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Thursday – Yentervention Boosts Dollar, Drops Futures


I told you so (actually I told everyone on TV Tuesday afternoon).  I like the fact that BNN ran a caption in the box saying "Davis: Bank of Japan May Drive the Yen Down and USD Up."  The only correction there is I didn’t say "may" – I was pretty darned emphatic that is WOULD happen this week.  Well, it happened last night as the BOJ stepped in and made a huge move, dropping the Yen from 77 to the Dollar to 80.27 at about 6am, which is a stunning 4.25% move in a single day in the World’s third largest currency.   At the moment – everything I have to say about the market movement I said yesterday in Member Chat when we discussed the day ahead:

Big Chart – That’s a very nice move by the NAS!  Huge tail and formed a whole candle over the -2.5% line!  Unfortunately, everyone else ground to a halt at resistance but, if we  gap over tomorrow and finish at Monday’s close – all will be forgiven, right?  Kind of scary when you see how well these lines work – think of how long we’ve been using them.  No moving average, no slanty BS no redrawing them with new levels every day – that’s the 5% Rule!  

Note also the last time we sold off hard, it was the Nas that led us back over the 2.5% line and stopped at about the same place it stopped today so look for that June 28th candle to repeat if we’re on the way to a healthy recovery.  It makes sense that the RUT fell out of favor as the reality of earnings favors the Nas and is not good for the RUT – who have mostly US revenues.  That’s why TZA was our primary hedge at the top.  Now we have to figure out how much actual damage was done to the RUT’s prospects by Q2 earnings.  

I’m still very concerned that we’ll get a Yentervention and it’s going to be very difficult to pop resistance off a strong Dollar.  

That’s our morning so far (7:30) but getting such a big pop in the Dollar is actually good for the markets because it’s clearly overkill so we went bullish on the futures with the Dollar at the 75 line, assuming it would be rejected and head lower to give us at least a small pop.  In order to get the Yen down 4.25%, it was mostly about pushing the Dollar from 74 to 75 as the Euro fell a relative 1% ($1.42) and the Pound ($1.63) gave up about a point as well.  

So that should be GOOD for equities this morning as the EU has a fairly direct effect on the Dollar as there are about half as many Euros as Dollars in circulation while there are almost 10 Dollars to on Yen, which is why just a 1% pop in the Dollar can drop the Yen 4.5%.  Look for the Pound and Euro to head higher (cue Trichet!) and the Dollar to pull back but anything over the 75 line on the Dollar is bearish for equities. 

We did a little bottom fishing yesterday as we had that nice dip in the morning.  RIMM, IMAX, JPM, VLO and BAC all were attractive at 10:38 and we did some long-term put selling in Member Chat but I also have 2 highly leveraged trade ideas we also discussed that should be playable at the bell as downside hedges in case the Dollar is over 75 and the markets look weak.  As I mentioned in yesterday’s post – you don’t have to put much money into a 1,000% trade to offset a dip in the markets:  

TZA Friday (weekly) $41/42 bull call spread at .37, selling VLO Sept $20 puts for .35 is net .02 on the $1 spread.  4,900% gain if TZA finishes over $42 on Friday and the VLO puts expire worthless (VLO at $23.26 so 14% buffer).  The key to spreads like this is we REALLY WANT to own VLO for net $20 in our long-term virtual portfolio so there’s not much downside risk.

SDS Friday (weekly) $22/23 bull call spread at .40, selling the same VLO puts for .35 (net .05), as we love those guys, or the IMAX Aug $17 puts for .40 for a free trade (IMAX now $18.37) or the XOM Aug $72.50 puts for .30 (net .10).

These are great plays if the Dollar is over the 75 line as that will be no good for equities but, of course, we think those levels will hold up on our short puts.  The nice thing about bullish offsets is that, if the market goes up – they expire worthless and that’s how we get a free, or nearly free, hedge on our virtual portfolios.  Keep in mind that this is INSURANCE, we don’t want to win because that means the markets are falling but, if they do, $100 turns into $5,000 on that TZA spread so it can’t be helped if sometimes we end up rooting for that sell-off!  

8:30 Update:  We lost another 400,000 jobs this week and we have Non-Farm Payrolls tomorrow so perhaps a little sell-off into the open now.  Big  job losses can be a Dollar downer, as it puts QE3 back on the table because, as Bernanke earlier this year – as long as US Corporations DON’T hire US workers, he will continue to give them FREE MONEY.  However, these were about in-line with expectations while the EU is getting worse (relatively stronger Dollar).   So it’s going to be a another crazy day (we love those) with a lot of cross-currents moving the markets but it’s ALL about whether the Dollar is over or under the 75 line (over is bearish!).

Bearish bets we have plenty of (we’re reducing though) – what we’re waiting for is a clear sign to go bullish again.  These bottoms (our -5% lines) need to hold up and those -2.5% lines need to be retaken or we’ll have to go a little bearish into the weekend.  Hopefully the Dollar pulls back on our job news and we’re waiting for Trichet to say something to boost the Euro (which would make the BOJ happy too).  

Making young Americans happy is our pal Eric, "The Incubus", Cantor, who now  says it’s time for Americans to "come to grips with the fact that promises have been made that frankly are not going to be kept for many," and young people must "adjust" to a future with fewer entitlements and, by the way – there is no Santa Clause!  Oddly enough, promises to very rich Americans and Corporations will be kept at all costs – even if it destroys the country that Eric claims to represent but kids?  F*ck them!


Sure, promises were made, money was taken from paychecks for 40 years but it’s not like that money was put into a "lock box" or anything.  I mean, it’s the people’s fault they just left that Social Security SURPLUS of $1.4Trillion just laying around where George Bush accidentally used it to pay for tax breaks for the wealthy.  10M lost jobs later, those tax breaks are long spent now and neither the jobs or the Social Security money is going to be coming back and Eric Cantor just wants to make sure you know that and don’t have any illusions that the Government will be doing anything about it but, of course, they will still remove the money from your paycheck as someone has to pay for those extended tax cuts, right?  

Spain sold Bonds this morning at a whopping 4.9% for 3-year notes up over 20% from last month’s 4.05% rate.  4-year bonds went out at 5.05% vs. 2.87% in October, 2009 so perhaps a problem for Spain (Italy next).  Both the BOE and the ECB left rates unchanged and the BOJ is on QE33 at this point.  Meanwhile, a French court is investigating new IMF Minister, Christine Lagarde for abuse of authority but not for participating in the framing Dominique Straus-Khan so she could take his job and screw Greece over – interesting….  8-)

We went long on oil futures (/CL) off that $91 line as Over ten oil and gas pipelines lie within reach of dangerous exposure in the flooded Missouri River due to scouring, in which the greater weight and speed of the water can remove dozens of feet of the river bed by carrying sediment downstream.  And also because it’s almost the weekend and they love to jack it up into the weekend.  Gasoline (/RB) was also a play off the $2.90 mark in Member Chat this morning.  I’m sure I’ll be liking the same Friday $36 calls I liked yesterday on USO as an options play, maybe cheaper at the open.   Overall, we’re hoping to go long again but that Dollar is going to make it tough so very tight stops on the longs.  

Be careful out there.  

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  1. PP for today.

    Oh, BDC….I have not been a fan of DNDN, either, and always wanted to know how they were going to move sales/production to the main stream.  Guess they did not!!!! Thanks for playing.

  2. AMAG info: today announced the receipt of an unsolicited proposal from MSMB Capital Management (“MSMB”) to acquire all of AMAG’s outstanding stock for $18 per share in cash. AMAG’s Board of Directors will carefully consider and evaluate the MSMB proposal in due course and will inform AMAG stockholders of its position. 


    MSMB wants to block the acquisition of Allos and take AMAG private.  Ballsy move, but one I think would work for them and they could sell the company for more.  AMAG just needs to garner a bit more in sales.

  3. Pharm- maybe we missed each other yesterday- posted a question for you on DEPO. I bought more stock on the dip but still holding the Sept 7.5 calls and puts. Looks like these are toast unless there is a miraculous turn around. I will roll the puts later but wondering if you have any suggestions on Sept Calls. Thanks,

  4. PLX files their response to the FDA’s CRL.  This should be interesting.  Selling a few more Nov $7.5 Ps.

  5. Phil: How would you structure an FXE (short) / CAD (long) position w/ an approximate 6 month time frame? I know you don’t trade forex, but I assume the principles are the same.

  6. Oil Lines
    R3 – 96.09
    R2 – 94.92
    R1 – 93.56
    PP – 92.39
    S1 – 91.03
    S2 – 89.86
    S3 – 88.50
    Yesterday’s high and low – 93.75 / 91.22
    Breakout lines – 97.84 / 84.59 

  7. pstas – sorry, I did see it, started a post and then was called to a meeting.  For the Puts, I would roll to Mar $7s for a credit.  They should be fine.  For the calls, yes, not fairing well, but the hammer formed yesterday should be close to a bottom (?).  Any pop in the stock should get those up again to 50c and then I would roll them or get out since you have stock.  I have rolled all of mine to March $6s.  I still have some Dec $8 Cs as well. 

  8. Forex / Zero – Have you looked at selling  December FXE Calls and FXC Puts? This will achieve what you are looking for while selling premium. There are problems though as spreads are wide in these instruments and they are margin intensive. 

  9. Pharm, DNDN reports sales slower than expected, and drops 64% premarket?  Isn’t that an overreaction?

  10. FXE/zero – you may not have to wait that long (link)…

  11. FAS Money Recap
    No change today:
    Long strangle – Jan 12 18.33 Puts (2.40 now 2.53) and 28 Calls (2.40 now 1.58). So the long puts are up (thankfully)
    Short Weekly – 23 Puts (1.00 now 1.75) – These will be popping over 2.00 at the open!

    Short Monthly – 26 Puts (1.75 now 4.85).
    Things were looking much better at the close yesterday until the BOJ and ECB decided to join us in the currency debasing race. Even the Swiss are in that race now! 

  12. Good morning Pharm! Good to have you back… 

  13. Pharm- thanks on DEPO.

  14. Phil / Surprised the mkt isn’t more upbeat about Trichet’s QE3 announcement?  Looks like they are determined to support the Euro concept.

  15. Phil
    How do you determine the relationship between the dollar and the market?  I don’t understand how the dollar under 75 is bullish but over 75 is bearish?

  16. Depends on the view.  Unlike DEPO, DNDN has had time….and there are more things in the clinic for prostate cancer than any other cancer.  I don’t see their technology worth $4B market cap.

  17. oil price?
    either oil goes down or indexes go up

  18.  Dollar lines as well since it looks to be this morning’s story:
    R3 – 75.77
    R2 – 75.31
    R1 – 74.93 (actually acting as support now and since 05:00)
    PP – 74.47
    S1 – 74.10
    S2 – 73.64
    S3 – 73.26

  19. Thx stj….should have stayed away!  That last drop did not do good things for the biotech sector!

  20. RIMM recieved 2 more downgrades today both with price targets below $24.00

  21. Pharm – DCTH is turning out to be another ARNA! Shall I take my losers here. I have stock and some sold Dec 6 puts. Unfortunately I have a big position in this one.

  22. Pharm, how low do you think ARIA can go before it bounces?

  23. In case anyone recently bought ground turkey or turkey meat of any kind:

  24. and VIX is up

  25. Phil,
    any thoughts , for planning purposes, on  upside plays in the NAS – tying in to your observation that they led the way up in June?  I notice QLDs are very sparsely traded.

  26. Oh my, biotech hell for now.  If we are in long term positions in all biotechs, just be patient.  These are not for the faint of heart, and this is not the time (usually) to be buying unless you BELIEVE.  Remember CRIS?  ARIA has gone from $3 to $9.  IMGN?  They all had their day in wins an losses, we just need not to look at every move!

    ARIA – well, some support here, some at 9.10. 

    DCTH/nicha – I have quite a bit as well.  If you have the stomach, patience is the key.  They are approved in the EU, and we need to see how sales go there.  They are refiling with the FDA, so we need a catalyst there as well.  This one has been a dog, and we are trying to get out even, just a bit of luck….please?

  27. Oil below 91 !!

  28.  Willex,
    lower dollar relative to other currencies makes US good cheaper to the rest of the world.  The result – higher profits for US companies in terms of price (but not value)
    The price of the markets then increases.

  29. well i am suprised!  normal pattern is bottom by around 10:30 on gap down opens…but seeing very worrisome things

  30. Wow, Europe down big, yet again.

  31. JRW- what are new lines?

  32. It’s not going to end well and they all know it but won’t say it! 

  33. Good morning,


    IWM   73.74,  75.33,  75.91,  76.32,  76.69,  77.34,  77.84,  78.13,  78.64,  and  78.98

    Yesterday gave us a hammer on the daily chart, so I will be buying TNA on a break above the 8EMA on the three minute chart  (or TZA on a break below yesterday’s low of course)

    Also, I have been informed that some find my postings of results irritating. Since I do this at the request of the board, I encourage those irritated to select the IGNORE button to the right of this comment !!  8-)

  34.  JRW – keep up the results, gives me hope! lol

  35.  Jrw- txs…since i am away from a trading screen, could you kindly indicate what the IWM level is that corresponds to the 8ema on 3 min chart? thanks. By the way, are you still bearish on the trend (as you indicated a couple of days ago)?

  36. It’s just jealousy JRW.  I don’t generally post my results, as I would be called an outright liar. 

  37. JRW,
    They only try to tackle the guy with the ball. Pls keep posting.

  38. Virginia tech on lockdown….another gunman

  39. JRW
    Don’t stop even if they say your not real again, you have color for a reason!

  40. JRW—even if I mostly have no clue on how you get in and out (I am in awe)—- now and then a few nuggets sink in —please keep posting

  41. JRW
    Appreciate all your posts!

  42. lflantheman, I for one like what you post and wish you would do more of it!

  43. @JRW III
    You and Felipe are beacons on the horizon of  savvy trading.  
    e.g. Yesterday you wrote to go short if IWM hit 76.69.  It did. I did. It promptly went to 77.79. Closed it out based on some arbitrary loss number of a $1.10 instead of a disciplined 20% and course, if held overnight, would have paid off very very well a mere 18 hours later.  
    I believe that the irritated, the whiners and complainers are afflicted with a diluted form of Penis envy.  The Flipster has no such affliction. One of these days I will score large on your recommmendations.  I just know it.

  44. JRW well if people do not like your posting they just shall ignore it, simple. Even that I do not follow your trades I still find it interesting reading. Possible the man with the big zigar enoys them

  45. I’ve bought back the Weekly AAPL puts 395, believing it’s going lower and I can sell further out puts for more $.  I sold some AAPL 395 weelly calls at close yesterday.  I have no other AAPL holdings right now.

  46. Sold TZA @ 75.33 for 76cents.

  47. Kinda reminds me of 2008……relentless but volatile.

  48. JRW
    Keep posting, its an incentive to us mere mortals :)

  49. jrw wha tthey dont’t like your smileys??!!

  50. jrw and lfant, keep posting! please.

  51. JRW – i miss you when you are gone.

  52. so far seems like we’re holding the S&P 1235 line.

  53. Sold some AAPL Weekly 380 puts for $1.50, short the 385′s as well.

  54. JRW
    Keep those posts coming

  55. Good morning!  

    Dollar at 75.13 so I don’t even need to look at the indexes to know we’re going down.  Dollar up 1.25 = markets down 1.25%, this is not complicated folks…

    We do NOT want to revisit yesterday’s spike lows but we’ll look for 11,700 to hold on the Dow and 1,230 on the S&P, 2,630 on the Nas, and 754 on the RUT (the NYSE already blew yesterday’s lows so not looking too great at the moment).  

    Fortunately we are well-hedged and the volume is not so heavy this morning and we can clearly blame the sell-off on the Dollar so we might reverse next week or even tomorrow if we have a lot of job losses in the NFP report. 

    Gold is still going up ($1,682) so there’s a lot of panic to this move and hopefully we can play for a bounce later but probably not until the EU closes.  

    Data still very scary and we’re sure not going to be bullish with more than one index below our 5% line so cashy and cautious remains the way to go.  

    Retail sales not so bad – as I said yesterday, it’s generally an over-reaction on the realization of how bad the Global situation is but we knew the global situation was bad for ages so it’s only the retailers who are surprised – WE need to be bargain hunting.  

    Thursday’s economic calendar:
    Chain Store Sales
    6:00 Monster Employment Index
    8:30 Initial Jobless Claims
    10:30 EIA Natural Gas Inventory
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    Notable earnings after Thursday’s closeAIGANVCENX,CFDCTEDEOGFLRFSLRHANS


    At the open: Dow -0.6% to 11825. S&P -0.8% to 1250. Nasdaq -1.63% to 2649.
    Treasurys: 30-year +0.29%. 10-yr +0.14%. 5-yr +0.08%.
    Commodities: Crude -0.78% to $91.21. Gold +0.89% to $1681.10.
    Currencies: Euro -1.11% vs. dollar. Yen -3.04%. Pound -0.53%.

    10:15 AM On the hour: Dow -1.68%. 10-yr +0.3%. Euro -1.36% vs. dollar. Crude -1.64% to $90.42. Gold +0.99% to $1682.80.

    July same-store sales (actual vs. estimate), update #1:
    COST +10% vs. +8.6%. 
    HOTT +7.3% vs. +0.5%. 
    LTD +6% vs. +4.2%. 
    WAG +2.7% vs. +2.5%. 
    ZUMZ +4.9% vs. +7.5%. 

    July same-store sales (actual vs. Thomson Reuters estimate), update #2:
    DEST -7.3% vs. -7.5%. 
    BKE +6.8% vs. +10.5%. 
    SSI +0.8% vs. +2%. 
    M +5% vs. +4.1%. 

