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Monday Market Movement – More Greek Madness

S&P 500 (SPY)Last Thursday, I said in the Morning Post:

We’ll certainly be angling to hedge back near neutral into the weekend. Next week is going to be a real thrill-ride as Greece boils over in the EU this weekend and Bernanke steps up to the plate on Wednesday. 

In Member Chat on Friday we cashed out our FXI Oct $36 longs at $2 (up 117% in 2 days) in our $25,000 virtual portfolio (now over $80,000) – selling into the morning excitement and grabbed the QID Oct $44/47 bull call spread at $1.45, selling RIMM Oct $22 puts for $1.10 into the panic as a bullish offset.  At net .35, it will be very easy to get a quick 100% or even 200% gain ahead of the Fed on the morning sell-off and we’ll be looking to cash out and switch horses if we can hold the same levels we held on Thursday, the same ones we were looking to break over on Wednesday (we did) – notably S&P 1,200 and Russell 700.  

We are simply waiting on the Fed this week and little attention should be paid to any action in the markets as long as it stays within our range.  What matters is the reaction to Wednesday’s FOMC statement at 2:15 and, between now and then, it’s all about Housing in the US, with the NAHB Housing Market Index this morning at 10 followed by Housing Starts and Building Permits tomorrow at 8:30 and then the MBA Mortgage Index Wednesday at 7am and, finally, Existing Home Sales at 10.  After that the Fed has the floor and nothing really matters after that.  

If Housing is bad, we are ready with IYR hedges in our Income Portfolio so we’ll be able to sell DIA puts to cover into the morning sell-off that we anticipated on Friday.  We can also take advantage of the morning panic to short TLT again, as they should be flying over $113 again.  Our last TLT spread was last Wednesday, where we sold the weekly $113 calls for .90 and bought the $114/112 bear put spread for $1.12 for net .22 and that one finished Friday at net $1.75, up 795% in two days – so you can why I’m excited to get another pop at it this morning!  

Doug Short wrote an excellent article titled "Weighing the Week Ahead: Expecting Magic from the Fed?" which saves me a lot of writing if you read that!  John Nyardi has a more alarming article which asks: "Can Central Banks and Governments Stop the Tidal Wave?" where he makes a good case for the fact that we’re in a bear market rally and that we wouldn’t be seeing this level of Central Bank intervention if things were not already far worse than they seem.  

Click to ViewOf course things are bad but – are they THAT bad?  Notice in Doug’s chart of the University of Michigan Sentiment Index vs the GDP how HORRIBLE Consumer Sentiment is.  Clearly it looks like this could be the worst thing EVER.  Unfortunately, I Have to take the other side of this argument and point out that consumers are clearly WRONG this time as their sentiment doesn’t match the improving GDP.  

Consumer Sentiment doesn’t cause GDP – it’s a result of it and the modern consumer is besieged by a 24/7 negative news cycle unlike any that existed before.  Not only is the negativity of the mainstream media coming from nothing but Big Business-owned broadcasters but those same broadcasters have taken over the Financial Press as well – there is no alternate viewpoint, save that of a few radical bloggers such as myself.  

The last time consumers were this wrong in their sentiment was in 2002, just after 9/11 and just after the big crash of 2000-2001 (the last time we made the horrible mistake of trading in a perfectly good Democrat for a Republican) and the Dow Jones Industrial average flew from 7,500 in October of 2002 to 10,500 in in December of 2003, up 40% in just over a year.  Why?  STIMULUS!  Do not discount the power of stimulus!!!  Sure Bush’s chicken in every pot BS sent this Nation spiraling into the worst debt since World War two and unemployment to the worst level since the Great Depression but hey – look at the stock market!  

Well, don’t look at the part where the whole house of cards collapsed in 2008 but look at all the fun there was until then.  We don’t want to miss that, do we?  To be clear, I am NOT saying everything is fine or the economy is strong but what I am saying is that the same Central Bankers who sent the markets up 100% – TWICE – are not the guys you want to bet can’t send them up another 20% of more (back to 14,000) – EVEN IF THEY ARE SOMEWHAT INEFFECTIVE.  

The only question on the table at the moment is – will they even be trying?  We are currently assuming the Fed will do SOMETHING on Wednesday but, if they do not, then all hope may be lost, Globally, on Thursday morning.  To that end, EDZ is always a favorite Disaster Hedge of ours – but they will be jumping this morning on poor performance in China overnight.  

Another trade idea from Friday’s post that will be cheaper this morning is shorting gold with the GLD Nov $180/174 bear put spread at $3.30, selling $193 calls for $3 for net .30 on the $6 spread.   The logic there is that no Fed easing will send gold lower and an equity rally will also send money out of gold and into more exciting assets.  

This morning, Greece is the Boogie Man again (along with Obama and his tax hikes on the rich) but we discussed how overblown the panic is over this VERY SMALL nation whose debt is only large when measured against their own meager GDP.  Last Tuesday I discussed this in great detail in Member Chat as we looked at the Greek budget (in Euros):  

These are not typos – the entire 11M person population of Greece generates a GDP of $330Bn, which is a healthy $30,000 per person GDP (US is $50,000) but they are now $460Bn in debt.   That’s $42,000 per citizen, which may sound like a lot but not compared to the US, as our $15Tn National Debt is but a small portion of the $54Tn worth of liabilities our Government has taken on (on our behalf) – encumbering every man woman and child with $174,996 worth of debt.  In fact, if you go by Republican statements that only 65M people in this country actually pay taxes – that becomes a very ugly $830,769 per taxpayer that our Government has saddled us with.

