hot a the moment. 

    FAS/Mampcs – I expect FAS to finish at $31 so I sure wouldn’t pay a premium (or anything) on the weekly $31s unless you absolutely have to.  On the weekly $30s – they MUST roll so I’d look to get an even roll to the Apr $31s (now +25).   You have .10 of premium in the caller and their delta is .25 higher than the Apr $31s so it would take a better than .50 pullback for you to get an even roll while a move over $31.50 will cost you very little extra so that’s the line to watch before you "have to" roll.  

    11,000/Amatta – I do not think we go below 11,000.  I just think we go lower in the near term so it’s silly to take a long bet at the top of the run.  If I were forced – either at gunpoint of by annoyance, to take a long trade for fear we are breaking higher – that’s one I would take because I do think we hold $11K and that way it’s risking .85 to make $5.  That’s good as you are SELLING manageable amounts of premium on MoMos – that’s what you do do with them and, if you keep rolling and rolling – very few are going to bury you long-term.  

    USO/Cnar – Yes, I suggest you sell covers.  You are in cheaper than we are so I’d spend $1.85 to roll up to the July $43 puts at $2.65 and LOOK to sell the May $41 puts for at least $1 (now .82) but selling the April $44 puts if they fall below $1 first, probably at $109+ oil.  

    DEPO/Pharm – Excellent play!  

    Solar/DC – Notice it says 2020 and that the statement is based on $110 oil and whatever crazy price coal is.  If coal pulls back 20% then that parity estimate rolls back 10 more years.  Short-term – no one is laying out money for solar projects so we only want to buy them when they hit a dip.  Maybe if SPWRA breaks over $20 but right now ($17.75) I think it’s more likely they see $15 again if oil pulls back.  

    BIUD has a fun 10-minute chart!  Even POT is falling out of favor – now that is serious…  

    XES/Scott – Oil is being very silly here at $108.65.  Good for us as we get to load up the truck on shorts but look out when they break.  

    In fact, XOM $85 puts are not bad at .77.  XLE Apr $81 puts at $1.93 have little premium.  OIH May $164/159 bear put spread is $2.20.


  66. On the IBD 50 list of market leaders, only 3 are up today. Only slw has higher than average volume. The rest are down and 30 of them have above average volume so far


  67. Spam – double damn the damn spam filters. missed the GMCR roll when at the 3.10. don’t really want to roll yet here at 3.37. Grrrr!



  68. Phil:
    I read right over the part where it said 2020! Small detail! :) ! Thanks for pointing that out.
    I did a small gamble on the USO Weekly $43 puts from above. Would you hold that until weeks end? I do have a stop at .20.




  69. test


  70. is there a point at which we might sell some XLE puts or do you expect more falling?


  71. Nasdaq Rebalance Can’t Hide Tech’s Dinosaurs
    The Nasdaq 100 has become a haven for too many low-growth stocks
    Apr. 6, 2011, 11:12 am EDT   |   By Kevin Kelleher, Technology and Markets Contributor

    It’s not often that the curators of a closely watched stock index have to publicly confess that the index has grown so inaccurate it needs to be fixed. It’s even rarer when the fix results in the index becoming less relevant.
    That’s what happened Tuesday when Nasdaq OMX (NASDAQ:NDAQ), the publicly traded company that owns the Nasdaq stock market, declared it would undertake the first “special rebalancing” in 13 years of the Nasdaq 100 index. Such rebalances are triggered when a company comes close to taking up 24% of the index’s market cap.

    SPONSORED LINKS

     

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    In this case, that means a little stock called Apple (NASDAQ:AAPL). After the rebalance, Apple’s weight in the Nasdaq 100 will drop to 12.3% from its current 20.5%. Microsoft’s (NASDAQ:MSFT) weight will rise to 8.32% from its current 3.41%.
    That is kind of ironic, because the last time the index was rebalanced, in December 1998, Microsoft was the stock that had thrown the index out of whack. Between the Nasdaq 100′s creation in January 1985 and the 1998 rebalancing, it had risen more than 30,000%.
    Partly because that rebalance came just as Apple was beginning one of the greatest second acts in corporate history, its stock was greatly undervalued. As a result, Apple’s stock has risen 4,000% since that 1998 rebalance.
    Nasdaq says the new rebalance will cause the index to better reflect the actual weightings these stocks will have in the Nasdaq 100. And in some ways, the index will become an even truer proxy for the technology index than it was before. This is because tech stocks will now make up 61.9% of the Nasdaq 100, compared with the 59.5% ratio before the rebalance.
    Unfortunately, all of this overlooks a critical point. People look at the Nasdaq 100 not just as a tech index, but as a proxy for marquee-name growth stocks. Over the past five or 10 years, the tech industry has stopped being a haven for growth stocks.
    Unlike the 1990s, which was the last period that saw a sustained tech rally, the tech sector has really become two industries. One is made up of pioneers like Microsoft, Dell (NASDAQ:DELL) and Cisco (NASDAQ:CSCO) that are doing a bad job of keeping up with a sector where growth is coming from the “cloud,” the Web and mobile technologies.
    These stocks aren’t exactly the ones setting the tech agenda in the coming decade. Their price-to-forward-earnings ratios are below 10. Their net profits are flat or growing in the single digits. And some of them, like Microsoft, have resorted to enticing investors with dividends — the badge of the over-the-hill company. These aren’t growth stocks anymore, they are value stocks.
    The companies in the second technology industry are brands like Apple, Netflix (NASDAQ:NFLX), Google (NASDAQ:GOOG). They are doing a decent job of innovating in these areas — or at least keeping their heads above water. When people talk about innovation in Silicon Valley and the profit growth they bring, they mean companies like these. In particular, they mean Apple.
    Much of the coverage of the Nasdaq 100 rebalance centered on the news that index funds tracking the Nasdaq 100 will be forced to sell shares in overweighted stocks like Apple and buy underweighted ones like Microsoft. But so far the impact has been limited. Apple closed Tuesday down 0.7%, and Microsoft closed up 0.9%.
    Over time, the real impact of the rebalance might hit those Nasdaq 100 funds themselves. The index is no longer a proxy for tech growth stocks. It’s not even a proxy for tech value stocks. It’s just a collection of 100 larger-cap, mostly tech companies that happen to be listed on the Nasdaq instead of the NYSE or Amex.
    If for some reason that’s what you need in your investment portfolio, then this is the index for you. But for investors who want a piece of the future success in Silicon Valley — the explosive growth in mobile technology, the social web and cloud computing — there are much better opportunities around.
    They might start by considering a stock called Apple.


  72.  Swks down big today. See a downgrd to Hold by Kaufman yesterday morn but no news other wise
    How about  shorting May 29 P @ $2.?
    I was using this SWKS as a proxy for AAPl


  73. ISRG flying lately? any reason?


  74. Phil, Sell some Jan 70 puts on BRK.B on this selloff on the buy write awhile back? Thanks


  75. Pharm – ARIA has had quite a run.  I have 30% gain.  Sell it and wait for it to come back down?  what do you think it’s worth?  Thx.


  76. Phil,
    Third try to send this!!!
    Nasdaq Rebalance Can’t Hide Tech’s Dinosaurs
    The Nasdaq 100 has become a haven for too many low-growth stocks
    Apr. 6, 2011, 11:12 am EDT   |   By Kevin Kelleher, Technology and Markets Contributor

    It’s not often that the curators of a closely watched stock index have to publicly confess that the index has grown so inaccurate it needs to be fixed. It’s even rarer when the fix results in the index becoming less relevant.
    That’s what happened Tuesday when Nasdaq OMX (NASDAQ:NDAQ), the publicly traded company that owns the Nasdaq stock market, declared it would undertake the first “special rebalancing” in 13 years of the Nasdaq 100 index. Such rebalances are triggered when a company comes close to taking up 24% of the index’s market cap.

    SPONSORED LINKS

     

    Top Stock for 2011 – GTSO
    Desperate Search For Rare Earth Minerals Solved. Rare Opp…
    http://www.RareEarthExporters.com

     

    Hot Stock Celulas Genetica
    Stem Cell BioReactor Technology Organ Regeneration. Inves…
    http://www.TheStemCellGroup.com

    In this case, that means a little stock called Apple (NASDAQ:AAPL). After the rebalance, Apple’s weight in the Nasdaq 100 will drop to 12.3% from its current 20.5%. Microsoft’s (NASDAQ:MSFT) weight will rise to 8.32% from its current 3.41%.
    That is kind of ironic, because the last time the index was rebalanced, in December 1998, Microsoft was the stock that had thrown the index out of whack. Between the Nasdaq 100′s creation in January 1985 and the 1998 rebalancing, it had risen more than 30,000%.
    Partly because that rebalance came just as Apple was beginning one of the greatest second acts in corporate history, its stock was greatly undervalued. As a result, Apple’s stock has risen 4,000% since that 1998 rebalance.
    Nasdaq says the new rebalance will cause the index to better reflect the actual weightings these stocks will have in the Nasdaq 100. And in some ways, the index will become an even truer proxy for the technology index than it was before. This is because tech stocks will now make up 61.9% of the Nasdaq 100, compared with the 59.5% ratio before the rebalance.
    Unfortunately, all of this overlooks a critical point. People look at the Nasdaq 100 not just as a tech index, but as a proxy for marquee-name growth stocks. Over the past five or 10 years, the tech industry has stopped being a haven for growth stocks.
    Unlike the 1990s, which was the last period that saw a sustained tech rally, the tech sector has really become two industries. One is made up of pioneers like Microsoft, Dell (NASDAQ:DELL) and Cisco (NASDAQ:CSCO) that are doing a bad job of keeping up with a sector where growth is coming from the “cloud,” the Web and mobile technologies.
    These stocks aren’t exactly the ones setting the tech agenda in the coming decade. Their price-to-forward-earnings ratios are below 10. Their net profits are flat or growing in the single digits. And some of them, like Microsoft, have resorted to enticing investors with dividends — the badge of the over-the-hill company. These aren’t growth stocks anymore, they are value stocks.
    The companies in the second technology industry are brands like Apple, Netflix (NASDAQ:NFLX), Google (NASDAQ:GOOG). They are doing a decent job of innovating in these areas — or at least keeping their heads above water. When people talk about innovation in Silicon Valley and the profit growth they bring, they mean companies like these. In particular, they mean Apple.
    Much of the coverage of the Nasdaq 100 rebalance centered on the news that index funds tracking the Nasdaq 100 will be forced to sell shares in overweighted stocks like Apple and buy underweighted ones like Microsoft. But so far the impact has been limited. Apple closed Tuesday down 0.7%, and Microsoft closed up 0.9%.
    Over time, the real impact of the rebalance might hit those Nasdaq 100 funds themselves. The index is no longer a proxy for tech growth stocks. It’s not even a proxy for tech value stocks. It’s just a collection of 100 larger-cap, mostly tech companies that happen to be listed on the Nasdaq instead of the NYSE or Amex.
    If for some reason that’s what you need in your investment portfolio, then this is the index for you. But for investors who want a piece of the future success in Silicon Valley — the explosive growth in mobile technology, the social web and cloud computing — there are much better opportunities around.
    They might start by considering a stock called Apple.