    July same-store sales update #3:
    CATO -3%
    DDS +9%
    JCP +3.3%
    KSS -4.6%
    JWN +6.6%
    ROST +7%
    TGT +4.1%
    TJX +4%

    Trichet says the ECB will not engage in QE even as the bank is reportedly in the market buying sovereign paper as he speaks. The Italian 10 year yield drops to 6% from 6.14% minutes ago. The SNB, MOF, BOJ, now the ECB – it’s the 4th major government intervention into markets in less than 36 hours. Is the Fed next? 

    The Italian stock market is again having technical difficulties, informing traders the value of the FTSE MIB index is no longer updating. Italy is at its session low, -3.3%

    Mortgage rates dropped sharply over the last week according to the most recent survey of lenders conducted by Freddie Mac. The 30-year fixed dropped to 4.39%, and the 15-year fixed fell to 3.54%. The agency’s chief economist claims the housing market is firming, pointing to a 3-month gain in a national housing price index.


  56. sns1 / EMA

    The 8 Period Exponential Moving Average is, by defenition, a moving target; if you are away from your screen, you should not be playing my system !! (Very dangerous)  That said, I believe we have bottomed here and should bounce.

    Good hunting !!

  57. JRW – My only request is to get your @ss out of bed a little earlier!  Kidding of course.  ;-)

  58. With GMCR down almost $3 today, it is officially a crash.

  59. JRW / irritating — I assume your posts are only irritating due to the amount of political banter in them. :)

  60.  FINALLY, a solution to Social Security!




    Midwestern oil tycoon Warren Buffett, pictured here adorably eating a parfait, presented his quick and easy solution to America’s debt problem today on CNBC:
    I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than three percent of GDP (Gross Domestic Product) all sitting members of congress are ineligible for reelection.





  61. JRW – I am in awe of your method and results. Pls keep posting.

  62.  I think someone broke the FTSE.  My screens just told me everything had gone to zero.

  63. I’m just glad that debt deal brought confidence back to the markets. Remember that thing? Seems like ancient history now, doesn’t it.

  64. JRW- not sure who’s complaining. The only two I’ve ever read were yipcarl with his huge mancrush and amatta when he was having a tough time in the market. the rest of us got mucho luv for ya… Just wish I had te time to follow your lines but I’m not getting paid to go to school anymore:(.

  65. It would be funny if it was not so tragic to see central banks pushing their currencies to the bottom as fast as they can. That would be like the captain of the Titanic calling for Full Speed as the boat is already under water… Not going to end well anywhere, not China, not Brazil and certainly not Europe, Japan or the US! 

  66. Iflan, rustle123, rainman – pls keep posting. I almost always follow you guys.

  67. AAPL:  I’ve rolled the Aug 5 395 puts (sold) to the Aug 12 390s for $8 +.   As noted yesterday, AAPL below 380 would trigger me to BUY calls.

  68.  JRW-
    Txs. And by the way Keep On Postin’! Between Phil’s more fundamental posts and your day-trading, i get a great perspective.

  69. Out of the GMCR puts, bought yesterday, someday those GMCR retail longs are going to "wake up an smell GMCR coffee" and find it does’nt smell that good, :)

  70. Another .45, system seems to work, had to sell to take a break missed another .30.

  71. Yodi / StJean – Kojo hasn’t  said to roll the put side of the August IC, right?  Or did I miss it somehow?  Glad I’m just paper trading that one.

  72. JRW
    Is it TNA time yet?

  73. I’m waiting for QE3 announcement or TARP 2 or FMTB 1 (Free Money To Banks) if we continue to fall another 1000.
    Coming right back to the S&P 1235 line again, think that is the key line today to watch.

  74. There is certainly some panic going on today. 51M in the first hour, that may slow and a lot of it might be due to KFT whcih has already traded 2x volume. Even so, individual stocks are breaking down on technicals and you can see obvious panic on issues like WFR and CTB.

  75. oil 90

  76. A brief note on a company I’ve never posted on here, but I know  well…..CSII…..They manufacture medical devices which I use.   Good earnings report yesterday.  Up today.  Buy the stock, not the options.

  77. VIX – 26

  78.  Phil, been in the back hills of Yellowstone for the last week, seems I lost a bit.

  79. Sorry, got caught up in an emergency!  

    Good we’re holding our levels.  Oil a disaster at $90.45, not worth playing as it’s too crazy.  

    Dollar topping out (hopefully) at $75.30, now 75.24 and that means it can be taken down to goose the markets if we’re lucky.  

    XLF dropped like a rock – that sucks.  Have to deal with them later (FAS). 

    As we have downside plays locked in, how about some speculative upsides IF we hold our lines:

    2 SSO Aug $47/48 bull call spread at .46, selling 1 $43 put at .84 for net .04 on the longs.  

    DIG Aug $49/50 bull call spread at .55, selling $43 puts for .45 is net .10. 

    DIA Aug $118/120 bull call spread at .80, selling $109 puts for .50 is .30 net.  

    As a day trade, I would like the QQQ Tomorrow $54 calls, now $1.55 if the Qs can cross back over 2,650 but tight stops (.15) off the entry.  

    On the whole, it’s safest to watch and wait to see where things settle.  Volume is picking up (60M on the Dow at 10) and we’re still heading down. 

  80. Keeping pace with Europe right now.

  81. Thanks for the support all !!

    Presumably, those that e-mailed irritation will not be receiving this or future posts !! 

  82. Rick Santelli Mass of money looking to find a home distorting Treasuries and currencies..

    Train.. meet wreck…they better control this or R2D2 will

  83. jcaesar
    IC RUT very difficult market today KOJO holding his head in the sand. However delta is now -.43 on the short put I look it like a flash crash and trust after the EUro market closes it will calm down. DOW is down 250 pts quite a lot many people capitulating I think. At the moment I will lieve position as is

  84. Phil / Treasury    Do you think Treasury and Fed will make a move today to inject some confidence and catch the shorts of balance?  They must be very concerned, since asset mkts have been the only positive during the past year and if investor confidence totally collapses it’s Depression time.

  85. JRW…..Where did you get my picture?    :)   

  86.  german sov cds worst performer today…+5% to new multi-year high

  87. shadow / TNA

    No, If you look at the 3 minute chart you will see that I should be in TZA, but I’m still in cash waiting for the retest of yesterday’s low; I will commit from there !!  I’ve only got three hours left to trade, as I have a plane coming this afternoon !!

  88. Phil / Treasury    So, I’m asking if you would make a spec play on such an intervention assumption (you know how the system works while I have no real understanding).

  89. Thanks Yodi.

  90. FXE/ZZ – I don’t play them but FXE has options and you can simply take a Jan $135/125 bear put spread at $2 and sell the $148 calls for $2 so the bet is that they don’t top $148 (now $141) and a big bonus if they drop below $135 (4%).  

    FAS Money:

    Let’s roll the weekly $23 puts ($3.30) to the August $22 puts ($2.80) for .50 – gaining $1 in strike for .50 is a good trade.  

    Let’s sell the August $21 calls for .83

    On the monthly, the $26 puts are now $6.30 so we went to sell another 1x (10 I think) Aug $23 puts for $3.50 and put a stop on the $26 puts at $6.70 – essentially if XLF fails $14.  If you have to cover the short, you can add 10 Jan $15 puts at $1.85 as they should not take too much damage on a move up.  

  91. iflan – i assume you are a cardio doc?  If so, what do you think of Spectranetics?  Reason I ask, is I have a small, med device company that is in the space of them, and we are trying to get it approved (510K), but not selling the machine…selling the handpieces!

  92. JRW – plane coming? So, you have moved on to collecting planes now?

  93. TBT/ Phil
    I am hemorrahing money on TBT.  I am short 20 Aug 32 puts as part of am earlier roll.  I’m down 7K on that position.  I have other positions that expire later.  How should I attempt to roll this ?

  94. JRW- While I  doubt you are as successful as claiming (estimating you should be up more than 500% to date with five months left in the year with nearly no losses) , I doubt even Sir Lloyd is doing so well in a room full of Bots.  With that said, I do find your post’s entertaining.Thx

  95. Pharmboy
    What’s your take on SVNT? Hold Aug $8 puts sold-will need to roll. Do you think the sell-off is being juiced by DNDN affect? Wasn’t a great earnings report. Thank you.

  96. Thought that Wagner’s Flight of the Valkyries was appropriate for background music…

  97. jakester / 500%

    No, not yet this year, but last year……………………… 8-)

  98. JRW…..May I add these words of wisdom….’.Holy crap don’t stop posting results!’ 

  99. Thanks JRW
    Hopefully this is it.

  100.  JRW,
    Do you have time to manage my portfolio?

  101. SVNT – yes, I have them as well.  Waiting to see where the hemorrhaging stops. 

  102. SPY is officially back to the start of QE2.

  103. Dollar/Willie – Things are priced in Dollars so, when the Dollar goes up, the PRICE (not VALUE) of stocks and commodities goes down and vs. vs.  

    Trichet/Tusca – It’s dollar supportive (QEwhatever in the EU vs. no QE in US) and bad for US.  

    $90 Oil – EU closing in 2 mins – hopefully we can pull it together here.  

    Dow volume 77M with only the RUT holding yesterday’s low at the moment (750 line). 

    TNA Aug $60/61 bull call spread is .55 and you can sell TNA Aug $43 puts for .60 so .05 credit on $1 spread and a $17 drop on TNA would be 28% so another 9% down in the RUT to 607 is what you’re betting against happening over the next 15 days.  This is a good offset to bearish spreads to lock in gains. 

  104. Good Morning!
    JRW – :)

  105.  Won’t QE 3 be an admission that the system is broken beyond repair?  

  106. It appears we are breaking through SP support at 1230. What’s next?

  107. QE3 will break the system beyond repair.

  108. DJI 80M in hour 2. VIX 27 (+15%). Dollar dropping over the last hour hasn’t helped. Think we can get the DJI -500 today? Where the hell is Matt?

  109. Shadow dont underestimate the panic taking place, calling a bottom in this type of atmosphere is very dangerous. Im staying in cash unless I see an exodus out of bonds. Very doubtful.

  110. JRW
    Not sure why anyone would email you rather than just click the ignore button.  Seems like most of us appreciate your posts and tutorial on your system.  Thanks.

  111. jakester
    If you paid closer attention you would notice JRW does report losses and if you paid even closer attention you’ll notice JRW posts lines and entry points so maybe you could cash in too. It takes practice, I’ve been here over a year and am just now feeling comfortable, and making serious profit with the system. The board has been through comments like yours before to the point where some members have even backtraded to validate JRWs 500% claim.
    So… my point.. JRW is for real!  Oh yea jakester the other myth…Phil and JRW are one entity.. LOL

  112. FAS Money Recap
    Weekly – We are now short the August 22 Puts (2.85 – cost 0.50 to roll) and the August 21 Calls (0.82)
    Monthly – Selling 10 August 23 Puts (3.65 now). Stops at 6.70 on the 26 Puts. Buying 10 Jan 2012 15 Puts to cover the additional Puts (1.95 now).
    Phil, we are still naked on the Monthly Call side. My guess is that we wait for a bounce to sell calls.

  113. RIMM/Bert – That makes it a good day to sell puts.  

    VIX at $27 – NOW we have some fun long contracts to sell – definitely time for a Buy List!  

    EU Close down over 3%, DAX down 10% for the week (we’re only down 6% so a long way to go if we’re going to catch up!).  

  114. peedlew99 / QE3 — No, QE3 won’t be an admission that the system is broken beyond repair. Didn’t we think TARP meant that? We’ve been fixed by that. We just need to keep turning the QE wrench until it’s fixed. What is the alternative?

  115. stjeanluc, so are we rolling the weekly put to the monthly put and selling the monthly call?

  116.  Just bought the TZA 42/48 August Bull Call Spread, for $2.40, and offset it with the VLO $23 September Puts at 2.22.  VLO was above $27 a week ago.  This dip made it very clear that I didn’t have sufficient disaster hedges!  At 1340 on SPX I had a ton of hedges, but by 1270 I had closed out 75% of them to lock in profits, and was unprepared for this much additional downside.

  117. I have WFR 2013 7.50 puts  Would you roll down here or hold out

  118. Wow! /CL taking another leg down 89.35! Taking CL down would be a good way to implement QE3!

  119. WTF????????

  120. utilities broke. this can’t possibly go lower can it? look out s&p 1200 i guess.

  121. We are officially 5 of 5 below the 5% line

  122.  Holy Sh*t, I havent seen a 41 handle down day in since the flash crash.

  123. FAS Money Update – $6.70 triggered on the August 26 Puts. We are now short only the 23 Puts on the Monthly trade. It is now  full panic mode on the financials with XLF breaching 14.

  124. WOW Phil JR….this is amazing, any words of wisdom….

  125. Jr_mints – Correct, getting out of the weeklies and skipping one week to the next monthly. 

  126. where are the big boys JRW?

  127. Better be a flush!

  128. why are you guys shorting bonds..what is the rationale?
    returns: well if someone had 100k and made say 20% a week or 4 percent a the end of one year the return would be 1.38 billion ..but if the board has an average port of say 10 k then it knocks it "down" to 128 million…so everyone should chill on the one said jr had a huge account so returns of 4-8% are feasible..who gives a crap anyway..his guidance is v helpful..maybe he is george soros..maybe fidel castro..maybe peggy lee..maybe he’s dirt poor and scrapes by..jr i hope its a G5!…

  129. Dave/JRW- Thank you for your advise but I pay close enough attention. There is no need to take my comment personally. BTW, if you were "paying attention" you would notice I stated " with nearly no losses". It was a simple observation based on years of experience trading the market. Good luck!

    whats cramers excuse today!

  131. Que panico!

  132. Oil – They will try to make a stand at 89. I have lines at 88.50 and then 88. After that, not good!

  133. crisis in Europe is center stage for US stocks — the concluded debt ceiling deal and the chatter about a double-dip are irrelevancies at this point. Gold making new all-time highs signals that we are not on the brink of a deflationary crisis like we faced in 2008 — but rather we face new rounds of reliquefication by world authorities. This tells us we are in a serious correction — one much deeper than we expected — but nothing more.
    that s form my contact in europe

  134.  FML

  135. well this is either the sweet spot to buy for today or a breather for another big leg down.  When’s the last time we finished down over 400pts in a day?

  136. chuerpo me ovevos tricchet!!

  137. And the oil market is unhinged on it own now. It’s not only the dollar – since 9:30, the dollar has gone up 0.15 and oil has lost $2.00. Like that guy was saying yesterday:

    "Investors are looking past the budget situation and realizing this is an austerity plan," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

  138. 1/3 TNA at $59.20, 1/3 at $59.25 !!

  139. peedlew99,

    Sorry, I’m not a "profesional"  8-)

  140. If I went bearish yesterday…you know things are VERY bad.

  141. Phil / 2008   Fortunately I wasn’t around during the 2008 dip, so haven’t experienced this kind of panic.  You started this am modestly hopeful for a bounce.  There’s really not a lot of new news, bit puzzling.  Are you still expecting this to form a  bottom and bounce?  Or, are they now expecting Europe to implode and bring on a total crash.  Still suspicious that Timmy and Ben will not just sit on the sidelines.

  142. QLD/8800 – A bit dangerous with all the overpriced Momos that will crash if the market keeps going down.  Even GMCR is down 4% this morning.  

    Hey, Gold finally fell!  

    Buffett/8800 – That is a GREAT idea except 3% of $15Tn is still $450Bn – Buffett needs to remember that not all 300M of us can pony up another $1,500 a year each!

    Much love for JRW is warmly appreciated!  I think the problem is, much like in politics, a vocal minority can ruin things for the majority.  I get that on Seeking Alpha also, many comments hating what I write very few saying anything nice about it.  If you like someone’s work – let them know.  I know I’m a lot happier when JRW’s turn signals match up with mine!  

    Gotta take a bulish poke at the Dow off the 11,500 mark.  (/YM) in the futures is $5 per penny per contract or the DIA Aug $119 calls are .90 with a stop if they fail the line in the futures (about 11,550 on the Dow).  


  143.  rainman,
    Clearly "they" don’t have any other ideas, but I really think further QE will have diminishing returns.
    I have a question, and I’ll try to keep it brief:  Seems the lesson learned in the Lehman crisis was not to let ANY significant institution fail.  Seems fair to say this is now the guiding principle with regard to PIIGS, the euro, ect., ect…
    But this reasoning supposes that things would have worked out better if Lehman was saved.  Here is where I’m curious.  How different would things have been had Lehman been saved?

  144. TBT at 27.50… Screams of despair being heard from Eric Cantor’s office. Knives and sharp objects being removed from his desk! 

  145. IC plays put in offer to buy back RUT Sept play 875 c for .50 and the OCT SPX play Oct 1425c  for .55 AS soon as you put in the offer they jump up the price on you they really do not want to sell!!!

  146. Positive comments/Phil – ok, then, I’ll join the chorus (baritone) – I love you, too, JRW! Very educational, don’t play your game yet, but boy, is it helpful for my own game.

  147. * "I don’t play your game yet"

  148. All in TNA !!

  149. Condors / Jcaesar – Sorry, didn’t get back to you earlier but I sat out this month after I read "THE" book. These 5 weeks condors are turning out to be too dangerous for the potential return! I do feel pretty good about it now. Still on the sideline for the longer ones and waiting for the smoke to clear. Cash is still good (except at Bank of NY/Mellon apparently).

  150. JRW III
    you got balls

  151. Phil/Let them know 
    Nice work!  Phil, JRW, Pharm, stjeanluc….
    O.K.  I’m a brown nose, but a damn good brown nose!…. :)


  153. Spain cancels bond sale for AUG 18

  154. stjean – Yeah, maybe I was a bit bold with the IC’s earlier in the week.  They were up as of yesterday and now they’re even.  Still have plenty of room with the deltas.

  155. IC just closed the RUT SEP 875 c for .50

  156. st jean – TBT, mine too.