The ENTIRE budget of the Greek Government is $96Bn, or $263M per day, about what the Republicans claimed Obama spent on his trip to India last year!  If you don’t believe the 11M people in Greece (20% of whom are unemployed) can pay off a $460Bn debt, then how on Earth can you expect 300M American people (27 times more people) will be able to pay off a $54,000Bn debt (117 times more debt)?  

If Greece "MUST" default then the US is merely being delusional if they don’t do the same.  Even if you ignore all of our other liabilities and JUST stick to the $15,000Bn National Debt – that’s still 33 times more debt than the Greeks have per person or 122% US to Greek debt per citizen.  The only crisis Greece has that we don’t is the Greeks can’t go into a back room and crank up the printing presses – that’s the only reason America is "better" than those "lazy, unrealistic, welfare-state… (fill in your own Conservative derogatory terms)" Greeks.  

As it says in the Bible: "Let he who is without tax loopholes for the rich print the first Dollar" – or something like that.  Obama will be speaking this morning about closing $150Bn a year worth of the most outrageous tax loopholes enjoyed by Americans making over $1M per year and you would think it’s a full moon the way the Reps are howling on the hill from the same dogs who point their finger at Greek tax cheats and call for Government austerity "over there" – as if our 600 Congresspeople would even bother getting out of bed for just $263M a day!  

Of course the collapse of Greece can lead, like dominoes, to the collapse of Portugal, Italy, Spain, France and Germany and if that seems silly because surely someone will do SOMETHING before they let things spread that far – then you understand our bullish premise.  

We’re not saying it will work, but "extend and pretend" has been a very powerful and reliable economic tool for our Central Bankers and, as long as none are "without sin" then we can expect more of the same before any Nation is stoned to death. 

As bullish premises go – this one pretty much sucks, but we work with what we’ve got, right?  


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  1. Oil Lines
    R3 – 88.52
    R2 – 88.16
    R1 – 87.56
    PP – 87.20
    S1 – 86.60
    S2 – 86.24
    S3 – 85.64
    Yesterday’s high and low – 87.80 / 86.84
    Breakout Lines – 89.35 / 84.32 

  2. Not caught up yet so I appologize if this is already known. Just got this in email from Netflix. Oh my, is that panic I smell?:
    I messed up. I owe you an explanation.

    It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

    For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

    So here is what we are doing and why.

    Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

    I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

    So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

    It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

    Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the and websites will not be integrated.

    There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the website is up and ready.

    For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

    I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

    Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

    Respectfully yours,

    -Reed Hastings, Co-Founder and CEO, Netflix

    p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.

  3. rainman/NFLX (Qwikster)……….Clearly an attempt to dupe the customer (and the investor).   Best thing for investors to do with this (these?) companies is to forget about them and find somewhere else to make money.  

  4. Netflix / Rainman – If you look at the comments on the blog, it’s not that popular. I have Netflix and I like it because I can get foreign movies that never show anywhere on TV, but I’ll have to see how much of a pain that will be with 2 web sites. Renting console games might actually help the revenues – it’s a big market. Pricing will be key! 

  5.  Nice blog today Phil! 
    Looking forward to Vegas!

  6. Netflix/Everyone
    I got the email also.
    This is clearly a horrible move by Netflix thought I think there is something behind it.
    The name Qwikster is horrible for one and disassociates themselves with their brand that people are comfortable saying.  The other point which is very bad is that they are separating their charges.  My guess is they will lose another 20% minimum of streaming customers from doing this.  When you have bundled service, alot of time you ignore and just pay.  By separating the bill and having it on your statement from two different companies will be a wake up call to many people who will say "Well I don’t really use the streaming anyway, I’ll cancel that and save x amount per month/year".  Any anyone who uses streaming knows that the movies for the most part are crap or old or very low budget indies.  Not much value there plus they will be losing many of them come February thanks to Starz.
    You also have the new TV season this week which is another reason people might cancel the streaming because with people taping multiple shows on DVR, there isn’t a need to watch streaming old movies right now.
    The other bad idea is adding a video game.  Gamefly filed to go public over a year ago and still they haven’t.  Reason is there is not much profit in renting video games.  The games new are $40-$50 each which would be Netflix’s cost opposed to movies that they pay $3-$15.  Also the rate of theft is high in online video game rental.  People say they never received a game or sign up for an account, get the game and cancel the credit card the account is under.
    Even Gamefly recently bought a streaming video game company and they make most of their profits from buying and selling video games on their site.
    Now I think Netflix might be very proactive in splitting the company thinking already of selling one or both parts down the road.  They have to know the game is over and they do not want to have been billionaires or multimillionaires on paper and then have little to show for it in a few years.  I think that’s what the end game is from this split and name change.  But I definitely think NFLX will rocket under 100 in the next 4 months.

  7. FAS Money Recap 
    Long Strangle –Jan 12 Puts (3.01 average now 2.57) and 15 Calls (2.75 average cost now 2.32). 
    Weekly – Full Cover October 13 Puts (1.98 average now 1.68 – 15%)
    Monthly – Full Cover October 13 Puts (1.98 average now 1.68 – 15%) 

  8. It’s about time:
    We’ll see if that gets enforced. Or if the big guys find some loopholes to perpetrate manipulation forever! 

  9. TOS having margin problems

  10.  Phil / HOV
    what do you think about them after Q report? what chances they will go bellow $1?

  11. The road to Chinese world domination sill has some potholes: 

  12. stjean / Tea Party – I’m sure the answer list would have something like, "if you’re unsure of the answer, just say ‘tax cuts!’"  You really can’t go wrong with that one.

  13. Yodi / TOS – What kind of margin problems?

  14. lfantheman,
    wondering what your thoughts are on AAPL now.  expecting more of a retracement?