  77. PHIL
    Im trying to make sense of what you just told me:  USO rolling the April 41 p to July 43puts I undrstand that. But selling the April 44 for $1.00 I dont understand . Aren’t you expecting oil to go down, what’s the logic of selling ITM puts, how would I benefit from doing that. Im not questioning your advice , I just would like to understand the trade. Thank you


  78. Phil,
    Looks like your site is rejecting all msg;s containing links?


  79. Pharm/CRIS – Time to take profits? I got in around 3.10.


  80. Phil / SONC – spike today thru 50MA.  time for another play on this one?  I’m not a big fan of retail but perhaps a buyout target. 


  81. Phil,  TZA we discussed.  Your net is now $39.60 and TZA is at $33 so you can sell Jan $35s for $8 and reduce to $31.60 as that puts 20% back in your pocket right now and then you wait and see what happens.  If you get called away, it’s another $3,400 gained (10%) and, if not, you pull another 20% off the table and see if you get called away next year.  That’s assuming you don’t want to sell puts, of course.  
    OK, a couple of things that come to mind are: holding TZA long term with the with the decay it has will be to my disadvantage? You think it is not significant enough to make a difference? if we finish the year another 10% higher on the RUT which I have no problem believing, that would put TZA at 23ish, and getting back the lost $9 would be at that point impossible wouldn’t it? 
    So as an option what about selling front month calls instead? 37′s for $2.10 If what puts would you sell against them? 
    Otherwise what puts would you think, in january I only see 25′s or 20′s, but don’t seem to pay too well for those 25′s only around $3.5? 


  82. wheeeee! Kill those MoMos… OPEN falling 4%!!! 


  83. Phil,
    How will next AAPL weekly options look compared to this week’s depressed ones since they they must face possible AAPL blow out revenue and profit numbers on the 20th? They become available tomorrow! Any plays on this?


  84. Thanks DC – even a blind squirrel and all that…

    Dow volume 80M at 12:35 – strongest day in a long time.  

    Spam/Scott – If anyone is a software person, I’d like to have an Email system that ONLY accepted emails from people you pre-approve.  Why should there be a spam filter – if I don’t know you, I don’t want your Emails – that’s pretty simple…  Same would be nice on telephones…  

    USO/DC – No, it’s a take the money and run trade on a nice dip.  Much mellower to have cash and buy back in on the next pointless move up.  

    Sell XLE/Morx – See above, I like the puts on them.

    QQQQ WEEKLY $56 calls at $1.10 have .07 premium and are a good way to play holding the $57 line (rather than stopping out of shorts on a bounce).  Very tight stops, of course and the idea is to protect short Nas positions from stopping out on a bounce off the line.  


  85.  Is it me or is the Bear call Spread GMCR April 72.5/70 at 0.15 a gift?


  86. Phil, with my FAS roll I was waiting as per our discussion to see what hapened with FAS by the end of the week with an eye to roll my 30′s to next week’s 31′s for even. With today’s gap up that is not possible, it seems the financials are the ones holding up the Dow no? So wait and see if they reverse?


  87. jjflash, they still have 7 days which gives them time to make 80$, be careful about ‘gifts’ with regards to stocks like NFLX, PCLN, CMG, and GMCR.


  88.  amatta – see Phil response:
    FAS/Mampcs – I expect FAS to finish at $31 so I sure wouldn’t pay a premium (or anything) on the weekly $31s unless you absolutely have to.  On the weekly $30s – they MUST roll so I’d look to get an even roll to the Apr $31s (now +25).   You have .10 of premium in the caller and their delta is .25 higher than the Apr $31s so it would take a better than .50 pullback for you to get an even roll while a move over $31.50 will cost you very little extra so that’s the line to watch before you "have to" roll.  


  89.  OPEN, NFLX – WHEE!!!!!


  90. ARIA & CRIS – depending upon the basis why not sell some, lock those gains, and wait for it to come back down.  See my comment at 11:18 on CRIS…..this is how I play biotechs.


  91. It seems interday that if IWM can hold over 85.10 we may go up, rersistance at 83.38 and 85 .60. I hope the low has passed.


  92.  jromeha , thanks.


  93. What a slimy run!  Are all momos failing or just TZOO and NFLX?  I guessing all!  While we are printing higher highs and higher lows on the indices.. what a slimy way to get there!  Is this thing real or what?  I would love to get all gung ho bearish but I’ve been trained to fear the unexpected.  You don’t know what to bellieve until it’s already happening.  Better yet, been happening.  F-ers.


  94. $300 Oil – so speculates former Suadi oil minster in quote from 4/5/11. Sounds like current Saudi leadership really want the US to know how much they mean to us.


  95. Phil, Never mind, I saw answer above to Mampcs re FAS… I will put an order for even… should have just done it yesterday as it was a net .10 credit…


  96. jjflash, where are you getting that spread on GMCR.. I am showing 1.80 at the midpoint… 


  97.  @Amatta – GMCR Apr 70 C is around 0.34, Apr 72.5 c is around 0.18


  98. Trend lines from yesterday and today point to 85.38 at about 2:30, usually when that many indicators point to a single point it is significant enough to push it’s point.


  99. SWKS/Ban – They are not cheap at $27.  I’d hold out for a test of the 200 dma at $25 first and then the put sales get attractive. 

    How is the VIX down today?  

    ISRG/Jabob – I don’t consider them a MoMo, they are growing fast and earnings are on the 19th and likely to beat and they are below last April’s highs when they were earning 20% less with cautious guidance.  

    BRK.B/Jomp – Sure on the puts but I like selling the 2013 $70 puts for $5 better as it’s the same margin and you collect 2x so the decay should give you the same $2.50 gain after a year but you have $2.50 more buffer to the downside and a lower delta if Berkshire pops down on you.  

    USO/Cnar – That was if oil goes up (it didn’t) to protect yourself.  Before you enter any position, you should have a plan for what you intend to do if you are right or if you are wrong and you should know what you are going to do at what price in either direction at all times.  

    Rejection/High – Depends on the links, just let me know and I can go get them.  It’s more than a certain amount of links – I just recovered yours.  You do need to tell me because once you are marked a spammer, it gets stricter on your stuff.  Also, double posting is bad, just let me know asap and I can rescue it. 

    SONC/Terra – I always like them, there’s nothing wrong with range-bound stocks to do buy/writes on!  SONC at $9.34 is good for an artificial with the Sept $7.50/10 bull call spread at $1.45, selling the $10 puts for $1.50 for a nickel credit on the $2.50 spread and worst case is you own them at net $9.95 but break-even is $8.70 because of the calls.  

    TZA/Amatta – It’s to your disadvantage if the RUT goes up or stays flat but if we get a pullback you’ll be complaining that it doubles and you aren’t making any money.  You can flip to a similar IWM trade if it makes you feel better.  If TZA does drop to $23 and you sell $5 more and then they drop to $15 and you sell $5 more and then they drop to $10 and you sell $5 more then you will be at net $15 on the $10 stock and you can DD for a $12.50 average – you can play what-if games for years – you are either comfortable with a trade or you are not and, if not, kill it and find some other way to make money.  Selling the front month gives you LESS protection against a big move up and you don’t get paid enough selling front-month calls to make it worth the risk.  As usual, you apply day trading logic to long-term positions.  An utlra ETF is no different than a MoMo stock and you set yourself up to get just as burned on these as you do with the MoMo stocks.  With this trade, you have no need to sell long puts until and unless the ETF takes another dip – THEN you will get better prices.  

    AAPL/High – Another dangerous stock.  Next weekly options are the April options, they don’t do weeklies on expiration weeks.  The only AAPL play I like continues to be selling the 2013 $250 puts for $22 with $25 of net margin.  That’s almost 100% return on margin and the worst case is you own them at net $230 (32% off).  Kind of hard to get motivated to risk more when you can just do that.  

    GMCR/JJ – It’s still a severe penalty if you miss.  Those are the kinds of trades where, if you do them consistently, when you do get hit it’s like an insurance company making a pay-out.  It hurts but it’s part of the game.  If you only do it once in a while though – it’s just a question of how many times you can be lucky before you get burned.  

    Oil held $108 – now would be the place to go long if you believe there is going to be a stick into the 2:35 NYMEX close.  

    FAS/Amatta – You can wait, it’s an acceptable risk but watch the levels I laid out. 

    And what Nicha said.  


  100. jjflash, Oh Isee, I thought you were doing a put spread… sorry


  101. Phil: I guess some big boys decided HCBK isn’t dead after all. Sure had the hell beat out of it though!


  102.  Phil,  with the TZA I am not trying to be difficult…I AM TRYING to learn. Before I would jump in without analyzing the different scenarios. YOU have taught me to look ahead and plan what you are going to do when things go against you. I am seeing that it is more likely than not that we end up 10% or even 20% up on the RUT, because of inflation and the economy worldwide picking up. So I felt I was strapping myself in to January with that expectation. BTW I thought you believed the same--that we are going up for the year? Where do  you see we are next Jan on the indices?
    I understand your points, what I am trying to do is break even on this hedge that didn’t work as we bounced back from Japan in a flash…  


  103.  MCSI EMU Index [EZU] has attracted $133M in downside money flow and EWU another $51M.


  104. Spam,
    Microsoft Outlook (not sure about Outlook Express) has a ‘Safe List Only’ setting under Junk Mail options, use that and you will only get mail from approved senders.


  105. Nicha/PFE:
     
    sorry for delay to your question yesterday on PFE. I was thinking of selling the stock and buying the /Dec. $15 c since there was only a small time premium. this would allow me to capture the gain on the stock and release about $15k to invest elsewhere,but Phil’s comment below convinced me to stay with my original game plan of owning the stock  and just keep rolling the call and put combo when they expire to reduce my original basis and keep getting the dividend, 
     
    PFE/Dflam – You are in for net $14.03/16.52 and you get a .80 dividend (5.7%).  I’m not sure why you want to blow that off.  The Sept combo is still $2.77 so still $1.32 in premium is 9% of your basis still to collect between now and September so, overall, you want to throw a virtually certain $2 away why?   When the premium is gone from the Sept combo, the 2013 $20 puts and calls are $5.10 so figure you pocket another net $2.50 (17%) for the next 15 months plus another $1 in dividends to push you well over $20.  Don’t forget, if PFE goes up and up from inflation, they increase the dividend and the options get more and more expensive all against your constantly diminishing basis.  Sell $2.50 every 18 months and collect another $1 in dividends and you are just 6 years away from having free stock that you can still make $3 a year against.  Isn’t that worth working towards


  106.  Phil: Taking painful losses
    I know you’re tired of hearing about FAS.  But I realized two weeks ago that what I hoped to be a learning experience just became more maintenence and day trading than I anticipated or wanted so decided to not to make roll to May and contain the damage.. my position, short  (20) 30 weeklies, which of course I can roll, (20) Apr 30′s and long 40 apr 32′s.  So now my max pain is $7500to kill it today roll the weekly to gain maybe$600 but then leave myself open to worst case pin at 32 next week losing $3800 more or best case expiry at 30 or lower and total loss of $3500.  I already feel like an idiot for getting involved in a position that has close to thirty trades to get so far behind but wanted to ask one more time for your thoughts before I make one more bad move. Thanks and in the future I’ll stick to the sell discipline I was getting so much better at.