  157. It’s truly panic in the oil market again… S3 was 88.50 and they didn’t even stop there! 88 is the next line and then 87.12 and the full panic, break the glass line is 84.59. These are Fib line from yesterday’s action.
    Dollar is climbing again, but 75.30 (R2) has held so far  this morning…

  158. SVNT – rolling to Dec 8 Ps.

  159. jcaesar
    Just hold on the RUT Aug 745 put has still a delta of -.44

  160. peedlew99 / lehman — If I remember correctly, someone in the fed had it out for Lehman (Paulson?) which made them an exception. Not sure how it would have changed things if Lehman were saved. Publicly I don’t think there would have been much difference in opinion but privately I suspect the failure of Lehman gave the Fed more power over the remaining banks through iron fist rule. Frontline: Inside the Meltdown had a good "peek" into the happenings.

  161. JRW.   I appreciate all your imput and help.  You are kind of like Roger Bannister, making some of us feel we can reach greater hieghts, levels of achievement.  Keep the conversation coming.  Question: What is the best place to start to learn to find the "lines", on our own?  In case you end up with so much money that you don’t need to be here with us any longer.

  162. Yodi / cojones — That’s the nice thing about a system. No balls required!

  163. There was just a guy on CNBC (didnt get his name) telling us the banks in Europe are safe…sounds like 2008 all over again.
    Banks in Europe are in big trouble

  164. JRW,
    Continuing this thread of sitting at the feet of The Master,
    On my chart, there was a cdle completely above the 9ema @11:21 (75.40ish) which was also just above yes’d lows. Was that an entry point with your system? if so was the stop below yes’d lows 74.90 ?
    Thanks in advance

  165. rainman
    Spanish or English they both look the same

  166.  Kustomz – it was head of investment at JPM I think.  MInd you is not easy to tell when they are shouting over each other.

  167. Yellowstone/Rpme – Well I hope you had a nice time.  If it’s only "a bit" you are lucky.

    Treasury/Tusca – Very doubtful anything happens this quickly.  There is a meeting next Tuesday and if we’re this low – I would expect they do something but we bounced yesterday so no meeting was called and we have to not bounce today for them to think it’s more urgent than Tuesday.  

    TBT/Kyw – I thought we did September and January on the roll?  Oh well, 20 Aug $32 puts are $4.20 so $8,400 so I guess you sold them for .70.  If you just want to avoid a loss, you can roll them to the 2013 $25 puts at $3.20 and just sell 6 more to cover the extra money and your margin will be lower but it will be there for a long time.   If you want to be more aggressive, you can roll to 25 Sept $28 puts at $1.70 ($4,250) and there’s 1/2 the money back if it works and you can worry about the other half later.  At $27.50 on TBT, you can sell those puts first and set a stop on the $32 puts at $4.50 and hope for a bounce and all it can do is cost you $600 more.  

    Monthly/StJ – Gotta have some faith!  I looked but couldn’t bring myself to make a sale at this time.  

    Good point on CNBC – "These are the same banks (in EU) that just passed their stress tests with ‘flying colors’

    WFR/Joe – Nowhere to roll to really.  I assume you mean you sold them so you’re in at about net $6.50 and they are at $6.50.  If you roll down to the $5 puts for $1.40, you drop your net to $5.40 (guessing) but are you that worried that WFR will not bounce back in 18 months?  WFR just had nice earnings – EVERYONE is crashing so unless your stock is worse than everyone else (and it is today) I would wait to see where things settle.  

    $88.34 on oil, looks like we’re going to make $87.50 after all.  Those SCO spreads should be cashable at this pont.

  168. Whoa!  End of the World!?
    Like Palotay (see his comment at 11:53), I took out most of my hedges yesterday.  Do you think it worthwhile to buy more hedges now?  Or you think it’s the bottom?

  169. Phil--I know a couple of young people that own BPT. They got it as a gift 20 years ago when they were toddlers. It is all they own and it is only 100 or 200 shares. Wondering if you think they should dump it because of your opinion on oil?

  170. TBT - I have redone 2 analysis of the decay over the last 2 years and my conclusion is that each month that goes by costs you betwee 0.50 and .0.75 points depending on volatility. Now, TLT has been in a channel between 88 and 108 in these 2 years and 88 has held multiple times. Unless we see a magical recovery in the economy, I see very little incentive for the Fed to raise rates in the next 18 months. And don’t forget, next year is an election year. The market could "force" higher rates, but the problem is that "qualified" sovereign borrowers are going out by the wayside so I have to assume little pressure there (or even the contrary if Europe crumbles). The last time TLT was at 88, TBT was around 41. If you are rolling to Jan 2013 (17 months from now), you have to take into account between 8.5 and 12.75 points of decay. That would mean a target for TBT between 32.5 and 28.25. Now, this of course excludes any flash crash either way (one kills the trade completely and the other slows the decay). And I am not trying to predict the future, but it’s nice to have a roadmap before jumping in a trade.

  171. JRW / TNA    What is making you feel this panic can reverse.  You made the argument some days ago that the big money was buying.  Is the volume selling today retail panic or margin calls?

  172. tuscadog
    I see panic selling, money flowing in, and the BOTs stealing money from the poor!

  173. We played SRS, SSO, etc many eons ago on this board, and they handed it to us.  I stick with the basics, TLT, SPY, IWM, etc. The Ultras are for the pros, and yes money is nice to make on the options, but they are too volatile and the erosion can be devastating. 

  174. UUP $21 Dec calls in $25KP are up pretty nicely.  Cash out now?  Or you think USD can go higher?

  175. Is this why we are down sooo much???
    Geithner staying for now, White House says

  176. Hello Phil, today I bought GMCR December 75 puts and HDGE stock. Do you think that it is time to cash them both now?

  177. is this considered a stick when  you go from down 380 to only down 280?

  178. Jrw-
    Im back at a screen What did you see at 12 that made you go all in TNA?

  179. Phil—would you go short gold now?

  180.  rumor rbs to have big writedown tomorrow on greece exposure

  181. 113M 3 hours in. Vix backing down to 26.25. $ @ 75.19 dow off lows.

  182. I want my QE3! 
    I think that’s what Sting is saying.  It is called money for nothing after all.

  183.   paulson advantage plus fund now down -22% ytd

  184. Phil / Carnac – What makes you think that the European debt crisis won’t intensify over the next few days/weeks?  Why won’t we experience another late 2008 situation? 

  185. Mor questions JRW why did you not repeat no get out of TNA at 12.18 ??? thks

  186. Anyone/Phil -

    What do you all think of shorting the Euro?

  187. Economic question of the day:

    "Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?" - David Frum

    Yes, he can be shrill… but not always wrong!

  188. Wisdom/Asaenz – Cashy and cautious – this is the sell-off we’ve been waiting for since early July.  We don’t need to pick a bottom, we just keep letting our levels follow the market down until it proves something but don’t write off those -5% levels yet – we’d have finish the week below before we begin shifting a chart that’s held up since last November.  

    Gold $1,654 – smart guys cashing out and buying stocks!  

    I’ve trained you guys too well, I think.  I used to be able to call a bottom based on how many people were freaking out and capitulating – none of you guys are doing that!   I mean come on, the Dow is down over 800 points in a week and it sounds like a knitting circle in here!  Where’s the screaming?  Where’s the panic?  Actually – I just want to say I’m very proud of you guys – this is very impressive, but I do miss my buy signal!  

    Damn, JRW beat me by 3minutes with a bottom call!  

    Cash/StJ – Whatever you have – they have a plan to take it.  

    Bearish/David – Watch out for that whipsaw again today.  Wild gyrations to scare out the retailers ahead of QE3, just like last summer ahead of QE2. 

    Gold miners taking the market down now as well as energy – that’s the kind of drag we like to see!  

    Bounce/Tusca – There’s nothing NEW out of Europe.  Did we discover new debt or did the GDP of Italy and Spain slip?  No, it’s just the Wall of Worry’s World tour going back to Europe after a 2-week show in Washing DC.  The ECB has TONS of money already approved to "fix" things so, no matter how low we go, if it’s based on EU fears, then we’re only going to bounce back at some point.  We are mainly paying the piper for manipulating the Dollar lower to prop up the market.  You just can’t do that forever so we can expect many, many days ahead of the Dollar going up (now that our Debt is "fixed" and until QE3) and then the markets have to struggle to retake their PRICES against the stronger Dollar.  The bottom line is you will be able to buy more than an ounce of Gold with 10 shares of IBM now, as well as 2 barrels of oil per share and that’s a good thing.  

  189. Get to see who needs money in Europe next week

    The new six-month tender was expected to receive healthy demand from those ‘addicted’ euro zone banks locked out of unsecured lending markets, analysts said.
    The operation, due to take place early next week, could also prove a good barometer of how far the region’s banking sector problems extend into Spanish and Italian institutions and how pessimistic the banks are about a near-term resolution to the debt crisis.

  190.  I’ve been short the euro for the last month and a half.  I don’t love the US Dollar, so I’ve used canadian dollar, swiss franc and krona instead.

  191. Phil: I’m entertaining initiating a new position in a nice dividend paying oil stock with some conservative put selling.. anything immediately come to mind?

  192. DF looks like an overreaction as well.

  193. Phil: "Where’s the screaming?  Where’s the panic?"  It many not be public, but it’s there.  A few days ago when JRW was screaming "bear trap" over and over I went too bullish and am now rolling and adjusting like mad, with things flying around my office…

  194. I have the FXE Sept 140/135 BPS.  I have been shorting off of the channels it is running in, and this is a dangerous place, as it is in the bottom.  One needs time.  140 has been a tough nut to crack, but it will.  Here is the chart….

  195. PhiL/SSO: Need your help on this SSO position:
    Buy 30 aug. $48 C @ $3.10,now $1.02
    Sell 30 C,Aug. $50 @ $1.87,now $.45
    Sell 30 P,Aug. $47 @ $1.24,now $2.60
    I don’t have any hedges to the downsides (I misunderstood your comments a few days ago. My error) and remaining positions are basically buy writes

  196. yodi / 12:18

    A reversal is marked on the 3 minute chart by an engulfing candle piercing the EMA FOLLOWED by an engulfing candle on the other side; didn’t happen !!


    sns1 / 12:00

    Selling exhaustion and the flow reversed !!



    I think we go up, OR we go up before we go down !!  8-)


    8800 / entry

    No, 1/2 hour later; you can see it plainly now on the 3 minute chart !!


    loopster / lines

    Tough question, just put my lines on your chart and go through different time periods; after a while you’ll pick it up !!


    Gotta go as IWM 75.33 looks like it will hold so I need to sell !!

  197. yodi
    I can tell you what I also watch is the 20 and 50 minute SMA I have the 50 in yellow!

  198. Whoa…Well that’s officially more than -100pts move in the RUT in less than a month.

  199.  wasn’t it completely obvious that Yentervention was coming? How easy was that put on FXY to make money? It’s nonsensical — my Sept-124 puts are up 100%.
    TBT is a freakin’ STEAL down here!

  200. Phil,  BHP is down almost 25% and in major support, time to sell puts?   Thanks.

  201.  @David,  I would be wary of shorting the euro here.  As near as I can tell, the EUR/USD has nothing to do with fundamentals.  If I were going to go short I would do it the following way.
    Short 1 /6e futures contract and sell the 1.415 put for .002240 = $2800 credit. As well as the 1.415 call for .02420 = $3025 credit.  That puts you in profit on anything below a 1.4616 close in 36 days and uses up just under $5000 in buying power.  Also, you keep the $5.8k if we finish anywhere below 1.415.

  202. AIB is toast. What is going on?
    I’ve always hated DNDN (I know people that work there and they told me this was going to happen). Good to see them going where they belong (finally!). Too bad I didn’t have them though — maybe next time!
    Blood in the water everywhere. Time for naked puts on MoMo’s? Their fantasy valuations have to end sometime.

  203. Phil --  capitulation

  204. JRW - 75.00 LOD Wed needs to hold, also TNA is getting way ahead of TBT (which is looking weak again).  VIx poking back up too. Good thing for all the exciting banter in this forum this morning, or I might have bought into TNA on the way down.  :D
    MrMocha/bear trap - some of the biggest bears out there were writting articles and stating they were too scared to short at this point…it was the perfect bear trap, although it would seem "They" have a bigger plan in store for us…the bear trap can come later for icing on the cake! 

  205. JRW,
    Just wanted to say that I very much appreciate your contribution to this board.  Although I don’t trade IWM (I prefer losing my money with /ES and /CL, haha!), your trading methodology is very intriguing and I am studying it in an attempt to use it in the markets that I am trading.
    Quick question for you on money management:  What are your rules on position sizing and overall limits for trading (max daily loss/daily target, etc.), if you don’t mind sharing?  Do you have other rules on money mgt that you follow?  Also, people may have asked you these questions before, so please let me know if there a place on this site that I can go and look it up.

  206. Craig -

    I’m just looking to make 2-3% on EUO ETF.

  207. Someone asked about AGN:  here is something – Allergan keeps finding ways to broaden use of Botox. The drug known best as a wrinkle fighter is now FDA-approved for migraine prevention, upper-limb spasticity, eyelid spasms and neck pain from cervical dystonia, all medical uses that account for about half of Botox sales. Up next: overactive bladder relief, first for people with multiple sclerosis and spinal cord injury, and next for a much broader population.

    CEO David Pyott expects FDA approval for the first overactive bladder use later this year, Reuters reports. That market amounts to about 350,000 patients. Allergan would then look to broader approval for the bladder condition "several years later." One Botox injection can help relieve symptoms for up to 9 months, he said.

    Botox sales are already on the rise, thanks to the recent OK for migraine use. In the second quarter, increased cosmetic use also pushed the drug upward; sales grew by 16% to $418 million. Analysts have predicted that marketing the for overactive bladder could be a half-billion-dollar proposition. "For a company with a revenue base of $5.2 billion to $5.4 billion," Pyott said, "another $500 million franchise is kind of cool."

  208. Wonder if companies with buyback programs are picking up shares today..

  209. 2/3 out of TNA for $1.31 !!

    And 1/3 for $1.08 !!

    Good hunting all, I’ve got to go !!

  210. There is a reason why you cash out when day trading, the direction constantly changes, I thought yesterday was a bear trap also but did not buy TNA or calls. Right now I think will have a little upside, below yesterday’s low makes no sense.

  211. Damn JR, wish I knew you were selling first…as I would have went all in on TZA!  You helped crush the 75 level on liquidating! 

  212. wappler,

    Here !!

  213. Safe travels JRW!!

    Bears back from lunch. If it were not for Bernanke /DX would be around 76+ with markets at these levels.

  214. So Phil, would I be a little late in saying, what level would you buy DIA puts, lol?

  215. Good chart of SPX.

  216. NOK dividend is over 10.5%!

  217. Trying to leg into a second round of puts on IMAX and HOLI, but prices don’t seem to be budging much even in this downturn. 

  218. yodi
    If you can notice IWM is having trouble with the 20 min SMA, the next problem is the 50SMA

  219. @david, In that case I would consider shorting ULE, the proshares ultra long Euro.  These things have same problem that USO and FAZ do with the decay.  So why not have the decay work in your favor :)

  220. Phil / capitulation — On a more serious note, I have 134 alerts and 99 of them are now triggered. Most of these are downside alerts looking for entry points. I’m still about 50% cash and will likely put half of that to work when it looks like we’ve bottomed. There are a lot of tasty looking entries out there with the VIX at 27 but I see no reason to believe we are at a bottom yet. The high volume is nice but looking at the major charts we’ve entered into free fall on many with the peak in Nov the next support and not much of one (.IXIC already there but the exception) and last years Jackson Hole the next support (which would likely put us into a bear market). Might as well sit on the sidelines until there is some indication we are at a bottom. Employment tomorrow might be interesting but I think Jackson Hole is a more important waiting point. VIX 30+ usually makes for nice long term large cap put sales though and there seem to be a lot of large cap bargains out there right now.

  221.  Phil, yeah I was down more than a bit, trying to stay positive, and here I thought I was pretty neutral….next time I will hedge better. FWIW my Zacks guy capitualated, sold the whole portfolio except AAPL and bought a bunch of TZA, calling for a 30-40% correction.

  222.  kustomz 
    August 4th, 2011 at 1:21 pm | 
    NOK dividend is over 10.5%!
    True but they payed dividends once only.

  223. JRW,
    Thanks the the link.  I have read the summary on your methodology before, but my question was more on guidelines for daily/weekly limits and how you decide that you’re done for the day.  As far as I recall, these limits were not addressed in the above link…

  224. kustomz / buyback — I saw a headline that implies the answer is yes.

  225. Another good chart.

  226. IMAX coming back! 

    Very nice if TNA pops $61. 

    Hedges/Cwan – If you are cash I would speculate long from here and stop out if we fail to hold today’s bottom.  

    BPT/Jabob – I wouldn’t dump it if you intend to own it another 20 years but it’s very likely to revisit the $90s.  200 shares is a $2,100 dividend so, realistically, is it worth selling to avoid a $20 loss?  On the other hand you can cash out ($109 = $21,800) and sell the 2 March $105 puts for $7 ($1,400) ans protect yourself from a 10% drop and worst case is you reenter at net $98 ($19,600) so you are free to party with the extra $2,200 already and, if BPT stays over $105, you keep the $1,400 for 7 months, which is better than the dividends pay you.  

    TNA rejected right at $61!  Should get one more whack at breaking it but not good if double fail.  

    TBT/StJ – Thanks but seems to me that if TLT falls from $103 to $93 (10%) in short order, then TBT goes up 20% to $33.   From there, another 10% down is $84, about last year’s lows (and we opened this one at 86) so another 20% for TBT is $39ish.  That’s not really much different than last year and early this year’s highs – certainly not .50 per month.  The thing about ultras is on a big move, the multiplier effect kicks in so a long series of drops kills them an a long series of gains makes them superstars (like AGQ when silver was up and up and like AGQ when silver was down and down).  It’s all about stringing together consecutive wins.  