  15. stj / commodities — I’ve said in the past that reigning in commodity speculation might make for a nice replacement for QE but I’d be curious just how often "one" controls 25% of the deliverables in a non "bona fide" fashion?

  16. jcaesar
    TOS you sell 2 AAPL Nov 355p for ca 7.60 you margin is over 70,000 on PM they have a system problem

  17. Damn….the markets down big and BMY is up.
    Wanted to sell puts this morning.  What’s up with that?

  18. shorting TLT?

  19. Commodities / Rainman –  That’s probably one of the problems – we can’t tell. But look at the end paragraph of the article:

    What also may get interesting is to see how the makers of ETPs like $GLD and $SLV react (or if they even need to) – as well as whether this leads to a further pullback from the oil markets by Morgan Stanley and Goldman Sachs.

    Some names are named!

  20. lunar/AAPL….I’m certainly HOPING for a retracement, so that I can load up on some more calls.   Present positions are Oct 360/375 bull call spreads (60%) and  Oct 360/385 bull call spreads (40%).    My plan for retracement would be to buy an equivalent 10% straightup calls at 390, another 20% at 385, and below 380 another 40%.  

  21. Good morning!  

    Oil having that pullback we expected ahead of contract rollover.  As of Friday’s close there were still 62Mb worth of open contracts and at least 30M had to go by tomorrow, maybe 40M.  Last month, they left just 9,000 contracts open (9Mb) so you never know.  Nov has 306Mb, Dec 192Mb and Jan 99Mb so pushing 600Mb in the next front 3 months means we get to play this game again in 3 weeks in case you missed it this time around.  

    At the moment, though – there is money to be made playing oil (/CL) bullish off the $86 line with tight stops, as they may go lower but, if they do, we will play those lines too because today should be the end of the sell-off.  If we get down to $85, I’d be inclined to take a bullish chance on USO.  

    It would be very foolish of us not to take advantage of the opportunity to do a 1/2 cover of the DIA Oct $111 puts at $3.10 in the Income Portfolio – we are plenty well-covered and we can leave IYR puts naked while we wait for housing data.  

    The other nice opportunity is TLT back at $114.25 this morning and that means we can sell the Sept 23 $115 calls for $1.20 and buy the $117/115 bear put spread for $1.40 for net .20 on the $2 spread but we’ll probably go higher so a very small entry that you will roll up and double down would be prudent.  Since it pays 1,000% in 5 days if it works, you don’t need to play with a lot of money to have a good week!  

    We may not bottom out until the EU closes at 11:30 – they are down almost 3% at their lunch so we’ll watch it closely over there.  The Dollar has zoomed up to 78, up 1.2% from Friday’s close so of course the markets are down.  Even gold couldn’t hold $1,820 against this kind of Dollar move but let’s look for 78 to top them out as that’s $1.36 on the Euro (where we went long last week) and $1.56 on the Pound but it’s still 77 Yen (it’s ALWAYS 77 Yen) and we’ll see how that group plays out. 

    Silver is right on the $40 line (/SI) and if they can’t hold that, we’ll be loving the gold shorts.  Copper is barely holding $3.80 – not a good sign and we discussed copper in great detail in early morning Chat.  

    Not much to add to that so far – watching and waiting to see where a bottom forms up and we don’t want to rush into the above trades until we see where we stop but I am guessing this is a good spot but, if we go over 78 on the Dollar – expect me to have a few more hedges!  

    Monday’s economic calendar:
    Obama announces debt reduction recommendations
    10:00 NAHB Housing Market Index
    10:00 Quarterly Retail Trade Report 

    At the open: Dow -1.46% to 11341. S&P -1.65% to 1196. Nasdaq -1.33% to 2275.
    Treasurys: 30-year +1.22%. 10-yr +0.6%. 5-yr +0.35%.
    Commodities: Crude -2.44% to $86.03. Gold +0.01% to $1812.65.
    Currencies: Euro -1.35% vs. dollar. Yen 0.%. Pound +0.76%.

    Market preview: Hey, wasn’t Europe supposed to be fixed? Clearly not, and S&P futures -1.7% as Greece holds desperation talks about getting more assistance. Merkel’s ruling coalition suffersanother election loss, and the confab of European finmins ends in grumbling. But after gaining for five straight days, stocks likely were due for a correction. Later: NAHB index.

    With Europe down more than 3%, the only question is how far in the green the U.S. goes today. Plummeting European stocks have been met recently with little more than a momentary fall in the States. The S&P 500 has outperformed the Stoxx 50 by nearly 12% in just 30 days.

    I love the smell of capitulation in the morning!  ICI reports investors have pulled $75B from U.S. equity funds since April, more than the amount withdrawn in the 5 months following Lehman. “When we’re getting close to a market bottom, the phone starts ringing off the hook and our clients want us to sell everything," says a fund manager. 

    President Obama is expected to propose today $3.6T of deficit cuts over the next decade, including entitlement cuts and tax hikes on corporations and individuals. Medicare and Medicaid would both see reduced budgets, while Social Security would remain untouched. The proposal is unlikely to pass Congress because of Republican opposition to tax increases.

    Warren Buffett says he is "fine" with President Obama naming a new plan to establish a minimum tax rate for millionaires the "Buffett Rule." The proposal from the WH – aimed at replacing the AMT – falls in line with Buffett’s earlier comments that "billionaire-friendly" Congress has coddled the wealthy.

    Last week’s Treasury selloff appears to be over, as Treasury prices rise across the spectrum as fears about Europe again grip markets. Benchmark 10-year notes are up 31/32, pushing the yield down to 1.97%, and 30-year bonds jump 2 7/32 to yield 3.22%. Yields on two-year notes touch an all-time low 0.12%. 