  107. Phil,
    Assuming that one sells short the AAPL 2013 $250 puts per you idea, what monthly plays are then available (if any) that could leverage against this leap play and continue to tap into the high volatility of the underlying AAPL stock?


  108. GMCR – missed the 3.10 roll. decided to go edro style but with 60 strike: closed April $60 P for .33. bot may/june $60 calendar put spread (-10 may/+10 june) for .87.  After commissions is net $563 out of pocket to stay in this perky caffeinated game.


  109. Phil,
    Re AAPL 2013 Short $250 put, Schwab says that it would require me to tie up $5,600 per contract since 10% rule would have to apply on a position that far out.
    Did you factor this into your thinking?


  110. GMCR/edro – and thanks, edro, for sharing the calendar roll idea yesterday!


  111. Oil/Scott – Or the new Saudis will not limit production and flood the global markets and oil will be $20 again.  Well one or the other.  

    HCBK/Jbur – It’s amazing how long something can be "unloved" until suddenly it’s back in vogue and takes off.  Makes you realize what complete BS market efficiency theories are.  

    Still a weak bounce territory here,  just .20 on the Qs and .50 on oil calls ($108.50 is now the stop to the downside) and that looks like about all for the bounce so far but volume slowed down and still stickable….

    TZA/Amatta – So if you think the RUT is going up, why do you want to be in TZA at all?  You do understand that, generally, I am used to helping people play positions they believe in.   You are saying, I think TZA will be down 50% by the end of the year and I own the ETF, so what calls do I sell to protect it?  The answer is none – if you believe TZA will drop 50% on a 15% move up in the Russell then you save 50% by cashing out now.  This is so ridiculous.  Don’t take positions, other than hedges, that you don’t expect to go UP when you hold them.  Is that too difficult?   The only reason to hold TZA would be because you think the RUT will sell off and you will MAKE MONEY – you don’t hold a losing position that you expect to lose more – that’s kind of insane…

    Outlook/Lotter – Cool, thanks.  Tina is giving me a new computer so maybe I’ll start using outlook.  

    Thanks for reminding me ZZ.  Good hedge is EDZ again, Jan $12/20 bull call spread at $3, selling BA Jan $55 puts for $1.90 (net $5.50 margin) for net $1.10 on the $8 spread that’s currently $4.38 in the money.  Of course, any short sale can substitute for BA – VLO Jan $22.50 puts are $1.35, WMT Jan $47.50 puts are $1.55, PFE Jan $17.50 puts are .82 (you can do 2x at that price), BRK.B Jan $70 puts are $2.30… 

    FAS/Lincoln – That has been a terrible position to manage, way too wild.  How about rolling the weekly $30s to the May $32s ($1.84, + .30) and the Apr $30s to the same (even) and you can move to the May $35 calls (.70, -.05) and you are good as long as FAS is under $32 and, if they go over $32, you can then add July $34s (now $2.20) and plan on rolling the callers along?  I know it’s more of the same but if earnings are a problem for the Financials you may get out of all that you owe and, if not, you’re in a pretty good position to do 2 months of rolls.  It would cost you $8K to kill the play anyhow…

    AAPL/High – Well you are long on AAPL but not very long so you can sell calls and roll them along when you think AAPL is heading lower or you can buy short-term puts to cover, figuring you can lose $1 10 times and still make a net profit but it’s really just a play to take advantage of a system that gives you free money in exchange for your willingness to buy AAPL at a steep discount.  If your neighbor said he’ll pay you $10,000 to promise to buy his house for $100,000 in two years, I assume that’s an obvious choice right?  AAPL is worth $311Bn more than your neighbor’s house and is less likely to lose value over 2 years.  

    Woo-hoo – now we’re pumping on oil!  Of course we take the money and run (stop now $108.75) and flip short again at the NYMEX close (2:35). 


  112. Shadow, you nailed it!  I’m hoping they try and take it up to 85.60 before fading the rest of the day down to 85.17.  We’ll see-


  113. GMCR/Scott – Very nimble!  

    AAPL/High –  So you are tying up $5,600 per $2,200 collected?  Is that netting back the cash because TOS only nets out $2,500?  Obviously, that’s a big difference because one is nearly 100% back on margin and the other is 40%.  I’ll take $22 for $25 every day but we can make 20% a year in many other ways without tying up the cash long-term.  So yes, that matters a lot – enough to switch brokers.  

    12:00 PM On the hour: Dow +0.08%. 10-yr -0.13%. Euro +0.78% vs. dollar. Crude +0.37% to $108.74. Gold +0.36% to $1457.70.  

    01:00 PM On the hour: Dow +0.19%. 10-yr -0.16%. Euro +0.74% vs. dollar. Crude -0.15% to $108.18. Gold +0.32% to $1457.10. 

    2:00 PM On the hour: Dow +0.2%. 10-yr -0.33%. Euro +0.72% vs. dollar. Crude +0.06% to $108.40. Gold +0.44% to $1458.90. 

    A sudden shortage in T-bills – leading some Monday buyers toaccept negative yields - shows the market isn’t overly worried about the debt ceiling. A new FDIC fee takes one free-money machine (borrowing cheaply in repo markets, investing at Fed) and shuts it down.

    St. Louis Fed President James Bullard will back up his comments in Prague by formally pushing for a $100B cut in the central bank’s asset purchase program at the April 26-27 meetings, but even he doesn’t think he’ll get far. 

    Canada’s Ivey PMI pops to 73.2 in March from 70.8 the previous month, well ahead of expectations which called for a sharp drop. It’s more evidence Canadian industry is not suffering ill-effects from the strong loonie, which is off its peak for the day, but remains higher. FXC+0.7%.  - A strong currency is NOT bad for your economy???  Wow, who would have thought??  Certainly not the idiots running this country… 

    Canadian PM Harper says he would be very worried about a state-owned Chinese firm bidding for a Canadian company that did not have a commercial aim. His comments come in the wake of Chinese trading firm Minmetals’ bid for Canada’s Equinox (EQXMF.PK), and in the midst of a political campaign.

    China already outsourcing – next stop – NIGERIA!  An "historical turning point" is what Credit Suisse is calling thewave of Chinese firms moving inland or offshore, no longer able to absorb high raw materials prices, labor shortages, and a strong yuan. With China’s role in keeping global inflation low about over, "transitory" seems inappropriate. 

    It’s a modern day gold rush in Western Australia, where the commodity boom has mining workers making more than those in financial services, a condition the central bank isn’t pleased with. It’s something "the RBA is definitely keeping an eye on," says an economist.

    Not doing quite as well:  Cutting its growth forecast for the year, the Spanish government sees unemployment rising to 19.8% instead of the previously forecast 19.3%. Noting the dismal state of internal demand, Finance Minister Salgado credits robust growth outside the country with keeping the Spanish economy moving. 

    In the midst of a vicious spiral in which government austerity slows the economy, requiring more government austerity … members from within Greece’s ruling party question the policy of refusing to restructure the sovereign debt. "This situation leads nowhere," says a senior member of parliament. 

    One of our old favorites getting some love:  If few people are buying homes, what are the chances of an increase in furniture demand? Apparently pretty good, as KeyBanc Capitalupgrades Ethan Allen Interiors (ETH +6.6%) and La-Z-Boy (LZB +9.8%) on strong fundamentals. Plus, La-Z-Boy could gain market share as one of its top competitors (privately-held Berkline) liquidates.

    Netflix (NFLX -0.8%) shares slip on the prospect of the Dish-Blockbuster combo adding another big competitor to premium video distribution, but the biggest threat may come to Dish (DISH -0.1%) itself. Bernstein analyst Craig Moffett, comparing the deal to Cablevision’s (CVC) ill-fated pickup of Newsday, says the deal adds “meaningful risk” to Dish given how fast Blockbuster has been falling apart. 

    Three lunchtime reads:
    1) Insider trading: Legalize it?
    2) Fed Watch: More hawkish rhetoric
    3) Reasons to be bullish on America (and a few fitting investments)


  114. Interesting article on why POMO is not that efficient anymore.
    http://seekingalpha.com/article/261952-april-is-a-good-time-to-sell
    it seems that banks are currently preferring cash and pile it up on their reserve accounts.
    Gheee. Wonder what they are scared of… anyone not convinced of this great recovery?


  115. Phil, 
    This is like broken telephone…. THAT IS MY POINT, that I don’t want to hold TZA LONG TERM as I see markets being higher by January. Short term I am looking to cash out EVEN, You keep saying the market will correct short term, so I was looking to make the money back while allowing for some protection if it doesn’t do  (like today again where these bastards keep manipulating it higher)…. 


  116.  Note by Michael Snyder that Japan more screwed than it seems:  

    Japan is a resilient nation, but exactly how does a nation that is already drowning in debt replace dozens of cities and towns that are suddenly gone?

    The truth is that thousands of square miles have been more completely destroyed than if they had been bombed by a foreign military force. The loss of homes, cars, businesses and personal wealth is almost unimaginable. It is going to take many years to rebuild the roads, bridges, rail systems, ports, power lines and water systems that were lost. Nobody is quite sure when the rolling blackouts are going to end, and nobody is quite sure when all of the damaged manufacturing facilities are going to be fully brought back online.

    On top of everything else, the nuclear crisis at Fukushima never seems to end. In fact, it seems to get worse with each passing day.

    According to the Los Angeles Times, it has now been announced that seawater off the coast of Japan near the Fukushima facility was recently found to contain 7.5 million times the legal limit of radioactive iodine.

    The truth is that there are already signs that the Japanese economy is regressing into another recession.According to The Telegraph, one major manufacturing index in Japan has already shown a very serious decline….

    The purchasing mangers’ index (PMI) gave an early indication of the extent of the damage wreaked on the economy as it dropped 6.5 points to a reading of 46.4, the largest slide since the survey began in late 2001.


  117. Nice calls on oil today Phil!  Got the tops and the bottoms.  QQQ too.  Thanks for a very nice day.  


  118. UUP/Phil – following your take on the Fed being serious about quitting QE (at least for a little while), it seems to follow that we can expect a bump up in the dollar. Would adding to $25KP May 21s, or even June 22s be a good play on this?


  119. matt
    I got out at 85.40 and I think I will try a half position to 85.60.


  120. hi phil is TBT breaking out of a downtrend — what would be a good bull cal spread thx


  121. POMO/Pentax – Sure, do anything long enough and it loses effect.  

    TZA/Amatta – You have got to be kidding?!?  Sell it.  Buy something else that you do believe in and can cover to make the money.  Every other comment you say:  I think it’s going down, I think it’s going up – how many times have I told you to STOP BEING A DAY TRADER!?!?  Why do you not get that?  The VIX is too low for you to be able to take sensible short-term hedges.   Clearly TZA, which has gone from $37 in Feb to $45 in March to $33 in April moves much too much for you to cover it with a $2 hedge – it’s a joke – a false sense of security that keeps you in a position you shouldn’t be in because you don’t have the conviction to take a long-term stand.  This is completely ridiculous, Amatta, you ask me what I think, I tell you what I think and you refuse to accept it and you attempt to bully me into giving you a much riskier position I don’t think is a good idea so you can make the trade without accepting responsibility.  That’s a VERY bad pattern.  

    Thanks Damion!  