    UUP/Cwan – I would not assume the BOJ is done in one day and they are December so we can give them a chance to grow. 

    GMCR/Alik – When in doubt, sell half!  We’re down almost 10% in two weeks, it’s a good place to take profits and, if we’re going lower from here, you can always reload.   For sure I would take some HDGE off the table but GMCR I think should be much lower – still – when in doubt…

    Gold/Savi – Sure because we shorted them at $1,650 so I’d still short them here.  I was way too aggressive in $25KP and we got our asses handed to us with GLL but I’m going to go for a roll next week and try again.  The GLL Oct $19/21 bull call spread is just .60 so I like that along with shorting ABX Sept $40 puts for .40 for .20 on the $2 spread.  Another offset would be HMY Jan $11 puts sold for .60 as that’s a nice miner to pick up cheap.  

    Dollar 75.25 not making anyone happy.  Neither is the gloom and doom squad on CNBC.  

    Dow volume 130M at 1:30, strong but not amazing. 

    USO Tomorrow $34 puts can be sold for .37.  

  227. 130M 4 hours in (+27 M / hour), VIX climbing, DJI sucking into 11,600, things seem to be calming but volume still high. The 2 pm hour should be interesting.

  228. obur, yes im aware but, its still a 10.5% return

    Money rushing back into bonds

  229.  Phil
    you want screaming?
    70% of your picks for LTP portfolio this year lost 50% of value, I’m down more than 20% just this week……hope after my post market will go up a little :)

  230. Phil
    Good call on TNA, was thinking of posting the same 2 tries at 61 or IWM 75.33, I hope we blow by it. How are they going to sell if they don’t toss out some bait?

  231. Phil / WFR — Any thoughts on why WFR continues to be punished? They do have a PE of 19 so a target of $5?  IMAX — Someone mentioned the difference in how we tend to see the data in a way that supports our supposition. I’m actually surprised you picked IMAX. If the general population can’t put gas in their tanks, how are they going to afford the movie experience? I personally don’t go to movies but I did go to a IMAX 3D just to say that I had so maybe I’m off base here but. with "normal" movie tickets running $8, that’s $32 for a family of 4 without popcorn or surgary snacks. Even if you buy those and bring them in your pocket your still looking at 8 gallons of gas as the price of entry. I suppose CHINA is the answer?

  232. either oil goes up or we indexes have long way down

  233. Paulson/Angel – Ouch! 

    EU/JC – It might but it will end the same way as ours, with a big bailout and free money everywhere.  A major part of our long-term bullish premise is inflation, not stocks rising in value (see Secret Santa’s Inflation Hedges for 2011).  We may get a huge meltdown and we’ll be able to generate cash by doing plays like the ones in today’s post over and over and over again and then, when we do find a proper bottom, we can commit.  Back in 2008 – we did not know if the Government could or would bail out the banks and people panicked like the World was ending – is that what you think now?  I WISH we had another 2008 because we never made more money than we did on that recovery – who would think that was going to be a twice in a lifetime opportunity?  

    Euro/David – See above on FXE. 

    Well that was a hell of a round trip.  Dollar 75.28, imagine what would happen if it goes to 77!  

    If you regretted not going long at noon – now’s your chance again.  It’s always hardest to go for it while we’re heading lower but that’s when you get the best prices – especially on short puts. 

  234. Pharmboy….Spectranetics……Yes, I use their laser atherectomy device to clear plaque from arteries.  It has not worked as well as other methods, such as the CSII rotational atherectomy device, and I use the latter 20 times for each time I use the former.  They make other products as well, and as far as i can tell they are a well run company.    As an investment, I must say I’ve not reviewed them from this angle.  I’m much more interested in CSII as an investment.  I mentioned them in an earlier post.  Although I have no inside info of any kind on CSII to this effect, I would think them an excellent takeover candidate.  I look for CSII stock to rise in value in the coming months and I’ve come in on it today at 13.50. 

  235. TBT  / Phil – Well, we’ll have to disagree on that one. As I mentioned in my post, it’s all centered on volatility so big moves would indeed make a difference. But I don’t have a dog in that fight, it’s strictly academic for me!
    On the other hand, amid this disaster, CSCO seems to holding around 15 which makes me think that it’s now priced "correctly" around here. Of course, they announce earnings next week (8/10) so it might make sense to wait as the last 5 earning announcements didn’t have a positive impact on the stock price!

  236. DIA Aug $119 calls back to .80, were $1 at 12:30 so 20 in the $25KP as a poke on 11,500 holding again.

    Obviously game on in the Futures again – same deal with Dow (/YM) back at 11,500, oil 86.50 (/CL) worth a shot if they cross over too. 

    USO Tomorrow $33 calls at .88, 10 in the $25KP. 

  237. yodi
    Did you check? Had trouble with 20 SMA bounced off the 50 and now having trouble again at 20 SMA, We need to blow by 74.80. I see all my mistakes which are always forgot that one afterword.

  238. Phil, smell a dollar induced stick?

  239. Shadow/75 line - I posted 75 LOD Wed IWM line needs to hold at 1:09…and three minutes later we crashed through it.  I’m wondering if JRW liquidating was the spark that sent it lower.  He moves enough volume to catch the bots attention, especially as he needed to quickly get out to leave.

  240. Phil / 2008 – I wasn’t a member in 2009, but I’ve read over your old posts.  You guys made loads of money, especially with those buy/writes.  We would indeed be lucky (from a trading perspective) to have that opportunity again.

  241. Frum/StJ – That’s very true!  Same thing here, I would say that Rep policies were killing the economy in 2007 and 2008 and everyone would tell me to keep my liberal trap shut and enjoy the rally.  This month, I’ve been saying that Rep policies were destroying the economy and again I"m told I’m "too political" and I should stick to trading.  I can’t help it – I’m fundamental and the destruction of the American Middle Class IS a big fundamental!  

    Art Cashin says this is not capitulation yet.  

    Negative/JMM – Yep, it doesn’t get much worse than that.   Hopefully this is max fear at this point.  

    Oil/Jbur – Sure, that BPT play above. I’d look for any beaten-down energy trust and sell some puts.  

    Don’t worry Mr. M – it probably is a bear trap but on a scale of days or weeks, not hours.  

    SSO/Dflam – I’d just roll the Aug $48 out to the Sept $47 for $1.30 and wait and see if we get a bounce but roll target on the puts is Sept $43s (now $2.25) and, after the caller expires, you can sell something for $1 or so to pay for the roll.  

    Didn’t Cramer say yesterday that low oil prices were good for the markets?  He changes his tune so often I can’t keep track anymore…

  242. PHil I have to ask you reg the SCO spreads, because as you said they "should be cashable" now – at the moment on the Jan ’12  51/56  SCO spread, I can cash out at for $1800.  However, I would think the smart thing to do is sell the longs for 112% appreciation and wait for the shorts to come back and also lose their premium as approaching Jan…yesterday you seemed to indicate that it’s dangerous to leave them naked, but I"m wondering what’s the best move here…thanks for your advice!

  243. In support of Phil, BOTS are buying, buy signals, and now maybe a buy program starting?

  244. Amazing how a head and shoulders pattern can play out, when the Bernank doesn’t prop up the markets…like he did with the last two!  55% odds…in markets NOT centrally planned by our "leaders".  Well look on the bright side, those $90B in bonds today should sell easily…perfect timing Ben, I’m impressed!  BY the time he is done mid August, then back to central planning perhaps???

  245. Steve Leesman says no QE3. LOL – CNBC pulling out all of the stops to scare people now….

    Cramer saying "Great Recession" over and over again and just said down another 5-8% so that’s what CNBC is selling now.  

    Oil $87 – don’t be greedy on those longs!  

    Yentervention/BDC – Congrats on that.  Who could have known?  8)

    BHP/Bob – I like SLB better but I’d make sure oil found a floor first.  

  246. Thanks Iflan.  I asked b’c of your post on CSII. 

  247. Jean-Claude Trichet, the president of the E.C.B., declined to say what bonds the bank was buying or how much. He said the bank acted in response to “renewed tensions in some financial markets in the euro area.” It was the first such intervention since March.
    Mr. Trichet also said that uncertainty created by the U.S. budget debate had unsettled European markets. “It’s clear the entire world is intertwined,” he said. “What happens in the U.S. influences the rest of the world.”


  248. KFT has given up all its gains today.

  249. VIX over 28.
    May be rumors about BAC going into bankruptcy are true?

  250. Troy
    I just lost faith, we need a supper powerful jump start.

  251.  DNDN worth considering at $12.18? Still the best prostate cancer treatment and reimbursement albeit slow is still available even at $90,000.

  252. We are out the lows 7/15/08 and 6/12/06 on SP500…got a big fat line there, amazing we might fall through it…what a day!

  253. DNDN/cj – no thanks.

  254. Here is your bottom—I am ready to scream and panic!!!!!!!!!!!!!!!

  255. Gor blimey, this is right mess!

  256. Nice currency trade Craig!  

    AIB/BDC – Any suspect EU bank is toast.  Good idea on Momos:

    • CMG is still insane at $314, Sept $290 puts are $5.30.  
    • PCLN $492 (congrats to $25KP players!), Sept $430 puts are $10. 
    • GMCR $104, Sept $92.50 puts are $2.70.  
    • This group can be offset by taking a bullish play on the Nas like QLD Sept $80/84 bull call spread at 2.20, selling AAPL TOMORROW $380 puts for $2.20.  

  257. we are  in that tricky period now where i think a bunch of funds are probably going to blow up…so that means forced selling which changes technical dynamic

  258. Savi – I’m getting nervous, and I"m 95% cash.  This could be the death of the retail buyers…and I do think they are important long term, even with 70% HFT volume.  The sentiment of the average citizen is my worry…it is beyond the money…

  259. imo..there will be a period in a month or two when china takes foot off brakes and fed does something…that will trigger big rally, but it wont likely last.

  260. I posted, "Sit down 74.01", this was supper strong support, never believed we would hit it!

  261. Helicopter Ben, where r u when we need u?

  262. thats the most down vol i have seenin a long time

  263. imagine if we had a flash crash now

  264. Troy to your point I think the retail investor that left the market for dead due to the flash crash episode will feel vindicated by recent market action.


  265. Peter D or Phil.  I have some SPX Short Strangles that i am needing to roll today to 2x.  Short put leg is 1255.  Is it better to wait until we stop falling to roll or roll before the delta of the short put gets to high.  the 1255s are now delta .71.  i am considering rolling 1 1255 SPX put to 2 1190 put and 1 1250 call which would have a delta of.44 .  I appreciate the guidance.

  266. if we don’t hold 735 on RUT …

  267. everybody focused on europe, but i think asia is in just as much or more trouble…that massive overcapacity in china won’t be able to be hidden too much longer.

  268. Have a good trip JRW! 

    Flash crashing now – not good!  Bots are kicking in as stops are getting flushed.  The only good news is the volume is picking up nicely (now 156M on the Dow at 2:30) but that’s no help if it doesn’t hold the line.  

    Dollar 75.42 was the driver of this drop, huge spike up and not a word about it on TV.  Dollar up 1.5% now for the day and a 2:1 effect is "normal" the rest is panic caused by the Dollar flushing technicals and then we have NFP tomorrow, which everyone thinks are going to suck.  So much bad news baked in, I’m still looking for longs when we find a bottom. 

  269. 73.80 must hold, quick glance show next big one 71.00!

  270. At 7/15/09 low, 4/23/10  high line on SP500…which lines up with JRW’s 73.80 IWM….

  271. 7/15/08 low, not 09

  272. IC RUT Aug rolled 740p to 710 and 735 to 700 even roll. Just extra margin

  273. 2:30: 158M +28M, VIX 29.25 (+1.25), Dollar at new highs ($75.42) indexes at LOD. If we spike down, I’ll bet Art Cashin will be buying!

  274. TBT leveling out here…nibbled at sub 57 TNA for the hell of it…bored!

  275. JEsus…sold for $0.50 in less than 2 minutes…this is crazy, not going to hold long today…

  276. Oh, I can’t believe the 2:30 stick is going to make an appearance. This is going to be fun.

  277. You would think that the way CNBC is talking Europe just got nuked!  LOL someone just noticed the DOW got legs.

  278. Phil / Oil    This oil correction is good news.  How much does this put back in consumers’ pockets?  x% boost to US GNP.

  279. stick time??

  280. Good call on those AAPL weekly 380s Phil.  Right on.

  281. RUT is the problem child today, down 4.0%… talk about higher beta on the broader index! S&P and DIA down only 3% just like the "fake" QQQ! 

  282. Retrace 50 SMA giving trouble!

  283. Wow  JRW’s line again for the turn

  284. YOU have got to love the phrase "Rip Your Face Off Rally"  CNBC not liking any discussion of a Rally.

  285. Joe – a line with 5 years of confluence!

  286. Frum / Phil – As you know, we are in agreement on that one. More Frum after hours as today is mildly busy!

  287. Shadow – TNA getting ahead of TBT again..

  288. Phil
    Are the BOTs doing everything now? Looks like it to me.

  289. HOLI/Seer – Those poor guys.  Funny how you don’t consider that when you do business in a country like China – if anything goes wrong, they will blame you regardless.  Kind of makes me wonder if insurance companies underestimate the risk when covering companies that do projects there.  

    Capitulation/Rain – This is just too much, too fast.  The news does not merit the action at the moment.  They are worried now about things we discussed and moved on from 3 months ago.  I have to play for a 2% bounce from here and if we fall through 10% – I’d be looking to go long again at 12.5% but I don’t see it.  Yentervention clearly backfired on the BOJ last night so now we should get a pause with Nikkei futures down 3%.  

    Capitulation/Rpme – Music to my bullish ears!  

    Good chart Pharm! 

    LTP/Tcha – What picks are they?  Do you mean in the Income Portfolio?  That one we are waiting for a sell-off to commit more cash.  We haven’t been bullish in ages otherwise. 

    IMAX/Rain – They are only about 30% more than the regular movie tickets ($3) so it’s $12 for a family of 4 once you decide to go to the movies.  Less trips to the movies leads to more choice of "special" movies and, of course CHINA!  As to WFR, they are out of favor, the SOX are out of favor, solar is our of favor so it’s a great time to buy if you are a LONG-TERM investor.  

    TBT/StJ – We’ll just have to see how it all plays out.  

    Here’s 11,500 on the Dow (/YM) again!  

  290. Shadow – when are the bots not doing everything…70% average volume, less than 2 seconds per hold!

  291. Do you think the Politico is listening to the money now?

  292. shadowfax
    Thanks for the advice but I still can not follow all JRW moves I guess I have not the right set up for it trying to follow with TOS

  293. They tried pushing the dollar over that R2 line, but it’s coming back although could prove support now. That 03:00 trade tomorrow morning could be very interesting as overnight the European markets digest the speech from Jean-Claude Goebbels today!  And then, we’ll have US job # at 08:30. I predict market mayhem either way! But CNBC will certainly prove to be the calm and collected source of information it always is!

  294. When there is joy in the streets………..sell!
    When there is blood in the streets…….buy!
    Any questions?

  295.  Phil / 50% down
    I’m talking about HOV, RIMM, HSBK, WFR, BAC, CSCO, SKX, BRK/B, TBT

  296. To put a positive spin on things, SPY is still 2 points above its 400 dma! That’s going to be the line in the sand…

  297. yodi
    I don’t think the problem is TOS, JRW is the mother of all multi-taskers, I keep forgeting THIS AND THAT and this is all I do, you have more positions than half the site put together. Give yourself a brake!

  298. THey are working on the dollar, but someone needs to kill the ViX as it is reversing up again.

  299. Phil you believe that "they" would let you in on the news that would pummel the markets? Somethings going on, not taking whats happening in bond land seriously big no no …

  300. kustomz -  "They" seen the macro picture months ago…but the debt ceiling and Euro issues screwed up their gentle exodus to the retail sheeple.   

  301. I know this is counter trend but I just bought some PCLN stock for earnings…I think they’ll go to 550 on earnings and follow through rally.

  302. Wonder if JRW is flying to Monte Carlo…perhaps he is the only smart one today..=)

  303. Phil have the same play do you mean roll the put as well or wait??thks
    SSO/Dflam – I’d just roll the Aug $48 out to the Sept $47 for $1.30 and wait and see if we get a bounce but roll target on the puts is Sept $43s (now $2.25) and, after the caller expires, you can sell something for $1 or so to pay for the roll.  

  304. Phil / Italy   So this panic started in Europe today, mainly about Italy.  There’s really no new news here in the USA.  But Europe doesn’t have a Fed war chest, so what will the Europeans do overnight to calm things down, what are the realistic policy / communication tools available?  If Europe panics overnight things could continue ugly here tomorrow?  You seem to still be playing for a bounce. I guess the only thing which could drive a bounce would be a better than fct employment report (which most of us are sceptical about given recent metrics). 

  305. Phil/SSO: With the market down so much ,are you saying I should roll today from Aug.$47 P at $3.15 to Sept $43 P now at $2.30 or are  you expecting  furthur decline in market?

  306. yodi
    If you recall I asked JRW about running programs together, I am sure he does but he pays a programer that is all that guy does. His primary screen can run mutiple progections or continuous calculations. I can’t afford or even know who can do it. I have failed.

  307. The 15 day RSI on SPY is at 28 or so. The last time we hit below 30 was last July 2 and we bounced back over 6% after that in 5 sessions! We are clearly in a very oversold position now, but history tells us that given the right conditions, it’s possible to be oversold for some period of time…  

  308. Phil / VIX at 28.56    Level of Japan earthquake.  I just don’t see why the situation today is worse than that day?  This seems a bit overdone?

  309. Yodi projections like running trend lines.
    I can’t do that, only manually over and over that breaks consentration.