    A Bloomberg survey indicates 19 out of 20 primary dealersexpect the Fed will announce Operation Twist or a close variant at this week’s FOMC meeting. The Fed holds $520B of Treasury debt due in 2014 and sooner that could be sold and reinvested into longer terms ranging from 2018 to 2039 – a move that could push the 10-year as low as 1.60%, according to CRT Capital Group.

    Or, maybe the opposite:  Risk premiums attached to the sovereign debt of developed economies will be "persistently higher and more volatile" in the future, the Bank for International Settlements warns in its latest quarterly report. "Sovereign credit risk and its implications now pose a significant and urgent challenge to banks," far beyond risks it had posed in the past, BIS says. 

    Two who have recently been kicked out of the cozy clique of European politics speak out. Former U.K. PM Brown calls EU banks"grossly undercapitalized: they have liabilities far in excess of U.S. banks." No longer running IMF, D.S. Kahn tells French TV Greece is finished. "There is a loss and it must be taken by governments and banks." 

    The ECB announces it purchased €9.8B of sovereign paper in the week ended Sept. 16 as part of its Securities Markets Program (SMP). This brings the total purchased to €152.5B since the program’s inception last May. (PR)

    Suffering another election defeat in Berlin over the weekend, it is likely Angela Merkel’s coalition partner – the usually pro-Europe FDP – may resort to even greater levels of euro-skepticism to keep itself relevant. The party’s leader (also Merkel’s vice chancellor) shook markets last week talking about "orderly bankruptcy" for Greece."

    Default isn’t enough for Greece, writes Nouriel Roubini. The country remains uncompetitive within the euro system – likely leading to more years of depression and deflation, even without the debt burden. Instead, Greece needs to leave the euro, allowing for currency devaluation to ignite the economy. 

    conference call is set for 2 PM ET, between  finmin Venizelos and EU/IMF officials to discuss the latest Troika demands for Greek fiscal reforms. The cuts are so draconian, few believe theycan be met without causing a collapse in the government.

    China "would be insane" to buy peripheral European debt, says CLSA strategist Chris Wood, who believes talk of such action is little more than public relations. The government vaporized a chunk of savings in 2007/08, buying U.S. financials too early and is not likely to risk a repeat in 2011.

    JinkoSolar (JKSfalls 11.4% premarket after a toxic chemical leak forces the closure of a plant in China and leads to violent protests against the solar panel company.

    Jefferies upgrades Bristol Myers (BMY) to Buy and increases its PT on shares to $35 from $27. The firm sees Bristol’s underlying revenue and EPS ready to "rapidly take off mid-term," positioning the company as a "prime target for acquisition." Shares+0.9% premarket. 

  22. Flip/BMY
    You’ve been trading BMY.  I see Jefferies upgraded them.  How has the stock typically performed after upgrade?  Do they usually pull back after the initial spike?

  23. Not a good sign:
    The market will soon be made up entirely of bots trades owned by the big iBanks!  

  24. TNA Oct $41/45 bull call spread at $2, selling $29 puts for $1.70 is net .30 on the $4 spread with TNA at $42.50 so $13.50 would be a 32% drop or a 10% drop in the RUT to about 620 before these get put to you and then you can roll them and don’t you want to be long 2x TNA, ultimately, if the RUT falls 20%?  10 in the $25KP.

  25. DIA 9/30 $115.75 calls at $1.05 – 10 in $25KP, stop under 11,250 – which is probably .90.  

  26. Phil, oil approaching $85, what is your bullish play on USO?

  27. And silver 39.34! 

  28.  181 bps today, up 8%…but really they are AAA and we aren’t…their outlook is sound according to s&p

  29. tos Margin,
    Just spoke with tos. Selling the TNA Oct 29 Puts was coming up with a 25k margin requirement for 10 contracts. According to the rep, TNA being a leveraged ETF on an underlying with a 90% margin requirement, this is expected.
    I’d be curious to know what the margin requirements are at some other brokers on this trade. Thanks.

  30. Collateral damage from BAC:
    These large banks don’t seem to be able to manage their ways out of a wet paper bag. And they say the public sector is badly managed! 

  31. Phil and lflan/AAPL
    Good morning
    This may not be a priority this week, but I am curious about your views.
    A few months ago, Phil, you were concerned about Steve Jobs dying suddenly and you hypothesized AAPL falling to $275.
    What are your thoughts now on Steve’s health impacting the stock? Will any sudden bad news have as much impact, do you think?
    or is that already priced in?
    Of course, my prayers are FOR his health, always.

  32. Woo-hoo on gold – dropping loike a rock to $1,785!  

    NFLX/Rain – What the hell kind of thing is that.  Writing to angry customers and then taking away more conveniences as the "solution"?  You would think they would offer everyone 2 free months with a year commitment to their new service as a "thank you" for their patience or something smart like that – this is just dumb…  Investors are dumber though and stock up 2.5% because at least they are trying, I guess.  

    Thanks Dan!  I’m getting psyched for the trip too….

    Position limits/StJ – That would be nice.  LOL on that cartoon.    

    Oil still crashing so we need to wait that out but Dollar not going over 78 is good sign.   Also, indicates oil falling has nothing to do with the Dollar – which we know.   

    HOV/Tcha – They had a freaky good Q last year so the comps were impossible.  9-month revs down 20% from last year and stock is down 66% so still looks good to me but not at all a short-term play.  This is the kind of stock that if you own them at $2, you DD at $1 and you DD at .50 and you DD at .25 and if they go BK, then that sucks but, if they don’t – it’s a story you’ll tell your grandchildren on your boat that will be named The Hovnavian.  They spent $105M to buy 1,200 lots ($87,500 per lot!) so I wouldn’t say they are spending recklessly – they are simply bargain hunting and not building or selling much while everything it cheap.  It’s a strategy I approve of and the only question is – will housing ever recover?  If it does, then you are investing in guys who were smart enough to buy 1,200 lots for $87,500 each and, if not – then you are as screwed as anyone would be who used leverage to buy 1,200 lots for $87,500 each.  