    UUP/Scott – We have just 5 May $21s at $1.06 and they are .80 so it wasn’t something I wanted to do anything with ahead of the EU rate decision.  As you can see, what the Fed is doing seems very much open to interpretation but I do still like the trade in general.  

    111M on the Dow at 3pm, light but about 35% better than avg lately.  

    Bank of America’s list of top 10 stocks positioned to benefit from the explosion in food pricesTSCOADMDEPOTDDAGCOFMCMON,CFCNH

     "In this difficult situation … I understand that it is necessary to resort to the financing mechanisms available within the EU framework," says Portugal’s finance minister, for the first time admitting the necessity for assistance.


  122. scottmi – isn’t that the same as rolling your apr 60 to june and selling a may 60? Maybe i did’t interpret the lingo correctly.


  123. Hmmm, does the surge in FAS telegraph a stick, or just more nonsense?


  124. This is fun!

     

    Petroleum Data Tables    
      Most Recent Year Ago
      02/18/11 02/25/11 03/04/11 03/11/11 03/18/11 03/25/11 04/01/11 04/02/10
    Total OPEC 99.35 104.50 110.19 111.58 108.62 111.72 111.96 78.90
    Total Non-OPEC 95.46 100.70 107.46 109.90 107.17 109.51 110.81 78.24
    Total World 97.78 102.96 109.08 110.90 108.03 110.83 111.49 78.62
    United States 89.25 94.14 101.82 105.62 102.76 104.64 107.01 77.77


  125. FAS: Looks like they’re trying to pin $32 to cause pain to all of us short at $31


  126. Phil,
    Missed the roll on USO as had to go the Dr. and when I got bacK it was history.  I’ll wait and hope but writing the 4K up to experience.  I know you think oil is going down, per recommendations to roll out to June.  Don’t you think political risk in the Middle East adds unusal risk to the longer oil shorts.  We’ve got the Palistinians ( sorry on the spelling can’t get my spell check on) going for Statehood at the UN with a lot of votes, Iran causing trouble, and the US Gov’t DD on wars evey time something happens.
    So why the intermediate bias toward cheaper oil?  I do understand it will hurt the ecomomy.  That’s why I like the XRT puts so much.
    Thanks,
    Lori


  127. FWIW, I bought various shippers in 09 for my IRA thinking I was bottom feeding, and most are up a bit, but nothing exciting.  However TBSI is lagging.  If you are looking for well-priced 20 year stock for your IRA, look into TBSI, it might be the best bargain in shippers at this point.


  128. I give up ———--verizon disconnect/connect/disconnect!


  129. the stick is back again….so f’n annoying! BTFD!!!!


  130. More oil stuff:  

    Crude Oil Futures Price Graph.

    U.S. Crude Oil Stocks Graph.

    Crude Oil Production and Imports (Million Barrels per Day)

     
    Petroleum Data Tables    
      Four-Week Averages Year Ago Week Ending Year Ago
      03/18/11 03/25/11 04/01/11 04/02/10 03/18/11 03/25/11 04/01/11 04/02/10
    U.S. Production 5.586 5.581 5.592 5.510 5.570 5.568 5.638 5.473
     
    Petroleum Data Tables    
      Four-Week Averages Year Ago Week Ending Year Ago
      03/18/11 03/25/11 04/01/11 04/02/10 03/18/11 03/25/11 04/01/11 04/02/10
    Crude Oil, Excluding SPR 8.495 8.774 8.937 9.112 8.987 9.128 8.950 9.561

    U.S. Crude Oil Imports Graph.


  131. Retail Price Graphs. 

    Weekly U.S. Ending Stocks excluding SPR of Crude Oil  (Thousand Barrels)


  132. Shadowfax,
    Welcome back.  We switched to FIOS and love it if you can get it.  Have Hughs satilite at Lake Anna in VA and it’s the pits.
    Very slow, limits downloads per day, and goes out in storms.


  133.  DEPO- Pharm- "possible sale" – now, is that a genuine rumor or speculative rumor? :)
    Seriously- your math makes sense. Just betting on the possibility? 


  134. PhiL/ PFE :
    thanks for the advice on PFE yesterday. I have to keep asking myself whether my original intent was a trade or an investment. Great advice  you also gave Ammata on balance.Put that one in my "Phil quotes file". 
    I missed the opportunity to buy the "C" May $4 C at $.51,now $.61 Do you know the reason for the jump?


  135. lori13 / lake anna:  been water skiing there many times!
     
    shadow, I covered at 85.4 with TZA.  Now dumped TNA looking for a close around 85.16…


  136. All
    I have put together a document of Phil’s notes on strategy, hedging, balancing, rolling etc…I would like some senior member (Pharmboy?, rainman?) to take a look at it and see if what I have is correct. Also, there are some questions on a couple of things in there that need answering. Hopefully somebody will oblige. Thank you.


  137.  Watch TBT as it nears it’s 50-day (38.27). Obviously a failure by the gov’t to extend the debt ceiling would be catastrophic. Is the market pricing in a small probability of this?


  138. Nicha – you should be on the Phil book committee!


  139. Nicha/Phil’s notes:
    Would appreciate a copy of your notes on Phil. thanks
    dflamos@verizon.net


  140. TBT/Gucci – Where were you $2 ago?  Last time they popped, $39 was a very solid ceiling and they got knocked back to $37 over and over so I wouldn’t get too enthusiastic at $38.  Maybe if the ECB causes another dollar flop and TBT falls again or some Fed official says something dovish – then you can take advantage of a move to $37ish.  

    GMCR broke $65!  

    FAS/Daveo – Focus on the fact that our longs are coming back…  8)

    USO/Lori – Because $105 oil is unsustainable the same way $140 oil was unsustainable when this country (and the World) was in much better shape.  You make it seem complicated but it’s not – it’s like asking me why I think an ice cube will begin to melt at 33 degrees – it’s kind of a fact.  While TA people believe oil can go to $140 a barrel again, the fact is there is not enough money in the World for the 2Bn people who use oil every day to come up with 100% more than they paid last year for fuel that takes them the same distance.  If oil itself doesn’t collapse, then $50 x 90M barrels a day ($4.5Bn) x 30 days is $135Bn a month of sales that are taken away from other sectors of the economy.  But it’s worse than that as there are refining mark-ups and upstream costs and utility bills and transportation costs and food costs so it’s more like $300Bn a month or $3.5Tn a year or 20% of the Global GDP that is being funneled away from the rest of the economy and going to the energy sector who are employing no new people and spending no new money because they are actually pumping LESS oil than they did last year, the year before and significantly less than they did in 2008.  Where does this $3.5Tn come from?  You’ll find out when you see the Q1 earnings reports…

    TBSI/Mr. M – Looks good.  

    VZ/Shadow – Is that service new?  What was the old one and why did you change?  

    Stick/Jabob – You just have to play for it and then you learn to love it.  

    Hughes/Lori – Oh that sucks, I thought it was a viable solution.  Have to rethink some of my escape from civilization plans then…

    C/$25KP, Dflam – Well it doesn’t matter if you can just sell the April $4s for .65.  No need to roll if you can just quit the trade with a .05 loss.   If they go back down, then you can consider the May calls but we know we want them for .50 (now .65 too).  By the way, the roll is absolutely less than .05 now and if you can’t get that – time for a new broker.  


  141. Phil,
    OK so you see its not just me who is thinking along those lines-- I found a comment from a week ago and here is what YOU actually said--which I had forgotten:   
    TZA/Amatta – Why are you unhappy?  You get to buy back the caller for .41 two weeks early.  You can let them expire as I’m sure they will but I’d buy them back and hopefully get $3 more from the May $38s (now $2) on a pullback.  If you keep selling calls for $3 per month for 12 months – how much do you collect?   
    So actually I am in the exact position to do what YOU also had thought (because the short calls are worth half as much now .20 and the May 38 C’s are only 1.80)…
    But now when I bring it up, for some reason you think it is not the thing to do?
    Phil, I admire your incredible talent for trading and am thankful for all you have to teach us …I also recognize I am inexperienced and so get caught up a lot of the time, but with all due respect I think you tend to flip flop a lot and not even realize it.   


  142. Hey Phil, with oil topping at about $108.50, do you like any airline to bounce back as oil declines?


  143. Phil, looks like today’s the day 1333 gets taken out-


  144. Nicha/Phil’s notes
    As would I. Thanks in advance – for the notes and your efforts compiling same..
    ksw2001@att.net


  145. Phil/FAS: I would be happier about the longs if I hadn’t F’ed up last week.  Now I’m stuck with short weekly $30s and April 30$.  I wish I had gotten the rolls to the $31.  oh well, it’ll work itself out


  146.  Amatta – The issue seems to be that phil is advising you on a trade by trade basis. But, he does not see your entire portfolio. For someone with a small TZA position, using it to HEDGE many other upside plays, the above strategy is fine. But, if this is the case, you should not be worried that TZA will lose you money. Phil then steps in and can advise many creative ways to lose less money on your hedge (he even can make hedges come out "free" even in an up market). 

    Also, Phils makes hundreds of comments a day. Some are short term, some long term, some hedges, some investments. And, it depends on your entire portfolio, and most importantly position sizing and allocation.

    But, it seems to me that perhaps one of your issues is allocation and POSITION SIZING. Opt talks a ton about this. Make sure you have a very disciplined way to calculate how much money should be allocated to each position, such that up or down you can still sleep OK. 
    And, for me, at the beginning, when i thought i should be buying April options, i bought May. When i thought i should trade in 2012, i did 2013. Always always to give myself extra time….the only thing that is different is your leverage really, if the trade works, it still pays off, and if it doesnt, you have more time to adjust…. hope this helps

     


  147. GMCR/morx – yes is the same. as end result is essentially a new calendar spread, that is the terminology i put in my mind.


  148.  Unsustainable oil:  I dunno.  The last few spikes also went to unsustainable levels.  And, true to the definition of the word, those levels weren’t sustained.  But before they manifested their lack of sustainability by falling off a cliff,  the rest of the market came crashing down ahead of the oil drop.  So do we dump our oil positions — or dump the rest of our stocks?


  149. Hope your right on the oil Phill.  $50 bucks to fill up my Honda Van.
    Matt do you live in N. VA?  I fell in love with Lake Anna the first time I saw it.


  150.  Phil,
    Some years ago I was in the computer/software business and a significant part of our business was tech support.  On examination we found that a very small percentage of our client base was monopolizing a disproportion of our support resources. Eventually we came to the conclusion that the expectation level of this small group of clients would never be aligned with our ability to deliver and we eventually refunded 5 clients and "fired" them.


  151. Amatta –   Further to Hanna5′s point, have you considered OpTraders blog rather than this one if you are a premium subscriber?   I’ve been watching your hundreds of comments for some time now and feel sorry for you.   Just a suggestion that you seem to want to follow specific trades with specific actions made by an expert every step of the way that you can follow.  Probably Optraders blog would be more to your liking, and also probably would take less commenting and back-and-forth on your part….maybe even lead to better trading and profits for you.    Just a friendly suggestion.


  152. Phil, what is your gut feeling on the ECB decision tonight/tomorrow? I believe it is priced in as well but still hold /dx. Was thinking of selling now and putting a buy order in around 75 in anticipation of the spike down….