  310. FU David!!
    jk ;-)

  311. shadowfax
    What I can not figure out I just do not run or just on paper

  312. JRW consistently steps ahead of the up/down move which maximizes return…that’s why some people find his numbers hard to believe.  He gets in and out a few % points before most here.  The guys been right 99% of the time, he’s in and out at least 5x times a day. He’s got one of the best systems I’ve ever witnessed. Got to thank JRW for making me a better trader!

  313. Wow! Who flushed our toilet!

  314.  Phil/Rolls: for longer rolls such as HOV Sept $3ps which probably need to go out to Jan13 – better to do on a big down day with high VIX or on an up day with lower VIX?

  315. Well, if nothing else this is hopefully the kind of battle where you learn from your scars.  I recently changed from buying calls to selling puts as the primary strategy, and in the past week I’ve learned a lot about rolling, covering, and margin management.  So more tools in the lifetime kit, assuming this isn’t my last wipeout…

  316. ____ 400 on the DOW again when are they trowing in the towel ???

  317. David …..PCLN…..I don’t think it’s unreasonable to go long on earnings.  

  318. Shadow - and this is why I’m selling on $0.50 spikes…today is poison for all traders.  We blew through the TNA ascending lower limit so close, I didn’t even have time to type a warning…  Still waiting for a mini-stick…not looking good though!

  319. I’m very close to pulling the trigger on some long AAPL calls.

  320. Troy, this is outright panic. I cant see it being that simple. Somethings going on behind the scenes, big money knows what it is and recent action exposes their fear. I really hope your right and this just a simple 10% correction that’s taken place in a matter of days. If its contagion fears in Europe and banks have more exposure than most have been led to believe, we will experience 08 type event IF they cant calm investors fears.

  321. Winds of War theme for those who think it’s been that kind of day –

  322. I can find his lines within .1, I also find lines like 74.00, 74.40, and 74.80 that if you look back were very significant pivot points. I have tried to get my so called GF or other broke SOBs to help on another system but none can stand doing it. I am still looking! Less expensive than unknown programers at the highest level.

  323. lflantheman
    Why sell long AAPL calls when they 11$ down ?

  324. Phil, still waiting for a response on my SCO question above – can you advise – thanks!

  325. kustomz - could be the fact the spotlight was on our national debt, and foreign investors are liquidating as they know what we have for years.  THe real damage was the global spotlight, not the last second ceiling increase.  I do think you are right…something is going on, everything is being sold into, and the bots have shut down the buy programs.

  326. Unless we get a stick soon (and dollar not helping) we’ll close on a LOD of that can’t help Europe in the morning! 

  327. Shadow - 1200 SP500 has some history…plus humans like rounded numbers for some odd reason, and they do program the bots…:D

  328. No Yodi, not selling AAPL calls,   Buying them!!!

  329. Stick/Lapper – We need something.  GS down to $127, JPM $38.64 – I don’t think these guys are in the mood to put TBTF to the test at the moment.   A nice Dollar sell-off into the close would do the trick but a lot of money pouring into cash as people run screaming out of commodities makes it difficult.  

    Lucky/JC – The main trick is recognizing an opportunity when you see one and, as I said earlier (too early) being ready to jump in and buy while others are selling.  

    SCO/Jerconn – Sorry, I was talking about the Sept spreads, not the Jans – those are simply "on track".  You could cash out at $13 on the $51s and buy the Oct $60s for $6, which have a .51 delta vs the .61 delta of the Jan $56 callers and look for a bounce in oil over the weekend if you want to be aggressive. 

    Buying/Shadow – Don’t mean a thing until we take our 5% levels back but this looks ugly still.  

    SPX/Robert – I see about $52 and they can be rolled down to the Sept $1,235s about even so why not.  You can sell some Oct $1,280s for $20, which have a delta of 30 so you will make money a lot faster in Sept than you lose it in Oct but, if we head lower, that will give you another $20 cushion on a roll.  

    Asia/Angel – We’ll get to them when we’re done freaking out about Europe!  

    Holy cow – TZA was a set and forget today, going parabolic now for a 12% gain (and accelerating!) – That’s just nuts. 

    Anyone tuning into CNBC right now would be cashing out for sure.   Actually, maybe not a bad idea at this point as this is turning worse!

    3:30 come and gone and no buyers. 

  330.  The funny thing is you are thinking "wow, CMG is really down today" but even at 312 it’s only WHERE IT WAS AT ON JULY 1. Isn’t that insane with MoMo’s?? the stock only needs to rewind ONE MONTH’s worth of a two+ year up trend and it feels like a big drop.
    Don’t forget CMG could easily be a 200 stock and that still only get you back to last October’s price. SO you have to ask yourself, was CMG fairly priced last October?
    (and fill in any of these MoMo’s for CMG, they are all the same)

  331. 3:30: 192M on the DJI, +34M (accelerating), VIX 29.55 (+0.30), /DX 75.33 Indexes at new LOD. DJI now at Nov peak, RUT, IXIC, SPX broke below Nov peak,

  332. Phil / EDZ   Up an incredible 15% today.   Phil, would you add to this in anticipation of emerging markets ‘freaking out’ tonight?

  333. CNBC - rumors people pulling money out of Euro banks…perhaps some of the fear today…

  334. Buying Ocotber 380 AAPL Calls !

  335. lflantheman
    OK misunderstood

  336. Phil
    I am scared now……does it mean its time to buy some bullish plays? (I am a rookie).  Although this looks so bad to me I think I am going to sit on the side lines mostly.  However I made money today…..unbelievable I know, when a monkey like me gets lucky hitting the right keys on the keyboard LOL.  Seriously thank you Phil!

  337. I always count days till change, tomorrow is the best chance Monday is second!

  338.  Oil/Tusca – Good news long-term but, short-term, the entire energy sector is down 5% – you almost never see a sector down 5% in a day and we have 3 (Basic Materials and Autos too). 

    What we have right now is something VERY NASTY – we have a 1.25% drop, followed by a 2.5% drop, followed by a 5% drop.  There is the possibility that tomorrow is a total meltdown so make very sure you are hedge for it.  

    DIA Sept $101.75 puts are $1.05 with a delta of .15 so the insurance costs about .45 if the Dow jumps 300 points and pays about .75 if the Dow drops 500 – that’s a good hedge just in case you are worried things get worse tomorrow.  

    QQQ Sept $52/51 bear put spread is .23, pays $1 (4x) if the S&P falls 6%.  

    These are insurance plays to cover over tomorrow or the weekend.  


  339. $DJU are following today rather than leading and did not participate in this last down handle. fell through technicals though, which is a very important to watch in the medium term, assuming you think more downside is possible.

  340. I can’t believe we are actually headed toward 1200 SP500…today is a great day to study fear and panic…

  341. Wow, TZA weekly calls run out at the 46 strike, clearly the CBOE needs some better disaster planners!

  342. They just wont let the dollar run!! This baby wants to go..

  343. Shadow – do you use TOS. 

  344. QQQ puts for tomorrow’s hedge.

  345. Will 1,200 hold on the S&P futures?  (1,203).  

    11,400 on Dow also in danger.  Holy crap!  

  346. Troy / panic — I’m not sure I’d consider this panic yet. The dumping has been too systematic with a relatively flat slope on the moving averages and not enough divergence of the averages. I’d like sto see some giant candles on giant volume spikes. It is accelerating though so maybe tomorrow’s employment report will do the trick.

  347. Down 500+ on the dow — GOAL!

  348. FAS Money / Phil – The long strangle puts are now ITM! 

  349. Whuck? WTF is that guy saying on CNBC?!?! "Options are CHEAP right now". WTF?

  350. So much for 1200 on the S&P futures…. This is what panic looks like!  

  351. Phil, we don’t need to hear "holy crap" outta you!

  352. Setting up my alarm for 03:00 now!  

  353. LOL Barf… 

  354. Phil,  Do you think you might have been a day early on that bottom call? ;-)

  355. barf  — That’s funny. Is that OUR buy signal? :)

  356. Phil – do I get a sticker for my 3:32 SP 1200 call? 

  357. Wow, that was a finish……oh, more to go..

  358. Phil:
    When can we start to panic and embarrass you?

  359. Phil / panic   I’m a relatively new investor and this is the first time I sensed panic in your statements – which certainly scared me!  I’m guessing that overnight Tim and Ben will be working the Euro phones and Trichet et al will making some statements equiv to QE3 before the mkts open tomorrow?  Otherwise they risk a repeat of 2008, as it’s all about confidence more than fundamentals.

  360. AAPL/Iflan – Not so good right now but rollable. 

    Bots/Shadow – People can’t trade this fast, that’s why we get these 5% rule sell-offs.  Still we’re oversold and a 20% (of the drop) bounce is due but not today and tomorrow is friggin’ scary now.  

    List/Tcha – Were those unhedged plays?  When were they from?  Happy to go over them with you.  

    They/Kustomz – I don’t know what to think at the moment.  Now the VIX is freaking out indicating someone was caught by surprise today and the selling into the close was panic at any price – there was nothing but despair at the end so we just have to guard our cash and wait for a time to catch a turn.  

    Finishing at low of day 5% down indicates very possible 2.5% follow-through tomorrow although the selling is accelerating so maybe much worse tomorrow if no one says anything to cheer up the markets.  

  361. get ready for that sp downgrade

  362. 1200 held on the S&P, or should I say the clock ran out before it failed….
    And that’s our "hide under the bed" signal, i think.

  363. rain - "controlled panic" :D   3:27 and 3:29 candles on the IWM were scary to me. I"m just glad my 6 year old didn’t come into my office today and ask if I was taking money from scared people today.  Never teach a 6 year old the definition of the vix…or day trading for that matter…:)

  364. hmmmm bet the BoJ is not feeling so great.  They just punched their biggest consumer!

  365. Phil--a little nervous--you seem to be a little bothered and that got me more nervous—what to do
    helps saying it out loud

  366. Yikes-took it on the chin with the AAPL weeklies, couldn’t stand the pain and covered, no roll, see what happens tomorrow, one thing for sure, the premiums are looking good :)
    -live to fight another day…

  367.  See DIA $101.75s made 10% already – that’s a nice hedge!  

    PCLN/David – That is VERY counter trend – good luck! 

    SSO/Yodi – Waiting on the put roll as it’s hard to be more screwed.  

    War Chest/Tusca – Yes they do.  They have over $1Tn set aside (don’t have to print it) in a discretionary fund to bail out anyone they want – no vote required.  The problem is that Italy doesn’t really need it – this is just the bond pimps attacking their next victim.  

    Bounce/Tusca – Unless someone says something tonight, Asia was flat this morning and they have a ton of catching up to do (EDZ $23!) and Europe was "only" down 3.5% so figure they could hit -5% after a 5% Asia sell-off and then we could open gapping down 1.5%.  BUT we have our NFP Report, where only 50K jobs are expected but, on the other hand, last month was just 18K.  I think it’s no longer going to be "the news is so bad, it’s good" but more "it’s confirming a recession" if we get a poor number.  

    14th worst S&P day EVER! 

  368. pcln?

  369. ooh…missed to load up some EDZ calls? I guess EDZ will pop up tomorrow..:-(

  370. " Bots/Shadow – People can’t trade this fast, that’s why we get these 5% rule sell-offs. Still we’re oversold and a 20% (of the drop) bounce is due but not today and tomorrow is friggin’ scary now. "
    And when warm bloods trade fast, you get giant candles and giant volume spikes. When Art Cashin says (paraphrased) "panic is when they say "oh god, someone just take this from me" ". What he really means is that MARKET orders start flowing from the warm bloods and THAT’S panic because they know they are about to be raped and are pulling their pants down in preparation. That’s were you’ll start to see the volume spikes on big candles. Having said that, we might never actually see that since the bots probably temper the trade to the point that you get a volume spike with lesser movement.
    If you look at today’s DJI chart (ignoring the first few minutes and the last few), you can see a couple of these trades 11:24, 11:26 in particular. The rest of the volume spikes (2pm hour)  don’t have the candle movement of panic. Could be bots tempering the trade but they don’t look like panic to me like the 11am trades do.

  371. pcln halted?

  372. rain - speaking of pants down, Matt had his pants down mooning the screen all day…this D-Day for his thesis…  Looking at the last 32 minutes, the decending channel in TNA was perfect (minus one small spike)…and very, very narrow.  Definately bot selloff, I agree!

  373. pcln knock it out of the park?

  374. Last 54 minutes actually…perfect downward slope…with a small spike down at 3:35…with was spiked up instantly to the upper limit by the bots.  I’m always facinated with perfectly sloping channels that last sometimes for hours…very common with HFT dominating.

  375. Troy / painic — The 11:24 IWM smells of panic to me (and corresponds with the DJI). Nice volumes on those 3:30 candles but not unusually large candles. See my thoughts above.

  376. And yes Mr Boehner, the uncertainty in the market has been lifted! 

  377. CNBC - $1.3 Trillion market cap lost over the last 9 days…a half a trillion today alone!

  378. FU PCLN!!!

  379. Very interesting short article by Cullen Roche about liquidity drying up, something Phil mentioned a day or two ago had not occurred yet and something to watch. I guess its starting now.

  380. jabo—think positive maybe it will help the market tomorrow  :-(

  381. As expected, RUT is our worst performer of the day.  

    SSO/Dflam – The idea is to roll to something with premium to burn (and better position) even if we keep going lower, you are buying $4 of position for .85 and pushing the puts into all premium – well worth the investment!  It’s not about winning once you fall behind like that, it’s just about getting out even and living to trade another day. 

    Overdone/Tusca – Of course it’s overdone but once you get into panic selling – you just have to get out of the way and wait for it to stop.  Now that we’re down this far – there’s no need to pick a bottom.  It’s a long, long way back up.  

    HOV/Brook – well your puts have no premium at $1.60 and the 2013 $2.50 puts have some at $1.40 but 1.5x the $2 puts at $1.05 obligates you to buy 1,500 at $2 ($3,000) vs 1,000 at $3 so that’s the way to roll it. 

    LOL Jabob – Funny to read on a day like today:  

    Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.

    “This group is key because the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody’s Analytics. “That was key to why we suffered such a bad recession — their spending fell very sharply.”

    “You just can’t buy a pair of shoes for less than $1,000 in some of the luxury brands, and some of the price points have gone to $2,000,” said Jyothi Rao, general manager for the women’s business at Gilt Groupe, a Web site that sells designer brands at a discount. “There’s absolutely a customer for it.”

    SCO/Jerconn – Did I get to that, I lost track.

    EDZ/Tusca – Sorry it’s late but yes, it’s good to add a new hedge and take a little of the profitable one off the table.  

    Bullish/Russell – No, cash is king when the market is panicking.  At our resistance levels, we take a bullish flyer (small trade with big upside) but stop out if we fail our levels and then we try again later.  If you play 5:1 trades or 10:1 trades, you only have to be right one out of 4 times to catch it so, if you try one every 5% drop, that’s 20% worth of attempts to play a bounce.  Congrats on making money today – great job.  

    Hey PCLN had a nice pop back to $545 – Congrats David, great call!  

    Dollar 75.50 after hours – OUCH!  The last thing we need is a panic into the Dollar!    TBT $25 anyone?  

  382. Rain - I was looking at the 3 minute IWM, the 11:24 and 3:27 are the same height over 3 minutes.  On the one minute, the 11:24 is gigantic, didn’t even notice as I only watch the last 2.5 hours on my scrolling 1 minute charts.  One thing about the old human panic system…there is no need for rich folks to panic manually, when the machines can do it systematically for them.  I’m not looking forward to the day when the bots freak out/shut down.  How will the rich panic sell with so few humans on the floors…perhaps they can sell to each other in dark pools…

  383. On the bright side, oil is down over 25% from its year high! That’s another nice tax cut there… And gas is back down to $2.75 (-6% just today). That’s just the way it should work.
    Phil, I recall that you had met someone who told you that we would never see oil in the mid 80′s again! Welcome to never…

  384. Phil
    When do you realize trading is not for you? I was caught without hedges.

    My portfolio returns till August 1st were 10%. On August 2nd I realized that I was under hedged because inspite of the hedges I had, my portfolio was down 1%. I did not add more hedges yesterday morning and sold all hedges at the end of the day. Today I am down another 2.5%.

    This is the second time I have done this where I sold my hedges a day before the crash in April. Back then I analyzed to figure out what happenned and here I am analyzing it again. I haven’t learned from my past mistakes and I am lost.

    What is my alternative? Invest in mutual funds? After listening to you for over a year I don’t think so! (i have been in cash since the beginning of this year in my 401k)

  385. Phil, yeah, caught your previous comment on SCO spread and held on, thank you!

  386. Well I got my ass kicked covered all my shorts went long on 4 CL contracts at 1130 got a phone call for work looked back at my computer at 1215 and had been margined out of 3 contracts because of the huge drop in oil and the huge drop in tbt and RIMM. went from being up 600 to down 13500 25% loss for the day.  Learned a valuable lesson for the 2nd time this year

  387. I know i am a moron because I went long the mkt today and my biggest short is PCLN jan 600s…
    hoping and praying I don’t get crushed tomorrow ;-(
    Phil--what is your opinion on PCLN…any hope??
    Do you think the mkt bounces tomorrow or more …

  388. The saving grace for the day was I cover my PCLN short around 495 to free up margin and it looks like it saved me 3000 bucks

  389. BPAX – sold shares two days ago at $3.  Now 2.32. 

  390. Uh, Phil, I decline that offer of TBT to $25. Actually, outside of WFR, and GMCR, thats my biggest killer so far. My SPX puts are in rollers heaven right now, but someday, I figure they reincarnate with a profit.

  391. bertl tatoo it somewhere else and you will definately not forget it…use the first letter of each word…like welcome to jamaica have a nice day..would be hour befire the close cnbc had guys on screaming that bears were about to get face ripped off into close!!

  392. If we’re posting horror stories, here’s mine – yesterday I sold 20 DNDN  $35 Puts – only to see DNDN go from $35 to $12 today…talk about having your head handed to you on a platter -  maybe I’m crazy but I think there’s hope they go back some time soon.  It’s the nine days, if ya know what I mean…

  393. does it make sense to buy EDZ after hours now? I don’t know whether they even trade after hours?