    I certainly like owning the stock at $1.41 and selling the 2013 $1 puts and calls for $1.23 for net .18 on the $1 call-away so you make a nice 455% in 15 months if HOV doesn’t drop 30% by then.  If not, worst case is you own 1x at net $1.18 and say you DD at .52 for 2x at net .85 and then another DD at .45 for 4x at .65 and another DD at .25 for 8x at .45.  So, now let’s say we’re willing to spend $4,500 on 10,000 shares of HOV at .45 and risk a BK.  That means we start out risking 15 of these spreads for net $270 in the Income Portfolio and, if it works out and we never get a chance to DD, etc – then it’s a nice $1,230 profit in 15 months on the small upside.   

    A good spread entry is one where you would be disappointed if the stock doesn’t plunge enough to let you double down at least once!  

    NAHB Housing Market Index: 14 vs. 15 expected, 15 prior. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties," NAHB’s Bob Nielsen says.

  33. Maya1 – I know you didn’t ask, but FWIW  I think Jobs not being around is already baked in to Apple’s price.  From what I understand, his case is terminal (or very close). 

  34. I was one of those 1 million (former) NFLX members to cancel my subscription when they hiked their prices (and lost a content provider) all within a week of each other. Serves them right!

  35. China/StJ – I think China is pretty much where the US was in the 50s – with people coming off the farms and moving to the cities over time.  They are going to boom and bust along the way and it wouldn’t matter at all if people didn’t keep freaking out about it.  Contractions are as normal as expansion in the economy – it’s only this new insanity where people believe every day has to be a good day (and, if not, they have pills for that) that is causing much of this economic angst.  Of course a large part of that is the spread of the "Succeed or DIE" brand of Capitalism vs the more socialistic brand we used to practice that allowed people to have hope, even in the down cycles.  

    Speculation/Rain – Ah, there’s the catch – how do you enforce it.  As soon as they have rules, GS will have a team working on how to break them. 

    TOS/Yodi – Yes, I’ve seen a few infinities today.  They don’t seem very happy with naked selling this morning. 

    BMY/Exec – See last news item.

    TLT/Morx – Good call! 

    USO/Jercon – You can play oil to hold $80 by selling the Oct $32 puts for $1.27, which is net $30.73 so 7% down is $79 oil and figure can be rolled to $75 so that’s the ownership level.  That can be paired with the weekly $33/34 bull call spread at .45 and the Oct $31/33 bull call spread at $1.30 for net .48 on $3 worth of spreads.  The idea is that oil may drop this week but still recover or it may go up on QE3 and give you a fast and a slow victory.  VLO Dec $19 puts can be sold for $1.29 as another bullish offset – without putting all your eggs in one basket.  

    Obama very late. 

    Mondays/StJ – That’s interesting:

  36. Jcaesar/AAPL
    Thanks for your input.
    Do you think his death is priced in?
    And where would I get info on his ‘being terminal’?

  37. Very nice Phil, you nailed it again.  Just when I was thinking you blew it this morning with those bullish plays everything started paying off.  Thanks for getting the week off to a good start.  Do you expect us to keep going up into the Fed meeting?

  38. Obama is on watch the DOW tank

  39.   O now 25 minutes late for speech….people are tweeting "the teleprompter should start without him"…hahaha

  40. Maya1 – I have no information saying he’s terminal and I’m not an MD.  But I assume that’s close hold info if it exists at all.  I just know people who’ve had pancreatic cancer (dad’s close friend, friend from college, a fitness trainer at my gym).  I would be very surprised if after struggling all this time, he comes out of as a normal, healthy individual.  The illness and treatments take a heavy toll.  Anything’s possible, but the odds are that his lifespan is quite truncated.

  41. Maya/Jobs
    You  have to draw your own conclusions. Some people have claimed that the picture below is fake, but it is normal for all newspaper photographs to be photoshopped a bit to make them clearer, especially if shot with a long range lens. IMHOP this is legit.

  42. AAPL just reversed itself… huge spike all of a sudden.  What’s going on?

  43. More of the same from the big-O….. yawn.

  44. I am not short it anymore but for old times sake I just wanted to say;
    FU CMG!!!

  45. AAPL/Maya – I suppose I am more bullish on playing them to $500 (what I think they are worth) now as it seems that much more of the Jobs concerns than I thought were already priced in.  Of course, it’s being handled well by Jobs and AAPL and they are not suddenly announcing his death with an abrupt transition so much safer now than it was.  I still think they can fall back 20% ($320) but not 30% and certainly a BUYBUYBUY in that zone.  That means then, that it’s quite reasonable to sell the 2013 $270 puts for $16 so that’s a net $253 entry and you can be happy with that or you can buy the 2013 $420/500 bull call spread for $28 and then you are in the $80 spread for net $12 and your worst case is owning AAPL at net $282.  So you can buy 200 shares of AAPL for $80,000 and hope to make $20,000 at $500 or you can sell 4 of the spreads for $6,400 + margin (TOS says infinity) and add $4,800 cash and you can make $27,200 at $500 and at $200 you would be down $82 on 400 shares ($32,800) while with 200 shares of stock dropping to $200, you would be down $40,000.  - That’s how options can leverage your upside AND lower your risk (within a wide range, anyway).  

    Uh, oh Republicans – Markets are not plunging on Obama speech.  