  153. Thanks Hanna, very helpful advise.  I blew in USO because I took to big a position, then should have rolled out for time and NOT DD.  Oh well first couple of weeks trading after joining the site a year ago.  I’ll get it. 
    Nicha could you send me a copy too?
    Thanks.  lori@schweickhardt.info


  154. Well, well.  Something different every day, huh?  There was a fair amount of support going into that close.  Particularly with IWM. 
     
    lori, yes, I’m about 10 mins below DC.  I like Lake Anna, too.  However, in the summer the water does get a little warm and then there is that little nuclear power plant thingy there, too.  Fortunately, it’s safe from tsunamis!


  155. dflam, 8800, lori – I have some more additions to make from all the material I collected since the past week or two. I will be finished by this weekend but I would prefer that someone experienced first looks it over before passing on to others.


  156. Book committee/Snow, Nicha – Yeah, I’m sorry that has gone nowhere but we never got the Wiki going the way we wanted and the idea was/is to get it started there but maybe there is another kind of collaborative thing we can do?  It also got derailed when my Dad got ill but now I have time to focus so let’s take attendance and see who is going to want to work on it.  

    TBT/BDC – I think the danger is the do agree and we’re back to 36 but if they agree quickly, it’s likely with cuts that should strengthen the dollar.

    TZA/Amatta – The situation changed as I became more aware of the amount (too much) and the fact that your’re not even using it as a hedge so I feel differently about the transaction now than the first time you asked.  if I get new information over the next week, I may change my mind again.  It is NOT an appropriate risk in my opinion but you are free to do whatever you wish.   Unfortunately, you do that and then it becomes my problem to figure out how to "fix" it.   The quote you put in there was from 4/1 at 2:01, when TZA was at the lowest point of the day.  After the part you quoted I said: " If you are impatient. you can sell 2013 $30 calls for $15.  You can pair that with the sale of the $20 puts at $10 and that puts $25 in your pocket now and your worst case is you get another round assigned to you for $20, which is $5 less than you are collecting so that drops your net to about $35 but you’ll have 2 times as many calls so effectively $17.50 for 2x.  That’s your WORST CASE." – So I was not being inconsistent even then – you gave me a situation in which you were trading front-month calls and got blown out by a sharp move – I suggested an alternative that would be much more relaxing that I felt more comfortable with.   I give up Amatta – what are the words you want me to say???

    Airlines/Asean – Warren Buffet says he should be committed if he ever buys an airline.  I like them sometimes but they are not cheap right now and that Southwest issue indicates they have taken cost-cutting to dangerous extremes.  You can remind me on the weekend and I’ll be happy to run through the sector but CAL was my favorite and they are gone now so it’s hard for me to trust.  

    Holy cow, S&P finished at 1,335!  Nas 2,799 – still can’t hold 2,800 but, on the whole, a good show.  Keep in mind we need to see a full day above the line at least for us to take it seriously.  

    FAS/Daveo – Don’t worry, there is simply a huge advantage to selling weekly calls over time.  The question is how many times you have to roll back before you get lucky (and FAS expires right on the line to make the callers worthless).  Until then, the trick is to keep yourself in position to win.  

    Thanks Hanna – good explanation.  

    Oil/ZZ – I think when this wave breaks we’ll have an easy time catching it for the long ride down.  The amount of things that are being ignored at the moment is simply staggering – especially with earnings season approaching.  The average person watching CNBC is going to be completely shocked to see companies miss earnings or guide down.  Who knows how ugly it can get.  

    $50/Lori – And where does that money come from?  Think of the things you didn’t buy with the extra $20 or whatever from last year.  The things you gave up, then ask your friends what they gave up and then short the companies that sell them. 

    Oh no – CNBC now setting us up that, IF the government doesn’t shut down, THEN we should have a huge rally.  AMAZING!  

    At the close: Dow +0.27% to 12427. S&P +0.22% to 1336. Nasdaq +0.31% to 2800.
    Treasurys: 30-year -0.81%. 10-yr -0.36%. 5-yr -0.19%.
    Commodities: Crude +0.25% to $108.61. Gold +0.21% to $1461.50.
    Currencies: Euro +0.77% vs. dollar. Yen -0.71%. Pound +0.26%.

    Market recap: Stocks posted modest gainspropped up by strength in financials and defensive issues while typical momentum names such as Apple and Netflix slumped. Dollar weakness helped push gold past $1460/oz. and silver toward $40. Crude oil continued its climb. Treasurys fell, sending 10-year yields to their highest in a month. NYSE advancers led decliners three to two.

    The U.S. implicit guarantee of Fannie and Freddie paper should be make explicit and the $7T in debt of the 2 failed mortgage giants brought onto the government balance sheet, says the IMF. This would put the U.S. debt above $20T and push the debt/GDP ratio over 100%.

    Where have all the bears gone? In the latest weekly survey of investment adviser sentiment from Investors Intelligence, bears declined 32% to 15.7% from 23.1%. Going back to 1975, bearish sentiment declined by more than 30% in a single week just 16 other times.

    Stock trading volume has been sliding and may contract further when Citigroup (C), which has accounted for 6.2% of volume during the past two years, carries out a reverse stock split in May. But the decline is not a cause for concern, according to Strategas’ technical analysis chief, as trading patterns "suggest the market’s longer-term health remains intact."

    Prime Minister Socrates says Portugal will ask the EU for a rescue, citing his country’s high debt and difficulty raising money in the bond market. Analysts expect Portugal could need up to €80B. The euro yawns, sinking slightly to $1.4309.

    Google (GOOG +0.9%) plans a major overhaul of its YouTube site to include "premium channels" with professionally produced content, WSJreports. Google will spend as much as $100M to commission the project, which would supply about 20 channels each with as many as 10 hours of original content each week.

    Feeling their oats given strong copper prices, powerful demand, and high stock valuations, Freeport-McMoRan (FCX) and Xstrata (XSRAF.PK) are on the lookout for acquisitions. While FCX is only interested in a large deal, Xstrata is focused on smaller, developing situations. 


  157. hey nicha
    sounds useful if you are emailing pass me a copy as well,
    abel1236@gmail.com

    I have put together a document of Phil’s notes on strategy, hedging, balancing, rolling etc…I would like some senior member (Pharmboy?, rainman?) to take a look at it and see if what I have is correct. Also, there are some questions on a couple of things in there that need answering. Hopefully somebody will oblige. Thank you.


  158. Plil and the rest
    I could use hughes but 10 years ago I installed them and was a service station fixing the boxes for everyone in the west. Only money made was fixing boxes. At my parents house I had a choice of Verizon DSL or Hughes. They are providing super fast 1.5 meg down and .33 meg up when it works. My cousin has FIOS and I may if she will let me set up there, I hope to talk Saterday. BTW they promised FIOS 100 meg but the fiber is 100 feet too far away!


  159. Phil,
    Could you expand upon/clarify your TBT cmt below? Thanks.
    TBT/BDC – I think the danger is the do agree and we’re back to 36 but if they agree quickly, it’s likely with cuts that should strengthen the dollar.


  160.  Phil: Thanks for earlier reponse
    I do appreciate your help seeing possibilities when I don’t.  Because I get frustrated when I feel like I am backsliding into old habits letting a position get out of control.  I took your advice, now I’m taking deep breaths, a bike ride and hopefully clear my head for tomorrow :)
    cheers


  161. Hanna5/Amatta: Thanks for your very helpful comments to Amatta, I find that following this type of comment string is extremely educational-your comments are very concise and well reasoned.
    Amatta thanks for posting, super helpful to me, FWIW.


  162. Firing clients/CSL – Yes, as a consultant I often advise clients to do the same with their problem clients.  It’s amazing what a drain a single client can become on a business!  

    ECB/Jrom – I don’t think they have the guts.  I think they punt and that would be very interesting but it may be wishful thinking on my part.  I have tremendous respect for Trichet and I know he is under tremendous pressure not to cause trouble but he firmly believes this is the right thing to do (it is) but I doubt the UK or Germany will be pleased and if Sarkozy pushes for it, I don’t think he’s going to go against a united front.   The Portugal thing is very serious and if the ECB pushes rates, perhaps the Bond Vigilantes will decide Spain or Italy can be attacked the same way (an auction boycott under 5%) and then that $112Bn bailout for Portugal zooms up to $300Bn for Italy and $500Bn for Spain and that would leave the UK very weak and standing on its own.  For want of a low rate, the kingdom could be lost…

    The lyrics, history and origins reflect a moral theme to this famous nursery rhyme

    For want of a nail the shoe was lost.
    For want of a shoe the horse was lost.
    For want of a horse the rider was lost.
    For want of a rider the battle was lost.
    For want of a battle the kingdom was lost.
    And all for the want of a nail.

    FIOS/Shadow – Any way to get a neighbor to share FIOS and then share a WiFi?  Also, you should check into those 3g systems, if you have good coverage they are not bad but maybe no good for streaming data.  

    TBT/8800 – I meant "they do agree" (ie Congress).  So if we pass a budget quickly, it’s likely to be the Dems giving up (doubtful) and that would have a lot of cuts and we will look responsible (even if penny wise and pound foolish) and the Dollar may strengthen and rates will drop and TBT goes down.  If the EU does not cut rates, we look relatively better and same thing.  So, in the next 2 days, the downside risk to TBT far outweigh the upside.   

    FAS/Lincoln – Cool.  I do want to know how that goes so keep me appraised.  I benefit from getting more experience seeing how variations of strategies work out over time.  


  163. Shorting what didn’t buy – good song here.  Judging on strength of XRT, ANF, CMG etc, i think it is more a case of shorting savings, retirement, and the future rather than what people didn’t buy last year… 


  164. Phil
    Thanks a neighbor on the main drag has FIOS, she offered to let Verizon to run through the back yard but they won’t, WIFI with my hot spot router would work. I will try!


  165. Shorting the future – and if it is the future that is being sold out.. then, we buy TBT and Oil (along with bullion, bullets and beans)?


  166. AND WHY THESE GUYS WILL BE RIGHT … AT LEAST ON THIS FILE – from Rosie
     
    It is truly incredible how the markets, even today, cannot distinguish between a move in relative prices and an actual broadly-based acceleration in inflation. Yes, we have inflation in the commodity space. This isn’t the first time either. And there is no evidence that commodities, or a weak U.S. dollar for that matter (the two tend to go hand in hand), end up triggering a lasting inflationary environment. There is so much more that goes into the stew… and yet, since the markets are still so populated with short-term thinkers, all we find is resistance to this view.
     
    This is not the 1970s folks. In the 1970s, even the prices charted by auto repair shops surged at nearly a double-digit average at an annual rate. That price surge had nothing to do with the price of copper but everything to do with sagging productivity, powerful unions and tremendous labour power on the part of the proletariat (largely, if not completely, absent today ? outside of investment bankers, hedge fund managers and professional athletes) so that Cost-of-Living clauses ensured that the inflation would be widespread as opposed to contained within the resource space.
     
    The key to the outlook for inflation is not commodities ? it is the labour market. We have a situation where wages in nominal terms are running at +1.7% on a year-over-year rate and productivity is running at +2.0%. So we have unit labour costs fractionally deflating as they have been consistently since 2009 Q1. Go back to the 1970s, and guess how many quarters unit labour costs deflated? Try none. By the end of the 1970s, unit labour costs had surged at nearly a 7% annual rate for the decade as a whole; not sub-zero as is the case today.
     