  394. Holy crap Jerconn……call me next time b’f you do that!

  395. Phil / Ben    He must be freaking out more than we are, as $1.2 Trillion wealth reduction can lead to total crash in his hoped for ‘feel good factor’ (for the wealthy) which could spin into a Depression.  QE3 looks cheap relative to these #’s accelerating?  But, he may not have much time if the slide resumes tomorrow.  Hmmmm, wonder what they’re dicussing tonight?  If I were Ben I’d probably be strategizing a statement before the mkts open tomorrow?  Of course he already knows the employment #’s, so that must help planning (and Goldman’s!).

  396. Pentaxon
    still standing by your viyindicator?

  397. It’s going to be time to refresh some charts… 

  398. robert,
    Sorry, I was off PSW all day.  The 2X roll from SPX Aug 1255 put to 1200 (not 1290) is still available.  If you had spare margin, you can go 4X to 1150.   Selling some calls like you suggested would work also.  May be to 3X 1150 puts and sell 3 calls that give you the same credit as the 1150 put, which is the Aug 1270 calls.  This is nice as your breakeven point has shifted a full 105 points to the downside.  The key is to have the margin for the roll.

  399. Pharm – yeah I’ll do that…was sure that announcements of new factory openings, etc, would push them up…who could have foreseen a 66% drop, and that was even before the rest of the markets were down. ..did you have some inkiling?

  400. Oil / Bertll – Ouch… You should also look at stops below the resistance lines! At 11:30 we had a bounce off S2, but having a stop $0.05 or $0.10 under that line (especially if you are going to be away from your PC) would save you a lot of money in the long run! 

  401. jercon,a few years ago i wrote puts on a bio stock they where trading at around $60 sold $40puts.they dropped to $18.  now i never ever sell puts on biotechs.painfull but part of the learning curve.

  402. @jash – yeah, what’s worse here is I own a nice chunk of DNDN stock, followed them up from the bottom around $2 and totally did not "insure" them with some puts, etc…big mistake, but like you said it’s a learning curve.  And I still think there’s chance they go up from here, hopefully…

  403. FAS Money/StJ – Nothing you can do when you get a black swan but wait it out.  

    Options/Rain – You should have to pass a test before you can talk about something on  TV.  

    Sorry Barf but – Holy Crap!  

    Day early/Malsg – As long as it’s not a week early….

    Sticker/Troy – Sure. 

    Panic/DC – Now would be about the right time.  Look at this chart:

    Panic/Tusca – Oh sorry, I am just trying to make sure I convey my concern to anyone who is still bullish and not well hedged.  We could be looking at another 10% drop from here but that is what I said on TV on Tuesday.  My real  "panic" comes from hearing people on this board say they are not adequately hedged, etc and, as the close got uglier –  I sought to convey that to people as I put up those last few bearish trade ideas because there may not be a chance to cover tomorrow morning.  

    I still HOPE we bounce tomorrow but, as our President has taught us, hope and $3 gets you a cup of coffee at SBUX.  If we do not bounce, we could drop A LOT.  In fact, ONLY dropping 2.5% tomorrow would be an improvement!  Look what is happening on the chart: Down 1.25%, down 2.5%, Down 5%  - we all took our SATs – what is likely to come next in the series?  Either up or down 2.5%.  Less than 2.5% up will be bearish into the weekend anyway and there’s a good chance we spike down and flatline – which would still be bearish so the real place to take a poke at going long tomorrow would be on a 2.5% spike down.  

    Keep in mind that QE# in Europe is BULLISH for the Dollar and bad for the price of our Equities.  QE2 here is BEARISH for the Dollar and good for the price of our equities.  Tuesday is the Fed meeting – if we sell off further, that’s the turn we’ll play for but, failing that – it’s a very long way down….

  404. Market Priced In Dollar Devaluation Terms Down 8.6% YTD, Almost Back To Jackson Hole Levels
    Market Bloodbath, "Happy Birthday Mr. President" Edition
    Submitted by Tyler Durden on 08/04/2011 – 16:08 Implied Correlation
    The Dow is down more than 500. The S&P is down 60. The VIX surges 35% to 32 the highest since June 2010. Implied correlation surges to the highest since last summer. ES volume surges to the highest since the flash crash. Europe is opening in 12 hours. Margin debt is near record high levels, and mutual funds have record low cash. Liquidations galore. Did we miss anything?

  405.  Does anyone know what this means in the after hours:
    Today at 5pm: 500,961 shares of IWM traded at  $77.2115 according to the nasdaq website.
    IWM closed at $72.60 and the high of the day was $76.20, so it’s outside of the day’s range.
    Any ideas?

  406. Hey Phil, watched your excellent 20% down comment during your interview when you posted it…better watch out, or I’ll send that video to CNBC and they will make you their talking puppet.  Or better yet, you can go on CNBC and push our PSW hedges, like the other talking heads.  I smell legally illegal profits, as it isn’t illegal if the SEC doesn’t follow up, right?

  407. Info for those long…

  408. Aug – they have been doing the same thing on SPY for over a year.  I have been following those spikes and SPY had them today up to 126 on the 3 min chart.  Along with the chart above, I think tomorrow could be a huge up day.  I am trying to look at historical graphs on days after today.

  409. link


  410. Some unscientific stats:
    - Since 1950, today is the 24th time the S&P500 has dropped 4.75% or more in one day.  Half of those 4.75% one day drop occurred in the … 2008/2009 period.  The other 1/4 occurred in the 1987/1988 period.
    - The next day close on average is +1.1%.  The median of the next day close is +2.6%.  Take this is a grain of salt as there is only 23 data points (excluding today).
    - The close 2 days later (compared to the -4.75% day) was +2.3% on average, +2.5% median.  Same disclaimer about small data set.

  411. Just arrived home. On trains all day with just enough signal to see the blood gushing from my portfolio but not enough to get cute and trade it much. When the smoke cleared, I had my biggest one day loss, all from a straight-up stock position (PBR), while all my options cancelled each other out.

    Unfortunately, that was not the plan; in dollar exposure I was perfectly balanced between short Euro and long Barrick (calls) and PBR. Doh! Back to the drawing board. I added some longs @ 3pm, (Arch coal Jan 2012s, ACI down 10%+) and took off half of the Euro shorts, expecting an ECB reaction overnight. At least I didn’t panic out, but tomorrow I may regret that. Boy, do I still have a lot still to learn.

  412. Today’s levels. The NYSE, SPX and RUT dropped far enough to bring -7.5% lines into view, and in the case of the NYSE we may be down far enough to see -10% lines coming into play, if we had those defined.

  413. Helluva day huh? Tough day to be out of town and away from my good trading computer. But did ok, survived because I listened to my gut yesterday on the close and didn’t want to be naked long. Dumped, 1/2 my UUP Dec calls, from your UUPmplay in Dec Phil, this am after the Yentervention, and used the profits to buy some DIA 116 Puts as extra insurance.

    Bought back most of the calls I sold yesterday afternoon, and ended up the day very nearly just even, although the market was down 500+. So, even though today was active, I didn’t panic, kept my head and took profits along the way and established new hedges with some of the proceeds.

    I bring this up as a way of showing you how much I have learned from y’all over the past year. Thank you all for your lessons, sharing and input, it really got me through a tough day with little damage, and a lot of cash ready to get to work(although in no rush).

    I think everyone did a little math on the GDP = equation the John Mauldin often refers to. So, take q1 revised GDP of 0.3% and then fill in the other side of the equation remembering we had 18-20billon per week in QE2 stimulus, plus fed govt spending. Now, ask yourself what would that GDP be with austerity beginning and no QE#. And if you run big money you hit sell before yor brain comes up with the answer that we’re severely OVERpriced ATM. Everybody now headed for the same door, so we will probably see more selling IMO. And how’s that liquidity I was referring to going?

    Have to grab some more hedges in the am if I can…..

  414. Euro dropping..
    Larry Kudlow tweeted the following
    Sources tell me Italy has to restructure bonds.Deposit run on Italian banks.EU will have to mount Tarp rescue.Big stress on interbank loans.

  415. Phil,
    Thank you very much for your extensive comments on the Sprint trade last night.  I entered that trade on paper because I wanted to see it work over time.  The simple principles i get (sell puts,  buy writes) fairly well (for a novice anyway), but when it comes time to adjust a position, I was really confused.  What you explained and how you explained it, followed by trading it really helped me to experience an adjustment first hand for the first time.  That being said, I am very glad that it’s only in a paper account after today :D
    I just wanted to say thanks, you gave far more education than I expected; I really appreciate it.

  416. whewww… 
     Anyone else NEED a COCKTAIL or 10?????  

  417.  Phil
    looking to adjust an adjustment to a disaster hedge – after adjustment I have Aug TZA 35 calls sold against Oct 37 longs (the 37′s were an adjustment from Aug 30′s you had suggested). I am considering rolling to something in Sept to get some additional benefit, and selling some VZ 2013 puts to offset. Please let me know if this is a reasonable adjustment or if you’d suggest something else. I need more hedge  - thanks!

  418. Phil, as promised, more Frum:
    Some good facts for your comments! 

  419. Looking at stocks I like and not seeing that much of an increase in put prices or compelling opportunity yet.  Perhaps I’m looking at this the wrong way.

  420. @ Phil, if we get an up day tomorrow, do you think it would be wise to sell some of my stock positions and try to re buy them at a better price when (if) the sell off continues? Maybe 1/3. Or is it too dangerous/dumb to sell when we are way oversold? Maybe its better just to keep buying small pieces to average down (luckily i am more than 60% cash). I know its pretty hard to guess right now, but what does your gut tells you at the moment, are we done with the selling? I think that if the FED doesn’t at least cheer us up with some positive comments we will continue going down….two more days until tuesday (fed meeting) so we can easily fall 5% more at the least i think….

  421. I have to say that technically speaking, I don’t see a bottom for the euro yet! Yes, it’s also oversold, but not to the levels where you could see a bottom just yet. Seems to me that the ECB has a communication problem because, no matter what they say, it could be seen as bearish for the euro. It’s great to go around and say that the US and Japan have bigger problems (makes for good copy there!), but what do you say tomorrow or Monday if you have to bailout banks in Europe! Or they could continue with the same rosy speech, but they would be seen as out of touch. The sharks are circling now… Not going to end well! But I have been wrong before.

  422. In reviewing today’ numbers, I am struck by the disproportion between the Euro drop – less than 1.5%, unless I’m missing something – and the magnitude of the selloff. Why would a Euro drop that didn’t even crack 1.40 panic everyone out of U.S. equities? If there is an answer other than “blind fear” I’m having trouble coming up with it. Yeah, I know, the markets can stay irrational longer than you can stay liquid, and the markets had been selling off for weeks in any event, but what’s new here? I can’t even come up with a wrongheaded hypothesis!

  423. Instead of buying puts, you can always sell near OTM SPX calls. I was close to that today, and may go there tomorrow. I have already sold 3 sets on the way down, so I have a little more than double the count of calls as puts. Of course the value against is like 4x on the put side, but one tries…..

  424. Phil/Anyone…help for a rookie please
    I wanted some advice about what to do about some positions I have covered by puts that are in the money….namely three large positions I have in VOD, TEF, NVO.  Wondering if I should sell the puts and keep the stock or use the puts and sell the stock at the higher put price?   Some shares are long term at this point, so get long term captial gains.  Seems like Europe going down further so think maybe cash in VOD and TEF???  NVO I am unsure….planned to have it as long term holding.   Never used a put before to cash in a stock.
    For example….
    have 1000 shares TEF closed at $20.62 
    and 10 puts as follows….PUT (TEF) TELEFONICA SA ADR SEP 17 11 $22.5 purchased for $1.11

  425. ZZ – I agree, basically.  Under more normal circumstances I wouldn’t expect a 1.5% change in the Euro to have such a significant effect on US stocks.  But this is panic (perhaps deserved) based on concerns about the European banking situation and the greater world economy (including, by definition, the US).   Phil can chime in and say if I’m all wrong about this, but a currency shift in and of itself having this effect, well I don’t think so.

  426. 0×0, dont you know if you dont sell now you will lose 10% because the markets are going down 10 more! Panic!

  427. Pharm -
    I programmed the VIX 18% study in TOS:
    declare lower;
    plot Data = ((close("VIX")-close("VIX")[1])/close("VIX"))> 0.18;
    plot dp = ((close("VIX")-close("VIX")[1])/close("VIX"));
    and if you apply the study to SPX  dailys you do not get the same results as shown in your posted graph.
    EVERY time VIX goes up 18% or more the next day is az down day.
    Try it…….

  428. Zero you’d think with all the money coming out of Europe the Euro would fallen much further. Things that make you go..hmmmm

  429. Phil—what are your thoughts about PCLN???
    What a day--waited forever for this and…dangit!

  430. VIX 18% study on TOS
    Interesting – the TOS study is just wrong, not sure what data it is using.
    If you plot VIX and use the close values plotted they do not match the study calculations.

  431. Nervous/Savi – LOL, I have to reread my comments but, as above, I’m nervous as I hear from some people who don’t seem to have any disaster hedges or whatever to cover this mess.  Tcha, for example, says he lost 50% on stocks.  I don’t have the list yet but I’ve been saying "cashy and cautious" and Disaster Hedges so many times the past month that it simply didn’t occur to me that there could be people who are not covered.  Even so, we get past the point of "Wheeeeee" on a nice dip and to the point of "Ahhhhhhhhhhhhhhhhhh" at about 10% because a 20% drop (my worst-case), back to pre-QE2 levels, is now a real possibility.  As I often say – the Emperor has no clothes and all it took was one little boy/event to point that out and that event was our Congress blowing our credibility on the World stage (not to be political, of course!).   

    AAPL/Onko – I expected we’d bounce off 1,200 and that would set the floor on AAPL and, of course, they can be rolled to Aug $360 puts even -that was the logic of that position but no big deal if you take the small loss you can always offset it with another sale later – that’s why CASH is a very smart position all the time.   

    Romney/Angel – Amazing!  They are already abusing it…  

    One of those companies was W. Spann LLC, a mysterious New York-based company that apparently closed up shop last month shortly after its contribution to the pro-Romney PAC. As NBC News’s Michael Isikoff reports, the company was formed in March by Boston estate tax lawyer Cameron Casey and listed a midtown Manhattan address where the landlord says there’s no record of the firm being a tenant.

    The company gave $1 million to Restore Our Future on April 28, and according to records obtained by Isikoff, dissolved on July 12th, just two weeks before the pro-Romney PAC disclosed its donors to the Federal Election Commission. There’s no indication in the records of what the company did or who its owners or principals were.

    Bots/Rain – When Bots panic you have a flash crash.  

    $1.3Tn/Troy – Good thing we saved that $200Bn a year!  

    Oil/StJ – And on this very board, right now, there are people who don’t believe gold will hit my $1,250 target.

    Trading/Nicha – How many of your 10,000 hours of practice have you put in?  Don’t give up just because you can’t hit a curve ball, it comes with time.  So you were up 10% and the market dropped 7.5% and now you are down 3.5%.  Clearly you were a bit too bullish.  It was right to take profits off the table yesterday but this morning I added new hedges in the morning post because we didn’t get that gap up we were looking for (see yesterday’s comments).  You need to ALWAYS be hedged.  The only time you let yourself get out of balance is on a short-term premise (like we thought we had a floor yesterday) but then, as soon as your premise is blown – you need to bite the bullet and cover up.

    The fact that you have 96.5% of your money is GREAT!  Look at the sale that is being thrown.   Imagine if, in September of 2008, you quit because you lost 3.5% rather than wait for a nice bottom to form and buying  stocks at liquidation prices!  If you are having a bad week/month – just get back to cash/neutral and let the market play out until you have some clarity.  Also, if you have buy/writes – you are probably looking at paper losses caused by the high VIX pumping up all the long and short calls you sold, which gives you a very distorted view.  I’ll be reviewing the Income Portfolio this weekend and it will be a good time to discuss how we deal with long-term positions in a crash.  

    Best possible lesson to learn from this – ALWAYS have a disaster hedge that you buy at the top of a range (5% over Must Hold lines) and, when you cash that one out – you buy another one that you EXPECT to lose a little on if we bounce.  Playing to absolutely win EVERY position is a big mistake people make – by definition, when you hedge and balance, you will win some and you will lose some.  The more you make (up 10%), the more you should be protecting.  Maybe 25% of profits should be put into opposite hedges as a rule of thumb.  

    Futures/Bert – Thanks for sharing.  Very valuable lesson.  I put post-it notes around my monitor with statements like that to keep me from being a dumb-ass!  

    PCLN/Jabob – No, F them!   They beat by 10% and raised guidance but so much of that was already priced in you shouldn’t be too badly off.  I would not continue to short them, though.   As to tomorrow – it would be very foolish to let us go into the weekend like this but our leaders are fools so no way to know…

    Nice Bert!  Very smart not taking a chance into earnings.  

    TBT/Barf – Yeah, it’s 2008 all over again with those guys.  TLT up 10% in 2 weeks – that’s INSANE!  The only time we got a stick that before was the panic in 2008 but, sadly, we got it twice!  Still, TLT topped out at $110 in 2008 and they closed today at $106 so we are officially as panicked as we were in 2008.  That could be a bullish sign but it sure doesn’t feel like it today!  

    DNDN/Jercon – I have turned sour on companies whose business model is to charge people $100,000 a month to live.  This, however, may be overkill as the issue is that sales GROWTH slowed down on reimbursement (NOT approval) issues.  This is the kind of thing the company forms a task force for to fix, not the end of the World.  If I could sit down with them and a VC firm, I could set up a payment system that would have their business hopping – I just don’t see it as insurmountable.  The $25 puts are $13.30 and they can be rolled to 1.5x the 2013 $17.50 puts at $9 so you end up buying 30 at $17.50 ($52,500) vs 20 at $25 ($50,0000).  At $11.69, you’re down about 35% if it’s put to you and you can sell the Jan $15 calls for $2.10 ($6,300) to begin chipping away at the loss.  The least of your problems would be having to roll the callers to the 2013 $30s (now $2.20).  