    Thanks Bruce but let’s not count chickens before they hatch, just a little bounce so far and we still have to get past EU close at 11:30 but Nas is looking good as a leader and Dollar heading lower on US possibly (remotely possibly) finally doing the right thing and collecting enough money to pay the bills.  If we end up with a decent day, then I think it’s going to be up on Fed anticipation.  

    Picture/JMM – Sleeves and shorts look very fake so I assume the arms and legs are too but that does look like his face.  I don’t think he’s in good shape at all or he would never have stepped down – most likely, he’s on liver number 2 or maybe off in China getting a whole new body’s worth of spare parts.  Still, I’ll bet if pressed, you will get the photographer to break down – like this:  

  46. Phil / Jobs — I think he stepped down because AAPL became the largest company in the world. Where else can you go from there?

  47. here is the magical sloppy buyer ealry today!!!…aapl record high!

  48. angelcur / msb — Are you looking at some indicator or just the trend. I see nothing but bot.

  49. angelcur / msb — nevermind. You were talking about AAPL only. I thought you were talking about the markets in general.

  50. Phil, don’t know what you said, but all of a sudden AAPL is up $6 – 1.5%  – please keep writing about them, good for my long calls…

  51. For an income play a couple weeks ago, I wrote the jan 340 puts on AAPL at 15.  Never thought I’d be up 30% on those already.

  52. AAPL/Steve Jobs/        I suspect when he expires the stock will take a brief hit, then rebound and continue upward.   Until this occurs, the safest AAPL plays are those that involve bull call spreads 3 or more months out.    Is he terminal?   Of course.  We are ALL terminal.   I know that for a fact.  I learned it in medical school.     ;)

  53. Wow, go AAPL – that was fast.  

    Jobs/Rain – He built that company and then he saved that company so I doubt he’d leave it unless he really had to.  There may be dozens of Steve Jobs clones maturing in vats at this very moment, waiting for some kind of brain transplant technology to make it possible.   At about $10Bn, Steve can afford to experiment on himself and he has the amazing benefit of pretty much every science geek on the planet at least thinking about how it might be possible to help him so I’m sure there’s not a single possible treatment that escapes his people’s review.  He’s only 56 with 4 kids, 3 very young, so I doubt he’s willing to go without putting up a huge fight.

    NFLX looks ready to resume it’s downward path after that silly pop.  

    AAPL/Jerconn – We’ll see how the above trade does.  

    AAPL/Rustle – That’s the huge advantage of writing puts when the VIX is high.  You get a double whammy as we recover.  

  54. @Exec
    re: BMY, in all the time I have traded it, I have never seen it FAIL to move back after a substantial 4.00 move up (since mid-august that is how much it has jumped) regardless of who is upgrading or downgrading it.  But it takes some patience.
    Felipe’s idea to sell $27.50 puts makes sense to me as I have an open order to buy more at 28.00 and it is pricey now at 30.93. The dividend is becoming less attractive as it rises, since there are other drug companies that would be a better use of cash. If it goes much higher I’m in a position to sell more premium, expecting it to fall.
    If you do not want to own it ‘of record’ for the dividend being announced in about 1o days, then the short put would use far less of your FRNs.
    I expect that like most shares it will trade lower ex-dividend in the first or second week of October as it usually does. How much lower I can’t predict.

  55. Phil / Jobs — " He’s only 56 with 4 kids, 3 very young." — that would be enough reason for me to leave if I were him.

  56. Ha! 666 the high price target for AAPL! :)

  57. NFLX early pop was by short cover. IMO.

  58. Not a bad speech with one gem for many of our mouth breathing, twenty digit counting, freinds on the right:
    "This is not class warfare, this is math"
    Let’s see Rush explain that one……  :)

  59.  Phil, The TNA 41/45 BCS with the 29 put sold against it is now net 1.25.  I just now saw the post. Is this still a good entry?

  60. Phil AGNC I have sold the Dec 28p for 1.72 now 1.45 would you suggest to buy them back now before 21st Sept and sell them after this date again or just leave them as they are as I expect the stock will drop. after the declaration date. thanks

  61. In the beginning of Aug in 08 Naz outperformed the other markets along with TLT…just before the collapse, very similar to what we are witnessing today..  Bernanke better not drop the ball.^IXIC+Interactive#chart6:symbol=^ixic;range=5y;compare=^dji+^gspc+tlt;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined


  62. You wouldn’t know it from CNBC (what a joke of a station) but Geithner is holding a whole follow-up press conference on the tax issues.  CNBC feels it’s more important for you to play their stock game.  

    Oh now they finally cut over…

    TNA/L4 – Up 300% in a couple of hours is not a good spot to chase!  RUT 700 still a good spot so how about TNA Oct $44/48 bull call spread at $2, selling XOM Jan $60 puts for $1.75 for net .25 or the HD Jan $32 puts at $1.85 for net .15 or USO Nov $32 puts for $1.85, also net .15.   All should do well off good Fed news.  Also, you should always consider that, since you do make 100% on the way up if we go there – then you really only need the cover if we DON’T get a good move off the Fed and if you wait to sell the puts on a down move – you’ll get better strikes and prices.  

    AGNC/Yodi – They’re at $29.50 but I agree with your logic as a quick out and in could maximize your profits.  I would say do it and compare it to not doing it and see how it works out as the experience in itself has value if you intend to do this trade ofen.  

    Dollar holding 77.75 – we need it lower than that to make progress.  Hopefully consolidating for a move lower (it should be lower on the Fed). 

    TLT still $114.50 – lots of panic out there still. 

    Bernanke/Kustomz – If they drop the ball, we could be in for an epic collapse.  