    The proof of the pudding is in the eating. So let’s eat.
     
    In August 1987, the CRB index soared 21% on a year-over-year basis. What did the headline inflation rate do? It had the audacity to go from 4.3% to 4.1% a year later. The core inflation rate (excluding the effects of food and energy) did accelerate a tad to 4.5% from 3.9%, but a year after, the core was sitting at 4.4%. There was no 1970s-style breakout ? though it’s not as if the bond bears weren’t talking about it incessantly.
     
    Then in January 1995, the CRB index jumped 16% year-over-year. Again, the inflation rate the following year dipped to 2.8% from 2.9%, and the core went from 2.9% to 3.0%. In other words, stable. No breakout.   
     
    In April 2004, the CRB index increased 23% from a year earlier. And 12 months down the road, the headline inflation rate did pick up from 2.3% to 3.4%, but the year after that it had settled in at roughly 3.5%. The core rate went from 1.8% to 2.2% in that first year after the surge in commodity prices and stayed there the 12 months after that.
     
    Then in June 2007, we did indeed have the headline inflation rate spike from 2.7% to 4.9% in the ensuing year; however, a year later, the YoY pace was at -1.3%. Where was the sustainability? The core rate of inflation went from 2.2% to 2.4% and then to 1.7% during this whole process, which involved not just a massive commodity price period but also the era of rampant growth in credit and real estate valuation.
     
    The major point is that commodity prices are far from a leading indicator of inflation. Investors that relied on this to make their bond bets over the past 20 years must be an extremely rueful bunch. In today’s context, a sustained outbreak of inflation is virtually impossible ? at the least, much tougher than it was in these other episodes, and recall that back then the economy was actually in far stronger shape.

  167. Whilst short term investing is a pain…TLT is still the bet for now.  I am sorry, but TBT is not going to make it for long.  When labor picks up, we can revisit.



  168. All that money is on the banks balance sheets (someone said earlier?), and they are leveraging 100:1, thus pumping up the market…as we all know.


  169. Pharm, interesting.  So you are thinking deflation is more likely then inflation?  I think it’s all about stagflation… until the punch is pulled away.


  170. To reiterate, commodity inflation does not translate into generalized inflation unless things like expansion in credit and household balance sheets.  Credit is still contracting and balance sheets are getting smaller (aka housing).  Wages are decelerating.  ^OIX is the CBOE oil index.


  171. AAPL / Phil – I don’t know if that was corrected earlier (got busy with my day job), but on TOS, to sell the AAPL 2013 250 P requires $2500 of margin + the $2100 of cash received. In essence, you tie up $4600 to make $2100. Not bad, but not 90% either. I had an email exchange with TOS a while back to have them explained to me why they don’t list the total margin required, not just the 20 or 10% of the strike. Could not tell me… I am not talking about PM of course, different calculation altogether.


  172. Hannah, 
    Thanks for your input… yes that is precisely the issue.
    The disconnect is there with Phil, as like you say it is hard to communicate on a case by case basis (without having overall view of the portfolio) what is the expectation on each trade and for what purpose it was entered, etc… I don’t blame him for getting frustrated as he has an impossible load of stuff he is dealing with every minute of the day (I really can’t comprehend how he is able to handle it, it is simply astounding). 
    What I struggle greatly with is figuring out how to be balanced--having a grasp of what exactly is my stance from day to day and week to week as it is all so dynamic. Something that I think would be extremely helpful would be if I could have a short term trading account and a long only (TOS has such ability Schwab doesnt!) Plus having the overall delta feature. I am putting all positions in TOS paper trading so I think that will help me a lot.
    My perception of this perhaps got distorted as my longs have all taken a vacation. So every day even if the market was going up my portfolio was going down by a lot, if the market was down the longs took it more on the chin and I was still down. SO I have been crawling out of my skin watching for 10 DAYS STRAIGHT my portfolio lose $30K, I am down for the year $35K, so while the market is up 8% I am DOWN 4.5%… 
    Thanks again…
    I did read Opts position sizing and portfolio management from Phil but it is one thing to read and apply it theoretically and another when trying to do it when things are in flux. 


  173. matt – I think we are breaking at the seems – much like the differences in the political parties.  Stagflation, yes, that is what I am thinking, but who is going to buy gold, oil, etc. when all the money is in the bank?  Ipads, computers, houses, etc?  Our labor costs are going down, China’s up….margins are going to be squeezed, and in the end, I still see a downward movement to the market when, yes "the punch bowl’ is removed.

     

    And I know many believe the Euro is going UP because the rates will be raised, and to Phil’s points today and yesterday, they are in a world of hurt…..more so than us….so a tick tick tick….and then will they be able to defuse the situation? 


  174. Here’s today’s levels. No change in any breakout levels today.

     


  175.  I agree, Matt, I would vote for "stag" myself.  Pharm is correct in respect of history — commodity spikes are not inflation, and are unlikely to precipitate inflation in a country with effectively double digit unemployment — with a nasty structural look to it in many cases.  No wage pressure, then.  But is Pharm taking into account that there are now few billion pesky Asians consuming those commodities, and changing their consumption patterns in a way that looks fairly permanent.  It’s hard to imagine Chinese locking up their motor scooters and breaking out the old bicycle.
    History may repeat itself, but seldom gets the details right. The problem is that a change in global income distribution that leads to a change in consumption patterns creates the possibility that a large percentage of this particular "commodity spike" is no spike at all, but represents a permanent shift in price/scarcity levels.  All of a sudden you don’t need a "wage/price" spiral to have true inflation; a country whose workers are overpaid in global terms can be subjected to a persistent increase in the price of commodities and finished goods without ever seeing a nickle more in their paychecks.  I’m no economist, but to the layman, there is very little to distinguish said phenomenon from classical inflation.  If it looks like a duck and quacks like a duck……..


  176. zero – commodities are priced in, but the real question is sustainability….something has to give to keep this up..credit expansion, housing (we know where that is), wages (austerity and more layoffs coming in state and local gov’ts) and productivity.  Those at work are squeezed, and temps are being hired?  Temps!  In ’07/08 inflation was at 5.5% and deflated from there…..and history does repeat itself, esp. on Wall Street!  Unless the duck is run over by the truck…


  177. More history…

     

    It is very important to make the differentiation between levels and rates of change. Commodities are measured in dollar levels – $13 for wheat, $7 for corn, $4 for copper, and $100 for oil. But inflation is a rate of change. Did you know that we have oil today at $100 a barrel and a headline inflation rate of 2.2%? This is the exact same inflation rate that existed in June 1997 when oil was sitting at $20 a barrel. Think the Internet may have had something to do with that? Or the breakup of labour unions? Or the collapse of the credit cycle? We have the same rate of inflation at a completely different level of the oil price. And this will very likely continue into the future unless we get a whole new cycle of credit expansion, a dramatic falloff in productivity, a return to union power (if that didn’t happen in the first 2+ years of the Obama presidency, take it as faith that it never will). I will leave it up to you as to how to handicap the odds of these things occurring over the intermediate term.
     
    Another way to look at the situation is to realize that we had inflation at 4.2% in June 2006 and yet oil was $70 a barrel back then. In September 1990, inflation was 6.2% and oil was $34/bbl. And then go back to June 1979, when inflation was running at 11.1% and with oil prices at just $20. So … the lesson here is that levels are misleading to some fextent. For commodities to continuously cause measures of inflation to accelerate, they will have to keep on going up and up and up. But the reality is that even though commodities are in a secular bull market, they do often pause for extended periods on this journey ? it is not a straight line up, as we saw in 2008 and 2009.
     
    And the notion that there is a direct link or even an indirect link from fiscal deficits to inflation is completely off base. In 2000, the U.S.A. ran its biggest budget surplus in recorded history and inflation rose from 2.2% to 3.4% ? a nine-year high at the time (core inflation rose to 2.4% from 2.1%). In 2009 we saw an unprecedented fiscal deficit of $1.47 trillion (more than doubling from 2008), and yet inflation swung from +3.8% to -0.3%, the first true experience with CPI inflation since 1955. Core inflation in that massive deficit year also slowed to 1.7% from 2.3%. There are countless other examples of such noncorrelation. The U.S. government ran a $5.4 billion surplus in 1969 (versus the 1968 deficit of $16.1 billion) and inflation rose to 5.4% from 4.2% (core from 4.7% to 5.8%). The time before that in which we experienced a surplus in 1956, the inflation rate also rose to 1.5% from -0.3%.
     
    If that historical evidence doesn’t impress you, then rest assured, the hard core Republicans are going to see to it that the era of bailouts, big government, record deficits, and massive bond issuance are going to be things of the past. The inflation-istas and bond bears are going to miss a very big part of the story here because the fiscal retrenchment, insofar as it will resemble what Canada endured through much of the 1990s under similar circumstances, is going to take a significant chunk out of domestic demand growth, and with that, the ability of many companies that cater to the U.S. consumer is going to be severely constrained, to say the least.

     


  178.  I think you’re saying, in effect, that EM countries cannot sustain current commodity prices on their own.  Unless Americans and Europeans, even the unemployed ones, can afford food and energy at current levels, they are not sustainable. Do I have that right?


  179.  Nice duck, by the way.


  180.  That sums it up…

    Joseph E. Stiglitz addresses increasing inequality:

    The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.


  181. zero – I am speaking of inflation (TBT vs TLT, bonds) and the market in general.  Commodities are measured in dollars, so they will move with the price of the dollar.  I am also pointing to the EU and its issues with the PIIGS, vs the dollar.   I do believe the dollar will gain strength short term, which, in turn will take commodities with it.  That is all I am saying. 

    We continue to talk of inflation on this board, and I am offering another view to think about.  Inflation does not = commodity pricing.


  182.  Interesting thoughts about the BRIC countries and China in particular:
    http://www.economist.com/blogs/freeexchange/2011/04/chinas_economy


  183.  USO – I just keep selling out of the money premium.   The weeklies are fantastic for this.
    Some of you may want to consider this … it doesn’t usually move too fast, and you can keep rolling up if your timing is wrong.
     
    I currently have short positions in the 44′s and 45′s.


  184. Easier to read this one…..


  185. MON crushed….and we did not mention it today.

    AMSC trims forcast and takes a 50% haircut.

    Remember CSCO guiding down last November?  Here we go…..


  186. Amatta,
    Sometimes it is easy to lose focus on a site like this, where people every day are saying the trades they are making, and espousing their views on the market direction. Sometimes, there is no reason to change your stance from week to week like you say, and I think this is where you have the biggest problem.
    Take, for example, OptTrader, who i have learned a ton from. He has a very simple and defined trading strategy. He buys if a stock is above the 5 day moving average and holds it till it closes significantly below. He has a short formula for position sizing. Thats it. If the trade loses moves outside his positions on the first day, he’s out. If it stays in the trend for 3 months, he stays with it.

    The reason I illustrate this is not that this is the only way to make money, far from it. But, it is very defined and very disciplined, and if you want to TRADE, this is what you must do. You cannot just wake up and see what is happening one day, and decide to touch up a little here or there. You will lose money this way.