    EDZ/Pat – As a rule of thumb, EDZ prices in the ANTICIPATION of the next day’s move so it’s not a good thing to chase.  

    Bernanke/Tusca – It would be hugely inappropriate for the Fed to make a statement ahead of Tuesday’s meeting.  

    Back to Jackson Hole/Troy – Not low enough, we had rumors of QE2 ahead of time.  August last year, we were at 1,050 on the S&P.  Very depressing notes, even more so if you look at the end of September 2008 on the S&P chart and then look at what we’re doing now.   As to what’s illegal – Cramer’s very existence proves nothing is.  

    IWM/Aug – Sounds wrong to me. I do see some strange spike up to that level though.  

    Big Chart – That’s just amazing.  5% the wrong way in one shot.  There’s no good way to play that – all you can do is ride it down and find something to buy at the bottom.  

    Very nice Hoss, thanks!  

    Dollar 75.49, Euro $1.406, Pound $1.623, 79.23 Yen to the Dollar.  Gold $1,653, copper $4.22, silver $39.  Oil $96.33, gasoline $2.74 and nat gas $3.93.  These are just crazy moves but, sadly, the only other time we had moves like this was in the 2008 crash.  

    S/Scot – Wow, did they actually fall 12% today?  More caziness.  

    TZA/Deano – That’s annoying but not too bad.  $13.60 for the Aug $35s and $13.30 for the Oct $37s.  If you took something off the table on the roll, then why not just cash them out even and be done with it?  Otherwise, I would buy 1x the Oct $48s for $7.90 and roll the Aug $35s to 2x the 47s at $5.  The delta on the $47s is .61 x 2 = 1.22 and your Octobers are .85 + .59 = 1.44 so you have no danger to the upside and you might lose $1.20 on a $6 move back down (more danger from the VIX falling) but that would put the callers on track to expire worthless in 2 weeks.  If you want to be more aggressive, you can put a stop on the Oct $37s if TZA fails $37.50 and you can always flip back and buy more Oct $48s (for less than $7.90) which would then be fully hedged by the Aug callers. 

    Frum/StJ – Thanks!

    Dumbness/Asaenz – It all depends on WHY we are up or down.  My big mistake this week was not shorting the comment about QE3 yesterday, when we got that rally.  Looking back now, it’s very obvious that’s the only reason we didn’t drop much harder yesterday.  When you are 60% cash, you can afford to wait.  The things you own and want to buy more of may get cheaper, but that’s good when you are less than half invested.  It’s the next stage where things get tricky so you want to be REALLY sure of a bottom here.   EVERYONE needs to look at Oct 2008 on a chart and think about where we are in relation to that drop – THIS IS NOT A TIME FOR BOTTOM FISHING!   Now, where was I?  Oh yes, so cash is good right now and if the market is going back up – I can guarantee you there will be laggards to pick up later.  If the market goes down – that 60% can become 120% off a good bottom and anything left in your current 40% positions would be a bonus so – what’s the hurry?   Don’t anticipate – just be ready to react.  

    Nikkei down 3.6% at the open.  Futures at 9,300.  $50Bn spent by BOJ yesterday (single day record) and Finance minister says now worried about equity markets so I doubt he’ll do that again.  

  432. Euro/ZZ – There is a bank panic in the EU, has nothing to do with the Euro.  Italy can’t borrow at the moment and neither can Spain but they just did this week so won’t matter until their next round.  This is an attack on nations just like the attack on banks in 2008 and it can have the same result.  
    SPX/Barf – You can get burned on a big snap-back so be careful.  
    Puts/Russell – Keep an eye on the VIX, that’s bloating your put prices (as is the drop).  When that starts dropping (and the markets seem stable) that’s a good time to take that money and run.  On TEF, the Sept $22.50 puts are now $2.15 so up $1 is dull considering TEF dropped $1.31 today.  That’s why hedging by buying puts is NOT a good idea but at least you locked in a sale at $22.50 on your net $21.73 entry, right?  So if you take $2.15 and run your net drops to $19.58 and you can sell the Sept $20 calls for $1.50 to drop it to $18.08 and sell the Dec $17.50 puts for .85 for a net $16.65 re-entry if you happen to get called away at $20 or just a nice $2.78 profit if you don’t get reassigned after being called away.  

  433. David Frum / StJeanLuc – I’m always puzzled when conservatives go apopletic about Obama’s policies claiming he’s behind runaway govt spending and the recesssion. It makes me curious what the psychology of this is since it’s easily provable that he’s not doing all of the evil things they think he is. Even the health care legislation is something one of their own championed as governor of Massachusettes and other Republicans have promoted in the past. For sure something strange is afoot.
    One of the things that comes to mind is from Orwell’s Politics and The English Language:
    "In our age there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia. ….Political language-and with variations this is true of all political parties, from Conservatives to Anarchists–is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind."

  434. Politics / Pakdog – These guys are masters at distorting the truth and creating their own facts. Last week on Bill Maher show on HBO there was a Republican strategist that was making the claim that Obama doubled the national debt in 3 years. When Maher tried to correct her she insisted claiming that it was a irrefutable fact… They create their own reality, bark it over the airwaves with Fox and Limbaugh and then believe their own fantasy. I have an old friend who has this saying “Things that are perceived to be true are true in their consequences.” Welcome to the consequences….

  435. Pharm – I am still in BPAX. I bought at $3.80 and sold the Aug $3.5 C/P for .90. I must have missed that post from a couple of days ago to sell.

  436. Nervous/Everyone – Put me in the camp of being unprepared for this dip.  Portfolio was down 12% today, and another 8% on Tuesday.  I closed out the majority of my hedges to lock in profits on Monday in anticipation of a rally with the debt ceiling being passed, and left myself grossly unprotected.  Lessons I learned today include: 

    Hedges are not a substitute for having a lot of cash on the sidelines, it is clear now that I am way over-invested (I was warned multiple times that portfolio margin can be a bitch, and wow that is definitely the truth).  A lot of plays sound good, and without a system in place to prevent too many positions and too much exposure, it is clear that I get a little carried away.
    Scaling in is incredibly important.  
    Have a plan for all possible outcomes, because it is very hard to think clearly when you wake up on the west coast and see a sea of red.
    Only sell puts in stocks that you really want to own, and in quantities that you want to own! 
    Phil’s advice on allocating a certain amount of money to each position, with planned double down points, and making a portfolio management plan is right on – this discipline would have prevented a lot of pain today.
    Never close out your disaster hedges and leave yourself unprotected because you think the market is going to change direction !  (dumbass)

    Looking back on this list, I have heard every single item from Phil and others on this site.  Many Times!  I guess it could have been worse, today hurt, but nothing that I can’t recover from. I bought a ton of puts an hour before the close, so hopefully I have stopped the bleeding.  While we may see a boost tomorrow, it feels like a test of 1150 is in the near future (tomorrow?).  The mutual fund cash level chart posted on zerohedge makes me really worried that large liquidations are coming, which could easily snow ball.
    I’ve got more to learn, but this is definitely the right place to do it.  Thanks everyone!

  437. -
    Phil--I was able to pick up only the QQQ bps and did not fill on the DIA puts at the end of trading today—I have some TZA,  EDZ and SQQQ hedges but they all seem so inadequate if we are going to drop another 10 %—--should I pick up more in the morning regardless of where the market opens--I guess this is me panicking!!

  438.  I guess the bullets don’t work.  

  439. StJeanLuc – “Things that are perceived to be true are true in their consequences.” Well said and so true.

  440. Perhaps this explains why the conservatives get so upset with our President.

  441. And JRW III, please NEVER get on a plane again!

  442. ST JEAN /OIL
    After reviewing my mistakes from today I should have followed my rule of not leaving an open position (especially 4 contracts)
    when I’m away from the computer. Also I was up 600 before the market even opened and should have just left and went to work but I was trying to use oil to make up for TBT and RIMM positions when I should have probably shut those down with small losses after yesterdays recovery.  you are right about using the lines also they are on a post it note attached to my computer evey morning after you leave them

  443. BPAX/nicha – I have not sold nor do I intend to.  The company sold $48M in new issued shares at $3.  That is good for us b’c those shares are now under water and those institutions do not want to be the bag holder.  I like BPAX and I expect them to recover. 


    CSII/iflan – so CSII device uses centrifugal force, but how does it handle the foam cells and other white blood cells that have laid down within the plaque?  Excimer lasers ‘ablate’ the area of inflammation and thus can eliminate the cells through apoptosis.  Probably need to do off-line, but the excimer I have is smaller than the Spectranetics machine and is currently being used for dermatological disorders (vitiligo, acne, psoriasis, etc).  The hand piece is the game changer, and ours will be much cheaper than theirs…..anyway, I digress.

    Edro – not my VIX chart, but one of Cobra.  I just read the blog for the charts.  This person is pretty good.

  444.  I should have been more hedged, and should not have been in condors – very disappointed in the lack of an alert by income trader today – and just two comments – much appreciate everyone’s input here, I’ve learned a lot 

  445.  pharm – could you take a quick look at PBIO – and let me know what you think?

  446. Palotay
    I concur with your points from this week
                     Lessons I learned today include: 

    Hedges are not a substitute for having a lot of cash on the sidelines, it is clear now that I am way over-invested (I was warned multiple times that portfolio margin can be a bitch, and wow that is definitely the truth).  A lot of plays sound good, and without a system in place to prevent too many positions and too much exposure, it is clear that I get a little carried away.
    Scaling in is incredibly important.  
    Have a plan for all possible outcomes, because it is very hard to think clearly when you wake up on the west coast and see a sea of red.
    Only sell puts in stocks that you really want to own, and in quantities that you want to own! 
    Phil’s advice on allocating a certain amount of money to each position, with planned double down points, and making a portfolio management plan is right on – this discipline would have prevented a lot of pain today.
    Never close out your disaster hedges and leave yourself unprotected because you think the market is going to change direction !  (dumbass)
    Looking back on this list, I have heard every single item from Phil and others on this site.  Many Times!  I guess it could have been worse, today hurt, but nothing that I can’t recover from. I bought a ton of puts an hour before the close, so hopefully I have stopped the bleeding.  

  447. PBIO/deano – well, they look like a Life Technologies, Agilent type (but much cheaper) with and instrument that can separate and extract DNA, RNA, protein from hard to do places.  Not my cup of tea unfortunately, as they are a seller of a product to gov’t, pharma, academia, etc.  Not somewhere I would want to be at this time in the game.  I would pass IMHO. 


    GTHP – I am going start accumulating more in here (1/10 position for beginners).  They are getting some traction.  If there are any OB/GYNs on the board, it would be great if you would speak up about the technology if you have heard of it, seen it, used it?

  448. Asia getting slammed right now but futures are actually flat or even positive. Jobs, jobs, jobs are next!

  449. August CBS Poll: Disapproval of Congress hits all-time high - (82% dissaprove…approximately 18% brain dead?)

  450. Rehn News Conference
    Olli Rehn, the EU’s economic and monetary affairscommissioner, will hold a news conference in Brussels today at about 12:20 p.m. regarding “ongoing developments in the eurozone,” the European Commission said in an e-mailed statement.
    The ECB, which ceased buying bonds four months ago, was forced back into action after governments failed to convince investors that a package of new measures agreed to last month will prevent the crisis from spreading. The ECB may be hesitant to intervene in Italian and Spanish markets, which according to Bloomberg data have a combined 2.2 trillion euros ($3.1 trillion) worth of outstanding bonds, for fear of starting an engagement it can’t get out of.

  451. Rosie said the Euro was $1.20…..he ain’t such a bad econobear after all.  Just have to give him credit for sticking to his guns, er, beliefs.

  452. Bert /  Hear you on the dumbass vibe….kicking my self for thinking I was clarevoyent and could call bottom.  To make matters worse, I doubled down on some longs thinking I could get back to even and somebody ate me for lunch.  Fortunately, I followed Carnac the magnificent’s  (=Phil) advice and re-hedged which covered my loses for the day.
    When you get a chance Phil (I know this is a busy time for you), can you speak your thoughts on doubling down versus exiting a position.  Is it a finger in the wind call or is there a metric you use to pin a trade as dead.?  I know you preach the 20% rule and often lay out a stop on "funny" money trades but I am still holding out for a more quantitative measure.
    thanks and happy planting everyone.

  453. Great sign of the times Pharm!  :)

  454. Pharm,
    If you have a minute could you look into the technology BMOD is developing? Have been watching the stock for a year or so with no position. The latest trial results seemed decent but stock sold off to nearly zero. However, recently the company has been granted patents in a number of countries. Although the technology seems years away from approval, IF it works as the company claims, it would drastically improve the method of cancer detection. Wondering what your thoughts on this cancer marker are…Thank you for your insight!

  455. enni – lots of companies in this area, and their technology looks interesting, but too early to tell.  The company has been around for a long time, and I would continue to watch.  The last one we played at this game in this range did not work out too well, and I know the pathway and the drug…..just poor management of the trials.  So, watch and see how things develop.

  456. As for cancer arena, if you scroll through my writings, many are related to the area.  IMGN, ARIA, SGEN, PDLI, CRIS, MITI, BIIB, etc. 

  457. I shorted some VXX,
    even though we all know that eventually it will go down
    now recalling that in 2007-08 VIX went up to 90, i’m scared that I may run out of margin
    any words of wisdom?

  458. VVX -actually I’ve sold calls, so if I have some time on my side, if it doesn’t shoot up too fast

  459. Hi Phil
    I’ve learned an amazing amount on this site but still at the low end of the 10,000 hours so I’m hoping you can help me out of a little jam after the past few days.  My account is low on cash and I’m coming up against a margin crunch (obviously I was overextended and some of my recent efforts to roll overextended me further ).  Most of my positions are not front month so, despite it being painful to check my account balance, I am confident that the front month calls will expire and I can sell a new round of September calls. 
    I did take some of your advice and have some hedges (some from prior rolls).  Earlier this week I closed my EDZ Oct 14/Aug 18 (in at 2.44) at 3.80, to preserve some gains before the market reversed and climbed (maybe a bit premature).
    Right now I’m concerned about the following positions (all August unless noted) – Can you give me your opinion on my next steps?
    1) FAS 21P/20P (in at .19 cr)
    2) GLL 20C/23C (in at .88) and GLL 22C (.74)
    3) QQQ 57P (in at 4.50)
    4) RUT 745P/735P (in at 1.2 cr)
    5) TBT 32P/31P (in at .35cr)
    6) VIX 20C/24C (in at 3.17)
    Regarding the VIX spread, would it make sense to close the short 24C (520) and exercise and sell the 20C ( buy (2,000) followed by sale of 3166 for total 1166) for net 646?
    Thank you for all of your help, Phil.  And thanks for making this week less stressful than it is!

  460. Good morning!

    More of the same at the moment with the Hang Seng down 5% (1,110 point) to 20,774.  Failing 20,000 next week would be a catastrophe.  The Nikkei fell 3.7% but right on the 9,300 line we saw at the open and the Shanghai fell 1.8% but improved from the open.  India was down 3.2% at 17,128 and a bad break for them if they fail 17,000.  

    Overall, Asia wasn’t so bad as they gapped down at the open but didn’t get worse!   

    EU Futures are down 3% and I’m waiting for those to open.  Bond Yields are hitting records over there so I doubt it will be good.  

    The Dollar is at 75.50, the Euro $1.409, Pound $1.626 and the Yen has fallen to 78.45 and it can’t get up.  We need the Dollar below that 75.50 line or a recovery in our equities is very doubtful.  Our futures are currently down 1% ahead of the EU open and, at this point, we’d rather have a nice sell-off at the open as we have those short plays from yesterday afternoon as well as our brand new collection of Momo shorts and the shorts from the morning post.  As I said yesterday, we HOPE for a bounce and a chance to do some bottom fishing but hope is not a strategy.   

    Oil has fallen to $83.65 and $82.50 is where we really want to go long into the weekend if we are lucky enough to get that low but I doubt it.  The oil futures (/CL) can be played over the $84 line but with very tight stops as it’s totally dependent on the Dollar moves this morning.

    Gasoline (/RB) is $2.694 and should make a nice long over the $2.70 line into the weekend but when I say TIGHT STOPS, I mean it!  Natural gas is $3.91, gold is $1,662, silver is $39.25 and copper is $4.14.  

    Ideally, we’d like to see a sharp spike down at the open of 1.25% or, even better 2.5%, that forms a base we can go long off.  We want to cash out the short-term shorts into a morning sell-off and, cash into the weekend is just fine or, if you have longs to protect, then you probably want to get a little more neutral.  Here’s my comment and chart from last night’s Member Chat:

    Panic/DC – Now would be about the right time.  Look at this chart:

    Panic/Tusca – Oh sorry, I am just trying to make sure I convey my concern to anyone who is still bullish and not well hedged.  We could be looking at another 10% drop from here but that is what I said on TV on Tuesday.  My real  "panic" comes from hearing people on this board say they are not adequately hedged, etc and, as the close got uglier –  I sought to convey that to people as I put up those last few bearish trade ideas because there may not be a chance to cover tomorrow morning.  

    I still HOPE we bounce tomorrow but, as our President has taught us, hope and $3 gets you a cup of coffee at SBUX.  If we do not bounce, we could drop A LOT.  In fact, ONLY dropping 2.5% tomorrow would be an improvement!  Look what is happening on the chart: Down 1.25%, down 2.5%, Down 5%  - we all took our SATs – what is likely to come next in the series?  Either up or down 2.5%.  Less than 2.5% up will be bearish into the weekend anyway and there’s a good chance we spike down and flatline – which would still be bearish so the real place to take a poke at going long tomorrow would be on a 2.5% spike down.  