  63.   amzn now positive…growth leaders massively outperforming.

  64. bcs no rally

  65. forget tax increases..we need class warfare to get the pres releected..this is when we need the king of mississippi out here fighting for us

  66. If you are worried, you can find solace in the new safe-haven stock of the decade: GMCR, up 3% today, and the chart guys say its about to break out on another leg up.

  67. 11:00 AM On the hour: Dow -1.95%. 10-yr +0.6%. Euro -1.33% vs. dollar. Crude -2.93% to $85.59. Gold -1.32% to $1788.55. 

    Europe closes, "quietly" giving back about half of last week’s gains. Stoxx 50 -2.9%, Germany -2.6%, Italy -2.7%, France -2.9%, Spain -1.8%, U.K. -2.1%. The euro, -1.2% at $1.3640, is well off of its lows for the day.

    A Treasury source says Italy has covered 77% of its 2011 financing needs, and plans to  issue another €100B in new debt before year’s end, with no need to rollover any existing paper. "The Treasury’s issuance policies have a long-term horizon and they do not hinge on monthly maturities of notes." 

     Paul Volcker warns on the dangers of any attempt to release "just a little inflation" to goose the economy: "The danger is that if, in desperation, we turn to deliberately seeking inflation to solve real problems… we would soon find that a little inflation doesn’t work. Then the instinct will be to do a little more." Didn’t we learn in the 1970s how that works out?

    UBS CEO Oswald Gruebel says “rogue traders” are a fact of life: "If someone acts with criminal energy, then you can’t do anything. That will always be the case in our business." An irritated Kid Dynamite says if investment banks truly are helpless to prevent such actions, "then the public’s fears about those banks being serious hazards to the global financial system are true." (earlier)

    Big drag on the market today:  Sterne Agee downgrades a number of oil stocks this morning after cutting overall commodity-price expectations between 5-10% for the second half. The firm reduces the following to hold: Canadian Natural Resources (CNQ -4.8%), Continental Resources (CLR -3%), Forest Oil (FST -1.6%) and Penn Virginia (PVA -7.4%).

    Solar stocks (TAN -6.1%) are getting beat up, led by a steep 12% decline in GTAT Advanced Technologies (GTAT) and adisaster at JinkoSolar (JKS -23.3%). Weak demand is also creatingpricing pressure throughout the industry. Decliners: STP -8.7%TSL -7.7%LDK -7%JASO -8%.

    The Senate Appropriations Committee may have killed off two defense programs entirely after reducing funding (.pdf) and issuing a report noting major problems. On the chopping block: Northrop Grumman’s (NOC -2.2%) Defense Weather Satellite System, Joint Light Tactical Vehicle being bid on by General Dynamics (GD -1.5%) and Lockheed Martin (LMT -0.1%).

    The copper market has "broken down," plunging 3.9% today to $3.78/lb., its lowest price since November. Copper is now down 10% so far this month, and nearly 17% since early August began. Dr. Copper could be sending a warning signal about the global economy. - This is not a demand indicator so much as the speculative bubble popping

    Liquefied natural gas prices surge to 3-year highs on strong demand from China, Japan and India. A survey of analysts by Bloomberg New indicates another 25% increase in LNG prices is expected this winter due to tight supplies and as Asia and Europe move further away from nuclear power options. - See, demand!  

    UBS is upgrading analog chipmakers ADILLTCMXIM, and TXN to Buy. It expects ADI to benefit from bottoming industrial demand, and improving orders from communications equipment and automotive customers. MXIM, meanwhile, is seen benefiting fromstrong phone demand and low distributor exposure.

    On the other hand:  The recent rally in chip equipment stocks (SMH -1.7%) has created significant downside risk for the group, Goldman Sachs writes in cutting ratings for Applied Materials (AMAT -3.6%) and Lam Research (LAM -5.3%). "Record shipments to the foundries and Intel (INTC) will lead to excess supply and a downward trend in orders through mid-2012."

    DigiTimes’ sources believe a PC price war that’s broken out in Europe is set to intensify, as the market copes with weak demand, Acer’s (ASIYF.PKinventory issues, and Lenovo’s (LNVGY.PK)attempts to gain share. Gartner estimates H-P (HPQ) had 25.1% of the Western European market in Q2, and Dell (DELL) 10.8%.

    Another Chinese winner!  Silvercorp (SVM -7.4%) is sliding on another Alfred Little report alleging the company’s income is inflated by 5 times. The paper includes the results of video surveillance of delivery trucks indicating far lower levels of production than reported, and evidence the firm’s largest customer is a "related party." 

    Sometime it pays to go with the outsider. Only able to raise $150M to make bets designed to profit on a slowdown in China, Hugh Hendry’s Eclectica Credit Fund is up 38.7% so far this year. It’s a sharp contrast to the well-known, well-capitalized China bull Anthony Bolton who raised $743M and is facing problems. (previous)

  68. Some of the union’s wins in its labor pact with GM (GM+0.3%) that increase worker pay and add factory jobs may not be accepted as readily by Ford (F -0.4%) and Chrysler. Possible sticking points: $2-$3/hour more for entry-level workers; a new profit-sharing system that could improve workers’ bonus checks; reopening a Tennessee assembly plant and adding jobs there. 

    J.P. Morgan’s Mark Moskowitz believes the iPhone wassold to 225 carriers in Apple’s (AAPLFQ3, up 42 from the prior quarter. He also think the iPhone 5 will support both GSM and CDMA networks. This could be a positive for Qualcomm (QCOM), since such a phone would require a more expensive baseband chip than ones built specifically for GSM or CDMA 

  69. fuck tard alert:  cnbc just said "forget treasuries, forget gold, aapl is the safehaven"…that talk makes me a little nervous.