    Now, there is no reason to TRADE. In fact, most people should not be doing it. In this setting, Phils fantastic buy-writes are GREAT ideas. How can you lose money? If you are balanced over sectors, with good stocks, then a drop is just a great chance to add more. Even if the stock is flat by year end, you are up 10% or more. If the stock is down, you have a cushion of 10 to 20%. There is no reason to adjust these trades. No reason to look at them. Opt does not look at his account value or P/L during the day (a great idea) because it sometimes causes you to make irrational spur of the moment decisions.

    Some of Phils trades are VERY complex. Some of them also cannot be scaled. For example, when phil recommends selling 20 contracts for a 25k account, you dont just mulitple by 100 and sell 2000 contracts for a 2.5 million account. I would recommend, setting yourself some concrete rules. Rules are the key of a trading strategy if you want to trade. See JRW for instance. Very methodical. Very systematic. Very focused. 

    You have to set these rules yourself. But, for example, I always stay with trending stocks till the trend breaks. It does not matter if i think it is obscenely overvalued. It does not matter if it goes up 100%. I stay till the trend breaks and then get out. I have defined rules for what a trend break is. In this way, you take the emotion out of trading, and you will be less likely to capitulate at the top or the bottom.
    As for your portfolio losing money when then market is rising, i dont know enough about what it was to say. But, If this is your entire savings investment portfolio, then there is something very wrong with your allocation. You should be in mostly buy-writes and stocks. Smaller trading done in options, hedges, etc should not affect overall profitability so much.
    Best of luck


  187. Nice! Mauldin is so perky!


  188. Hi Phil,
    A couple of questions for you and the team:
    1) I have a JPM JAN12 37.5/45 Bull Call spread.  I am up about $200.  According to the rules, am I supposed to close it down now?  I frequently hear you talking with other members about being greedy so I don’t want to do that.
    2) I have the SDS hedge in place.  I sold the JAN 12 UNG puts.  Since UNG is heading down, should I stay in it at this point?
    Thanks! Dan


  189. Dan – UNG should be fine….U can always roll 2X to the 10 Jan12s.  Just follow the 5d MA, and if it starts to turn UP (Opts method) then you can either DD on those, or roll 2X depending upon margin.


  190. Hannah, 
    I really appreciate you taking the time to write all of this. You are right about all of it. I know I need a system as I am way too emotional. I hate to ask but would you mind looking at my portfolio and suggest what I could do to start moving it in the right direction? I have put all my positions on TOS now in a Paper Account, but not sure how I’d share that….
    I want basically to have 30%-40% allocated to long term positions (12 in different sectors, although I don’t know which sectors should do well in the next 9-18 months which is the horizon I would be looking at (hedged with b/w’s and perhaps a matching (expiration) hedge--which if in the short term things go awry I can cash out and use to add to the longs).
    Then with the 60%-70% be able to sell premium (as per Income Trader) and follow Phil on the daily plays. I think the 25K has become way too much for me (and has gotten me in trouble as I explained earlier). I see Phil has a lot more success on the daily trades such as Oil. I have to first get acquainted with Futures trading and fund my TOS account though.
    Then I think I might be able to relax more and go with the flow.
    Thanks again and I understand if you can’t devote time to take a look at the portfolio.
    Cheers. 


  191. hanna – your advice to amatta is great. It has helped me too. Thank you, again. 


  192. Cap/USO, I also keep selling weekly calls and puts but only on high flyers like PCLN, NFLX, AAPL and GOOG because they have very good premium(very risk too… I know). is your short USO calls naked or covered? Did you sold and bought back with 20% profit or let them expired worthless(hopefully)?
     
    I recalled once that Phil wrote something like "Why did you short oil(USO) the can spike up $20.00 over night?" so I stop short USO call naked.  Was the premium good enough to adjust to the risk?  Thanks in advanced.


  193. hanna, same here with nicha…  Thanks.  for my TZA two days ago too.


  194. Book and Notes
    I am willing to help with a book or Wiki section.  I have 54 pages of notes from blog clips that I have either not understood (to go back and review) or great/complicated/interesting answers from Phil and a few others.  I also have collections of articles from the site that I have found by digging through the K-1 project. 
    It seems to me that we need:
    1. Some sort of more specific help for newcomers. Key articles on strategy and how Phil thinks.  It is hard to get across that this site is about teaching us how to think and trade.  It is NOT a trade selection service! 
    2. A way to navigate through the volumes of information that Phil has already produced and then organize it in a way that is digestible so we can start to incorporate it.
    My 2 cents worth.  Let me know how I can help.


  195. Phil, 
    So the last on TZA, well that is precisely the problem I have (again I am not trying to take too much risks unecesarily, on the contrary, it is just that I don’t know how know if I am balanced or not). 
    At the time I sold the 20 TZA 44 puts when the world was ending (you did say that it could be the spark for a real selloff to come-- I read 1,000+ points) because of Japan and the situation in the Middle East, it seemed to me that that was the very least number of puts I should sell in order to protect some of the huge losses I was seeing on the long side. 
    What is especially difficult for me to reconcile is the fact that while the hedges are delivering just a fraction of the potential profit (because you’d have to wait until expiration for full profit to be realized), the longs are losing a much higher percentage (as they are b/w’s or synthetics in which the stock or long ITM calls are losing a lot more than the short calls, plus you are losing on the Puts). So I guess I tend to take the oversized positions that then when the market reverses are a big problem. 
    So all in all where does this leave me with the damn position? I checked the 2013 you mentioned, the 20 Puts show in TOS now for only $5 and the 30 Calls are  $12.50 (so maximum payoff would be $8750 risking $21,250) so that would be a very bad risk/reward no? Plus do you really think the market RUT will be where it is now or lower in 2013?     


  196. Hanna – agree with all the others, great advice, let’s hope Amatta listens.


  197. Pharm, above you raised the assertion that for commodities prices to stay elevated something would have to give-  I submit that the average Americans’ quality of life will be what gives.  If the dollar loses reserve status it’s been estimated that our quality of life will decline by 25%.  That means we fork over more for our necessities and have less for our niceties. 
     
    If the Fed sees fit to keep printing, that will be exactly what happens.  I think they will.  Until there is a revolution.


  198.  Phil,
      You can count me in on the book project.
     
      I would suggest that the first things we would need to begin are a medium to bring together the various collaborators, a definition of the purpose of the project and a definition of the scope, perhaps enumerating the subject areas.
     
      At one point I had suggested a spreadsheet as a systematic mechanism for cataloging the content of each of your articles, as well as their titles, to facilitate referencing individual segments which could form the basis of Chapters, as opposed to writing from scratch. I played with a framework for doing so, but discontinued doing so awaiting your opinion as to the usefulness of such a device. 


  199. Matt – I think we are almost there (down 25%)….and I ain’t gettin’ any richer my friend.


  200. jromeha/hanna – I am sure amatta appreciates all your advice and even though he has asked a lot of questions I understand his anguish because I was/am somewhat in the same boat as amatta.  I went with every position that Phil put up, position sizing was too large or too small (based on how I viewed the company), did not hedge at all or over hedged. I realize this has kept me from making any money. 
     
    Many times I have thought about leaving the site and putting everything in mutual funds. My friends are convinced the site isn’t helping because here I am barely holding on to my principal while they have pulled 20%. But after being at this site for over a year I know the mutual fund is going to lose money when the market goes down. Why shouldn’t I then learn to mange money no matter what the market does?
     
    I am slowly trying to overcome my preconceived notions of how a stock should behave and learn to invest. Greed killed me all of last year because I was always going for 80-100% on every investment (rainman warned me about this a while back) rather than being satisfied by making 20% as Phil says. My other problem was understanding how to roll. Back in January Phil suggested an IBM diagonal which I followed and had some losses the next month but with Phil’s guidance I managed to close the trade a couple of weeks ago with a $5k gain. But during the Japan earthquake market crash I was unhedged and lost a lot of money but managed to come out even because of the IBM trade. So there are things that I am still learning after being here a year. As I am writing this I realize I am over hedged now because I have lost money on my hedges but have not gained more than the amount lost on my longs. So it is still a learning experience for me.
     
    I appreciate this site not just because of Phil but also all of you guys for being so helpful with your advice. Thank you.


  201. Phil – i am on for the book project. I do not have experience with that but am willing to mine all your articles on this site. Frankly I think you have more than one book with all that you have to say/said. 


  202.  Thanks, Pharm.  If the word "inflation" were eliminated from the English vocabulary, the often unrelated phenomena that are referred to as inflation would stand out in clearer relief.


  203. nicha – as to being over hedged, my account sounds like yours but i don’t see it as over hedged it’s just that i am in a bunch of longs that don’t go up with the market, i.e. those in the 25K portfolio and a few others. If the same money was in index funds as my hedges are, things would look different.


  204. hanna5
    I thought the 25kp would be a good way for me to learn to "trade". When you said "Now, there is no reason to TRADE. In fact, most people should not be doing it". I am finding out I do not like trading as well as I thought I would. I like conservative boring strategies better. This evening I broke down how much I am paying in trading fees (at $1.50 per contract) just following the 25kp and I was shocked. I would have to have a pretty hefty return to just break even on fees. I am going to wean myself off of that portfolio and off of "trading" and get back to boring.


  205. I think lots of newcomers are totally overwhelmed by the amount of content that they are required to absorb in order to follow Phil.  Although I don’t have time to help with organizing the articles into some coherent format, I certainly feel it would be of great help to newcomers and people who are trying to learn to trade options.  It took me forever to figure out a lot of what Phil is talking about and how a lot of the trades work.  If I don’t totally understand it, I won’t trade it.  I think tonight’s conversation regarding amatta’s situation has helped a lot of people including me.  Furthermore, the 25kp has probably become either too complicated or too time consuming for a number of people.  I could follow it but I just didn’t have the time and quite frankly, I don’t have the stomach to keep adding to such large losing positions.  I prefer to keep my losses small and move on.  I think Phil is a genius and an incredible teacher and I am amazed by his ability to work around the inevitable problems we get ourselves into, and to watch and learn from him is truly priceless and worth the price of admission any day.


  206. RJ,
    That is what I found.  Right now, I don’t have a large portfolio and with my new job, I can not watch the market constantly during the day.  I have found that for now, simple Bull Put spreads 3-6 weeks out work great!  I look for stocks that Phil likes and then put the spread on.  It is close to set it and forget it!  If I start getting threatened on the short put, I simply roll down or down and out!  I am still trying to master the concepts so that one day when I get to play in the big leagues, I am ready.  I have a few of Phil’s long term plays going, but then I do these small little monthly things to keep me occupied and feel like I am "trading". 


  207. Lincoln – I forgot about your Charlotte comment. We should say hey sometime. In what part of town do you reside?


  208.  Another Big League hurricane season predicted, with all that goes with it.  www.news-press.com/article/20110406/WEATHER01/110406014/1002/RSS01


  209. @font-face {
    font-family: “Cambria”;
    }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; }
    All,
    Investing /trading is not easy. And anything worthwhile takes some time to become
    accomplished at. I remember reading about a 1,000-hour quote some time ago. I
    have learned out to get myself out of sticky situations. I have been trading PCLN
    recently. It seems to do nothing or moves dramatically, like a crazy train off the tracks. I will admit it is speculative, but it seems to be mispriced at times. The 505 weekly puts are good for movement: .50 to 5.50 & closed at high 3’s today.  You only need to be right a few times on these with small amounts to pay off. I just cannot follow it at all times. The day job gets in the way..