    Keep in mind that QE# in Europe is BULLISH for the Dollar and bad for the price of our Equities.  QE2 here is BEARISH for the Dollar and good for the price of our equities.  Tuesday is the Fed meeting – if we sell off further, that’s the turn we’ll play for but, failing that – it’s a very long way down….

    Not much matters until we get the Non-Farm Payroll Report at 8:30.  50,000 jobs are expected to be added and I don’t think we’re going to be in a "bad news is good news" mood if we miss.  Other than that, it’s all about the Dollar and that 75.50 line – below it and we should get a bounce, above it is still bearish.  Also, TBT below $27 is panic as we’re looking at negative yields on short-term paper.  When people are so scared they are PAYING the Government to hold their money – that’s BAD!  

    Speaking of fear gauges, remember this guy TED (spread)? The gap between 3-month borrowing rates that Treasury and the banks pay, a key measure of money-manager nerves, is widening again (though not yet near credit-crisis blowouts).

    Despite what happened today, tomorrow’s trading should be even more "epic," according to Joe Weisenthal: "The panic in Italy is real and it’s only a matter of time before the banking system is infected." Add to the mix a potentially weak nonfarm payrolls report tomorrow, and it could get ugly very quickly.

    The ECB’s "refusal to act … (raises) the risk that the crisis will spiral out of control," writes Ambrose Evans-Pritchard. The bankdid restart its bond purchase program, but it is confined to already rescued Portugal and Ireland? "As strange as it gets," says Willem Buiter. "The ECB will have to come in (to Italy and Spain), or accept the biggest banking crisis since 1931."

    Release the Perma-Bull!   “Our view continues that we’re in a long-term bull market, and in long-term bull markets you have downdrafts,” says Laszlo Birinyi. According to his research, the average S&P 500 correction is around 13%, and while the drop this week "surprised" him, he says he’s not too worried about the decline.

  461. Wow, oil (/CL) shot up to $85 and threw a stop already but now can be reloaded over that line.  

    The S&P (/ES) can be played long over the 1,200 line but I’m not sure we’re getting there as this little jump up  was based on the Dollar falling to test 75.20 as the Euro jumped to $1.415, where it was rejected.  So that’s our new watch line for the Dollar to go positive at the open – 75.20 on the Dollar. 

  462.  Phil, FAS money, okay so I was waiting to roll my 20 weekly $23 short puts until I got back to a real computer in time for market open tomorrow.  Big mistake.  Checking into TOS, I see I’ve been assigned 1800 shares of FAS in after hours trading at the after hours price of $18.03 (I didn’t know they could be exercised after hours- chalk up another hour of the 10,000 hour learning curve).  I am long 20 of the Jan $20 puts (instead of the $18.33ps), which last traded at $4.85 when FAS closed at $18.30, but they only have a delta of 47.  The last thing I want to own is 1800 (soon to be 2000 I’m sure) shares of FAS right now, but I don’t want to sell them into some big gap down at the open.  Obviously, i’m still protected by the puts, but I haven’t run into this situation before and I don’t want to compound my mistake.  Also, I didn’t sell the calls you recommended against the long Jan calls, so I could do something there( actually, I guess I could sell a whole lot more calls now)
    What do you recommend based on how we open tomorrow?

  463. Phil, thanks for the DNDN comments and suggestion above, I’m in a different part of the world and went to sleep before reading your post only this morn.  Your reaction – that the DNDN selloff was overdone – 66% because of slower growth – was exactly my reaction yesterday, but Pharm says that in any case they’re not a 4 billion dollar company and they were overpriced.  I don’t think they are a "hold forever" company – their product is not so effective and certainly better ones will come out (as Pharm says, there are more in the works). I also sort of suspect they want to play the AAPL game – guide low and earn high – but I have no idea at this point.  ‘Hoping to bounce today and maybe put your suggestion into play – thanks muchly!

  464. Orwell/Pack – I love that guy. 

    Maher/StJ – I saw that one, she cracked me up. 

    Great attitude Palotay and great lesson for all, thanks!  

    Here comes 1.45 on the Euro again and now the Pound is moving up a bit and that might be enough to break 75.20 in the Dollar, which is our bullish futures indicator now.  S&P right on 1,200, which is going to be tough to get through but nice and bullish if they do.  Oil similarly hanging at 85 on the dot – all waiting for the Dollar to break down…

  465. There it goes!  75.19 and we’re off!  Spain just flipped positive too – that’s very good.  We’ll see if the rest of the EU can catch up.

    75.18 – that’s one way to spark a rally!  

  466.  Sorry, I was reading the position wrong – the assignment was at $23, and the after hours price had nothing to do with it.

  467. FAS/RDN – Could be a nice break for you.  Keep in mind that you are now net short FAS at about $22 (the $23 you were assigned less the $1 you sold the put for).  If we get a bounce, you’ll gain penny for penny on the way up while losing just .47 on the long puts.  We have to look at it again at the open but, for example, as of yesterday’s close the TODAY $18 calls were .85 so you could sell those and pick up a quick .85 or be safer and sell the $17 calls for $1.55 and you’ll get called away at the close with a .55 gain as long as FAS is over $17.  

    It doesn’t change the new position we want to move to so you might want to sell those next week puts as well.  

    DNDN/Jerconn – They are not a $4Bn company but they are probably at least a $2Bn company and are currently valued at $1.7Bn so 20% up from here is very reasonable.  That pipeline issue should be a concern but, at this price, they also may become a buyout candidate for a large cap that wants to pick up sales.  I just don’t like the cost model for these drugs – if we’re going to have Health Care reform – things like this are bound to come into the cross-hairs.  

    Oh damn, Italy just trashed the rally with bad PMI or something (heard it on Bloomie).  FTSE and DAX down 2%, CAC down 1%.  That sent the Dollar back to 75.25 and we’re back below our lines again – that’s why TIGHT stops are key – those were nice little wins for the non-greedy and now we can re-load again if we get a signal.  

  468.  AAPL selling off hard all of a sudden – the Nas is not going to like that.    Looks like $367 at the moment (down 2.5%). – So much for being long on the futures!  

  469.  Could be just a fund trying to raise cash and AAPL is a big winner ripe for taking off the table.  

  470. Panic/Savi – It’s all about whether you are balanced or not.  It’s always good to have a SINGLE trade in mind that puts your portfolio into neutral.  It’s like a brake you can apply any time.  We haven’t been over 35% invested all year so we haven’t talked about Mattress Plays much but you can Google "Stock Market Parachute" or "Mattress Play" and I’m sure you’ll find my posts on the subject.  Having multiple bearish positions like that is a little dangerous as you have to run around selling them all on a big move back up.  Maybe 2 leveraged hedges at different time-frames and then one Mattress play should be the most you use if the purpose it to protect a long portfolio rather than simply making short bets.  

    75.30 – F U Dollar!  8) 

    Bullets/Palotay – Depends on the gun…

    Perception/Pack, StJ – "To be shaken out of the ruts of ordinary perception, to be shown for a few timeless hours the outer and inner world, not as they appear to an animal obsessed with survival or to a human being obsessed with words and notions, but as they are apprehended, directly and unconditionally, by Mind at Large.  This is an experience of inestimable value to everyone and especially to the intellectual." – Huxley 

    Oh good, AAPL sell-off all done, time to jump back in the pool with RUT (/TF) 720 now an attractive line to play over.  Dollar 75.35 is nasty but good if rejected back to 75.20 now.  S&P (/ES) can be played at 1,190 now and, obviously, 1,200 is our goal.  

  471. Lines/Bert – If you must walk away, then you MUST set a stop.  That’s another reason to only go long or short at serious resistance lines because you can bury a stop on the other side of the line (maybe a .10 loss on something like oil) and the bots are not likely to chase it down as there are too many people trading at that spot for them to dive at you.  Realistically, with futures trading, you either win or you stop out after your entry so there’s no reason to leave anything on the table if you can’t watch it.  That’s why, on TOS, there’s a big button that says "Flatten" (and one that says "Reverse") – it’s something Futures traders do ALL THE TIME.  

    Condors/Deano – That’s why I don’t like them.  One month’s loss can wipe out 4 month’s gains and if you put in two losses in a row, you’re having a bad year.  We’re having the same problem on FAS Money at the moment and Income Trader is right – you have to wait because it’s very possible that we’re right back where we started from at expiration day in two weeks.  I wrote an article in the Summer of 2007 titled "Don’t Just Do Something, Stand There!" and Chris Pavese added his take on the subject last May – both are very good reads (if I do say so myself!). 

    Yeee-ha!  1,195 and a stop out at 1,194 is good enough along with 722 on the RUT but oil is rockin at 85.82 so stop is 85.75 with a trailing .25.  See, you stop out the ones that are shaky and ride the winner.

    Dollar 75.23

  472. 86.30 – oil like a rocket now.

    Dollar 75.20 so game on above 1,195 on (/ES) and 2,200 on (/NQ) – see, we love those solid lines.  

    Oops, oil threw a stop at 86.25 so reloads would be $86 or $86.50.  

  473. Congress/Troy – LOL, that’s exactly what I said to Tina when I read that last night.  I want to interview that 18%…

    Failure at 86 on oil so no play until back over.  Dollar 75.23, possible re-load on RUT (/TF) at 720. 

    75.24, not going the right way..

  474. Doubling Down/Bio – I will be doing an Income Portfolio update this weekend and I’m sure I’ll be discussing that as it will apply to our positions there but feel free to remind me to elaborate over the weekend.  

    Italy GDP 0.3% – in-line actually but keeping the Dollar strong. 


    When you think, "I can’t do anymore. I need a break," that is the time to challenge yourself to keep going another five minutes. Those who persevere for even an extra five minutes will win in life.

    Very nice, oil back to 86.55 so 86.50 is now the stop with the .25 trail (actually we reset the stop at the next .25 line every time we get .05 over it).  

    75.16 – no wonder!  

  475. I usually hate the Nikkei (/NKD) but they impressively held 9,300 so that’s a good long spot if we begin to recover – rather than chasing US  equities.  The Nikkei can pop 100 points easily at $5  per point per contract so worth risking a $25 loss with a stop at 9,295.  

    Good attitude LDM.  You’ll notice in the Income Portfolio we’re about 75% cash.  When the markets are this volatile (have been all year) you never want to go below half cash.  It’s pure greed to do otherwise as you have $200K and if you have $100K in cash you STILL have $200K in margin to play with and that’s all you really should be playing with when $200K is all you have because a 5% portfolio loss becomes a 10% REAL MONEY loss if you are fully leveraged at just 2x.  I know it’s tempting to make 2x gains but I always tell people – if you are such a genius trader that you don’t believe you can possibly lose when you are 100% invested, then you should be able to make plenty of money when you are 50% invested.  

    Closing EDZ at $3.80 was absolutely right.  It’s only a $4 spread for October – certainly not worth sticking with to make .20 more.  As to your positions.  

    • FAS bull put spread???  I friggin’ HATE those.  I HATE any trade where you lock yourself into a position where you can lose 4 to make 1 and I’ll bet you can see why now.  FAS is $18 and I would take the money and run on the $20 puts ($2.60 but more at the open) and roll the $21 putter ($3.30) to the Aug $18 put at $1.50.  Why?  Well you have .19 in your pocket and you cash $2.60 and now you have $2.79 in your pocket and you pay $1.80 to roll the putter down to an out of the money put that is all premium (that expires in 2 weeks) and you STILL have net .99 in your pocket and that’s a damned site better than the .19 you were going for so your break-even is $17.01 in two weeks but, of course, you can roll the Aug $18 puts to the Sept $16 puts (now $1.44) so we’ve got a good amount of leeway there. 
    • GLL Aug $20s are .60 and you can roll those to the Oct $22s at .95 for .35 and the caller will expire and then you can sell something else for .35 or more.  You can roll the $22s as well and sell something to cover them as well. 
    • QQQ I don’t understand.  How did you pay $4.50 for that?  We’re at year’s lows and the Aug $57 puts are just $3.
    • RUT is an insane thing to play if you are tight on margin.  You can’t (I assume) roll out like the FAS spread because you can’t afford to have a naked putter.  I’d either take it off the table (about $4.50) or wait and see if we get QE3 next week.
    • TBT is the same hell as FAS for the same reason.  If you cash your $31 puts (I assume bull put again) for $4.30 then you have $4.65 in your pocket and the $32 puts are $5.30 so you can invest $3.05 to roll the putter to the Sept $28 puts at $2.25 and hope they epire worthless and leave you with $1.60 
    • VIX you have wrong.  There is nothing to exercise.  They cash settle.  I don’t know what you have here.  Is it a bear call spread?  

    And the Dollar bounces and flushes us out again (75.28).   

  476. Phil: I need a hedge for $600k of covered  call positions.I just have 30 Aug. $30 P .Thnaks

  477. Phil : on hedge, I just have 30 Aug.12,2011 $30 QQQ puts

  478. Phil/USO,
    I know it was a risky play but a couple weeks ago (USO just shy of 39) I sold small positions in the Aug 42 calls and sold the 36 puts. Of course I knew that rolling was a possibility. I rolled the callers to 40, then 38, then 37, now sitting with 19 contracts at 36 – all profitable. The problem is the puts of course – I rolled to the 35 putters and of which I have 16 contracts and 34 putters (3 contracts). Needless to say the high vix is killing me on the putters. I tried to do different calculations (rolling 35 to the 32 putters, buying back the 35′s at massive loss, etc).  So I though you can come up with a suggestion for me here as you are good at this stuff. I should have asked earlier but I always try and manage my own stuff unless I come up against stuff like this. HELP – Thanks

  479. Phil, I forgot to note that I am up against margin problems also which make it worse.

  480. Phil : I meant 30 Aug. $54 QQQ puts as my hedge. Sorry about that

  481.  Phil: Phew
    Finally my momo shorts helped, kept me even yesterday.  Had to double down CMG last month to get from 290′s to 310′ then took half back off to get back to more comfortable commitment with better chance to to pay off this month plus leaving option to double back down if need be. 
    a) flight to treasuries can’t be permanent, can it?  So still looking to Jan 13 positions to work if I continue to sell calls, rolling puts and adding to long calls in next few months.  Is this misguided?  
    b) on short puts on GE, MRK , MSFT, KO et al (mostly sept/Oct expirations) too early to double down? or should I just roll out even to Jan 12 for now?

  482. PHIL/GE: I have Ge Sept. $16/$18 BCS at $1.11 (now $ .86) paired with sale of Sept. $18 P at $.58 (now $ $1.82) . Should I roll to Jan. $16 C at $1.59 and sell Oct. $18 P and C ?

  483.  Phil: re: treasuries 
    that would be positions in TBT and TLT put diagonals

  484. Phil:
    Thnaks so much for your input.  The QQQ position is the result of a number of bad rolls that have gotten away from me.  It increased recently when I bought back a 52P (to offset) as a way to hedge more against further drops in the market.
    The VIX is a bull call spread (20/24).  I see how the VIX does not correspond with the market and, if I sell, I am trying to find a way to maximize what I get out of the trade (rather than selling a $4 spread completely in the money for 1.80).
    Thanks again for all of your help.

  485. Hedge/Dflam – The trick is to cover 1/2 the expected loss from a 20% drop in the market (with the assumption that, like now, at a 10% drop there would be a pause at which you can buy more).  Since you have covered calls. I assume you are good for a 10% drop and that means you lose $30,000 at 20% and that means you should have $15,000 worth of coverage, anything over that is just a bonus and  you end up betting against yourself.  It’s fine to add a short-term play like the QQQ puts as a BET but long-term, something simple like the SSO 2013 $125/115 bear put spread at $4.20.  

    SPY is at $120 now so if you buy 30 at $12,600 you get $30,000 if the S&P gets to 2013 4% lower than it is now and you don’t lose a penny until the S&P is up about 4%.  As you are long-term bullish – you can offset with monthly put sales like selling 10 (1/3) Aug $111 puts at .95 ($950) as you don’t lose on those until you are well on your way to gaining $17,400) and a dozen sales like that and your hedge is paid for (and then you are making a whole $30,000 on a weak S&P).  

    Ideally, you initiate a hedge AT THE SAME TIME as when you buy your long positions and, as we fall past 5%, you add a new hedge (and put stops on the original), etc.   

    USO/Jomp – Wow, all those words and you can’t tell me how much the contracts cost?  The Aug $36 puts are $2.60 and I assume you picked up at least $1 off the put and call sale so you are down $1.50.  I don’t see where that’s "massive" losses on 20 contracts ($3,000) but just roll the loss to the Sept $34 puts ($1.90), which are pretty much all premium and be happy to get back to even.  I’d wait for the weekend anyway because USO is at $33.72 and there’s 2 weeks left for oil to climb 3.2% higher than $86 to about $88.50 and put your putters underwater.  As usual in this situation, your entire problem is simply that you didn’t REALLY want to be long on USO at net $35.  If you were assigned USO at $35 (now $33.72) you could simply sell the Sept $33 calls for $2.20 and drop your net to $32.80 and you would either get called away even despite the tragic drop in oil or you would have a fantastic entry in a $32 positions that allows you to sell about $1.50 a month in premium ($18 per year or  56%).  No wonder you REALLY wanted to own USO at net $35 – very smart!  8-)

    Treasuries/Lincoln – Well played on the DD AND GETTING BACK OUT TO LOWER YOUR BASIS (most people forget that part).  When short-term TBills flip negative, I have to call a floor.  Maybe I’m crazy but long-term, it just doesn’t make sense to me that people will pay the Government (especially this one) a negative rate of return to hold their money because, eventually, those idiots have no money left to give the Government anymore.  I would not DD UNLESS you are early in a scale and intended to DD, then I would do so with a roll to Jan.  

    Oops, too late now, gotta work – please re-ask under new post…