  210.  Phil
    With position like FAS, INTC and others where we hold long options and sell weeklies or shorter term options – can you explain your logic for when to count the short premium as profit (loss) vs. when you sue the premium sold to reduce the cost basis of the long position.
    TIA.


  211.  Thanks for the kind words. Amatta, I am no financial expert by any means, and my style of trading is much more similar to Opts. I fear that I would not know where to begin advising you on your portfolio, although i would be happy to look it at for you (but, i do leave for Boston for 7 days this weekend, though i will have my computer i will be slightly out of touch, in meetings). 

    As for what others said about hedging, I second that. It is a complicated issue, and it took me a while to make sure that my hedges were highly correlated to my portfolio. Often, i will use QQQ, XLF, or DIA depending on the stocks i hold at the time….otherwise, I get around this by holding long puts in a variety of stocks that are trending down….the theory being that in a weak market, these would be particularly weak and drop more then my longs. Also, I directly hedge sometimes (like now with AAPL) by owning long puts, this allows me to continue holding the long stock and not have to book the tax gain, without fearing a near term pullback. 


  212. For what it’s worth, I have saved passages of interests from the day to day trading comments of Phil ever since I joined (August 2010). Perhaps when beginning to put together the book project someone can ask the members to search their own files for relevant content. It may be easier than searching through every day to find material.
    The great responses from Hana and Pharmboy make your site so valuable. Great job Phil and all members. Thank you all.


  213.  Bobhu -
     
    Let me try to answer your Q’s.
    - I do the highflyer’s also, but as you say more risky.
    - USO – depends on the account I use as to whether they are naked or spreads.  Sometimes its naked calls, but I spread them later when the cost is less (to reduce margin & risk).  Sometimes I sell puts also.
    - USO seems to be much less risky these days; and even a BIG spike in Oil does not seem to get a commensurate spike in USO.  It does not seem well correlated.   As a result, I am lately on Thursday or Friday, selling calls on the following week.  Depends on how oil is doing.  if its been dropping (say it dropped to 39 this week instead of being over 43), I might not do it, because I would view 42-43 as easily attainable.  But at 108-109 oil, I have no problem selling 44′s for this week or 45′s for next week; or 46′s for the following week (no following week strike available).
    - Like I said, its not big money, but its also not the volatility you get in a Naz name whether it is NFLX or BIDU or AMZN or PCLN.
     
    And with USO, since its not a company, nakeds are not as risky (except for the Black Swan that spikes oil by a huge amount), as there is no takeover risk.
     
    Hope that helps and answers your questions.


  214. BOOKS/Recommended - I have noticed the occasional request for book recommendations, including my own request, across the site over time. I have enjoyed and profited from the books that have been recommended--and have really helped me with many of the concepts brought up tonight like position sizing and risk management.  I’d like to propse a general format, to facilitate searches for same; to wit:  if you have a book you would like to recommend, start your post with "BOOKS/Title of book" or "BOOKS/Recommened" as in this post. When you just got done with a book you were enlivened by and just have to share, post a brief review!  Without doing reviews just now however, i do have a few books that i have found very helpful in the last year. In no particular order, they are:

    Trend Following, by Michael Covel
    Trade Your Way to Financial Freedom, by Van Tharp
    Options as a Strategic Investment, by Lawrence McMillan
    Options Made Easy, by Guy Cohen
    Trade the Trader, by Quint Tatro
    The Little Book that Beats the Market, by Joel Greenblatt
    How to Make Money in Stocks, by William O’Neil
    Millionaire Traders, by Kathy Lien and Boris Schlossberg

    I hope you enjoy them. There are a couple more CLASSICS i need to get and read.. the Jesse Livermore book, "How to Trade in Stocks" and  Lefevre’s "Reminiscences of a Stock Operator." I hear they are excellent and are on my must read list.   Cheers!


  215. Phil / Feedback / $25k:   Phil, just some feedback on the $25k portfolio. I am running a much bigger portfolio with much more boring strategies. I watch with interest on your daily trades in the $25k portfolio, but am not tempted by them in the least. I learned long ago that this kind of trading requires specific skills, and in general these are not the skills that those running only $25k would have. I still make trades almost every day in my portfolio, but that is delta hedging much bigger and much longer term positions to take advantages of daily gyrations of the markets and VIX. So even though I trade for a living, I don’t day trade Momo stocks or oil.
     
    I personally would much rather appreciate you running a long term "boring" buy-write portfolio with your favourite 20 stocks, showing us how it takes risk out of market timing. I believe you are running the $25k portfolio for two reasons: 1) you don’t think it is the best time to be piling in long on equities and that we are more in a trading environment (I agree, but I have many long term positions and hedges to account for that) and; 2) there remains a lot of subscribers on your site who want to gamble daily.
     
    I think your $25k trades are pretty popular. But I don’t think it really captures the lessons and character of the PSW site. I know you will roll out a new buy-write portfolio at some point when the market corrects. But my point is that most of your market lessons are around "planting trees" and there ain’t much planting going on in the $25k portfolio. I sense a bit of frustration from you in all of the TZA, MoMo, FAS, etc adjustments as instead of teaching concepts, the discussions always get down into nitty gritty details. This is my point… this is not how most people will make 30% a year for 20 years. Just my thoughts, and happy to hear you clarify your view on this if you think I’ve taken something out of context.


  216.  
    neverworkagain
    I second your view. I took some of the $25K and did not have much success and so decided to scale back on them and wait for a better time to initiate longer term positions. I am working during the day and so following such active portfolio is hard. I too would prefer a ‘boring’ 20-30% a year portfolio that I can follow.


  217. Good morning!  ECB decision is around 7:30 and everyone is flat waiting for it.  Even Asia was flat this morning.  

    Dollar is at 75.89 so we’ll keep an eye on that.  

    Rosenberg/Pharm – So he shares the Fed view of inflation?  I find that very surprising.  Low velocity of money is what you have to be watching.  There is, for a fact, twice as much money in the system – you can’t put that genie back in the bottle.  The only reason we do not have hyper-inflation is BECAUSE the velocity of that money has dropped about 50% so we are net even on GDP.  Do you think the money will never move again?  When that movement does pick up (and it might be a while) then the suddenness of the expansion of inflation will probably shock most people but it’s right there in those charts – we used to have a little bit of money moving very quickly, now we have a lot of money that’s not moving at all.

    AAPL/StJ – I am not sure what you mean.  Are you counting the brand new cash you get as being "tied up"?  Of course it ties up the money the putter pays you but that’s not your money – it’s not being subtracted from what you had before so your change in buying power (which I find to be accurate on TOS) is the net of the margin and the money you get paid for the sale.  If my entire account were just $25,000 and I sold 10 AAPL 2013 $250 puts for $22 and I have a $45,000 margin and a $22,000 cash credit that ties up all my buying power – what is my profit percentage when I end the period with $47,000?  

    Performance/Amatta – I do hope you realize that the net on your buy/writes can vary a lot but what matters is if you are over your targets or not.  You really need to ignore the day to day fluctuations and just focus on whether or not they are above their targets.  If I have GE at $20 and I sold GE 2013 $20 puts and calls for $3 my net is $17/18.50 – If GE is at $21 but the puts and calls go up to $5, I will show a $1 "loss" but it’s only a loss if I panic and buy back the puts and calls.  The simple math of the thing is that, if GE finishes one penny above $19.99, I WILL collect a $3 profit.  Everything that happens between now and then is meaningless.  If I have faith in GE, if I KNOW for a fact that if GE were to fall back to to $10 that I would happily buy another round and have an average entry for 4x at $14.25 – then I don’t care what my portfolio says GE is costing me at any given time.   

    Duck/ZZ – Good point!

    Rate of change/Pharm – That’s the interesting thing I’m seeing.  Prices of commodities have gone up so far so fast that now they may flat-line and then what happens?  No inflation!  Inflation is relative to the last price, the pain you get "used to."  I suppose if they leave things where they are now – citizens will get used to affording less and the top 1% will get used to charging and making more and The Bernank will get to go on TV and declare victory over inflation because oil remains under $110 and gas is "only" $4 a gallon and the CPI will go down because the IPhone 4 has two video cameras instead of 1and that means you are getting more for your money – MADNESS.  

    Of course, what you guys are forgetting (and isn’t it amazing that they can make you forget) is that we have a $15Tn debt ($22 according to the IMF – see news above) that is NEVER going to be paid and if the rest of the World is tightening and reacting to the non-inflation that we see/don’t see – then the relative desirability of our money and our bonds will decrease and the cost of borrowing will go up for us.  It doesn’t matter if Ryan Paul drops our spending levels to pre-Reagan levels – We STILL don’t have the tax base to cover it and that in no way, shape or form does anything towards paying off our debt, which has to be rolled over and over at the prevailing rates.  

    Stiglitz/StJ – That’s a good one.  

    "Inflation does not = commodity pricing."/Pharm – As long as you don’t buy any commodities, I suppose you are right.  

    Fukushima/Cap – NOW you’re listening to Markey?  

    Few items/Pharm – Yes, but they are the few items people MUST buy.  That’s why the others go down, money is being sucked away from discretionary spending to pay for necessities – they can’t all inflate without rising wages, can they?  So you will always be able to point to a graph where some things go down and others go up because the amount of capital people have to allocate is finite.  Putting off the big ticket purchases of Computers, Furniture, Windows, Floors, Appliances, Tools etc let’s you buy dozens of tanks of gas but, eventually, you’ve spent the money you had put away for a new couch and they STILL want $75 to fill up the tank!  What then?  Don’t be fooled by the fact that we are still early in the cycle.  

    Another good point by Hannah – I think we need to make you head mistress of our Education section.  

    JPM/Dano – Ask on new post (which I have to go and write now).  Thanks for help offer, I will try to get something going soon.  

    TZA/Amatta – Sorry no time but the point is that having the hedge protects your longs from LONG-TERM damage.  If we go down and bounce back then the longs did not need covering – the hedge is there to make it so you do not have to panic out of the longs.  IF we keep going down, then the hedge pays off.  If we don’t, then the hedge will expire worthless (if you leave it) but the longs will be back on track.  It’s a pretty binary event.  Also, I’m deeply concerned with how you react to what I say.  We were BUYBUYBUYing on the Japan dip.  I went on TV and said very clearly that the dip was a buying opportunity yet you seem focused on the cautious covers we took – just in case things got worse.  We took the hedges to protect our buys – where are the buys?   

    Thanks Kevin!

    Good point Nicha.  Thanks on book.

    $1.50/RJ – That is WAY too much to pay for an active account.  Any time you are paying more than $500 a month in fees, the broker should be kissing your ass to keep the business.  

    Have to go write my post, will catch up later.  


  218. neverworkagain, 
    Yes I am definitely with you. Phil seems to think I like gambling, but I actually am trying to make a living trading (has proven a bad idea lately) without having such a hectic day to day churning positions and going crazy on moves in oil etc. 
    I’d be very interested to learn more how you manage your portfolio and what has been your expectations and returns achieved in this more subtle approach. 
    Much appreciated.