  70.  i think aapl will be golden until crisis starts really affecting asia..then it will take a beating with market.

  71. angelcur……I believe he is correct.   I advised here several months ago to place your money in AAPL stock rather than other "safe havens" .   I stand by that.   (cnbc must have read and remembered my post).

  72. You’d think the Fast Money traders read my NFLX comments from this morning as they just repeated it almost verbatim.

  73. For anyone playing JRW’s lines from LAST THURSDAY, it’s been a great day so far. 

  74. Phil-  Your thoughts on a bear-call TLT spread, buying Oct $118 calls and selling Oct $115 calls?  A dollar premium on a $3 margin if TLT stays under $115 by Oct expiration.

  75. rustle123…..It is not unreasonable to assume that.   They are called "moles".  Sometimes they paraphrase Phil but don’t mention his name. 

  76. Thanks Flip

  77.  Anyone else receive a very "near and dear" email from the Netflix CEO regarding the service separation today? I’ve been disappointed in their service changes now for a few months and have also been disappointed at their lack of streaming movies online (I don’t want to watch burnt out 80s movies, but thank you). It is today that I am canceling my subscription after 5 years of being a member. I believe this reflects the opinion of many. 

  78. Phil/dividend
    When a dividend is issued, does it impact the option price?

  79.  LAS VEGAS!, I seem to remember someone saying something about paypalling them money having to do with the Las Vegas trip, but I can’t seem to find the comment any longer.  The number $175 sticks in my head.  Am I imagining this or do I need to send someone some cash?

  80. Have to paypal Savi $150 in cash.

  81. Phil, what is your premise on the TLT play (the 117/115 bear put spread) offset with the $115 calls.  If I understand correctly it’s a bullish call, as we expect (hope) to go up with the Fed news this week, and therefore TLT to drop.   But then you write (in your opening remarks this morn), "but we’ll probably go higher so a very small entry that you will roll up and double down would be prudent."    Can you clarify – if we go up, shouldn’t our position do well and if so what is the need to roll up and DD?  (Btw, I got in for 1.32 selling the calls for 1.40, so and .08 credit). 

  82. Craig – I sent u an email abt the details for paypal to Savi.

  83. Good morning!  I had a dream where Ben dropped 110Bn each month for 10 months for QE3 in addition to Operation Twist, and thought I had to wake up early to sell more puts.  Good thing it was just a dream!  Not a rumor, just a dream.

  84. Good morning,
    IWM  68.10,  68.69,  69.15,  69.51,  69.95,  70.15,  70.64,  70.98,  71.33,  71.87,  and  72.09

    Copper and all the charts prepared us for this, now oil confirms !!

    And Tim Knight has integrated the present $NDX chart (shown floating the lower portion) with the same chart from 2008. There are some very intriguing parallels here.

    I will be unavailable today; good hunting !!

  85. Verbatim/Rustle, Iflan – I’m pretty sure at least one CNBC staff "writer" pulls their stuff from here. 

    TLT/GS – I like the bear puts better but same concept. 

    Dividend/Exec – Generally the anticipation of the dividend move is priced in but the option is what it is when it finishes.  

    GMCR coming back to life.  Time for Momos to goose the Nasdaq? 

    TLT/Jercon – No it’s bearish, you are buying the $117 puts and selling the $115 puts and the $115 calls so the bet is they finish the week below $115.  The assumption is that $115 is assuming QE3 but we have been to $122 so it’s possible this trade gets burned on a bad spike and we have to roll up and DD but I would like shorting TLT more at $122 than $115, of course BUT – maybe we never get past $115 so now’s the time to take a small stab at making $2 but saving the big guns for an even more ridiculous move up.   Up means over $115, which is down in rates but that’s very confusing so we try to stick to discussing the direction of the thing we’re trading.  

    Dream/Peter – They need something simply shocking like that to really get the markets going.   They need to just flood the World with money and swallow the hyperinflation pill.  

    Oil/JRW – I would not count that as confirming as they are simply playing out their fairly reliable contract cycle.  NDX chart very depressing!  

  86. Okay, Phil, thanks for the explanation of the TLT trade.  I think we were saying the same thing because by "bullish" I meant not the specific trade but the direction of the market.  I’m assuming market going up means TLT going down, is that correct?  And if so, comes along QE3 and market goes up, meaning TLT stays at or below $115.  But there could be a fluke circumstance where TLT goes up and that’s when we want to roll up and DD – hope I got it right!

  87. NFLX/manimal – same thing here. funny the exit survey didn’t include a "cancelled due to lack of faith in managment"

  88. For those of us betting on XLF or FAS, this is disquieting (from Dow Jones): "Monday’s largest trades in the equity options market were big bets that U.S. financial stocks could tumble to multi-year lows by the end of the year. … Within the first 10 minutes of Monday’s session, one bearish investor bought about 75,000 put options that would capture gains should the fund’s shares dip below $11 over the next three months. … Another investor expressed pessimism in the direction of financial stocks with a "put spread." The bearish, two-leg strategy was set up when a trader sold 50, 000 December $9 put contracts to reduce the cost of buying that same number of December $11 puts."

  89. Phil
    I have thought there were spys for a least a year makes my day to see I am not the only one.

  90. Well, don’t say the market didn’t give you a chance to grab those longs today.  That was a fun double dip as they try to shake out the weak hands.  

    FAS weekly $13/14 bull call spread at .40, selling JPM Oct $28 puts for  .63 is a .23 credit on the $1 spread.  FAS Oct $9 puts can also be sold for .50 (better for people who have 100% margin).  In the $25KP, let’s buy 20 of the bull spreads for $800 and sell 10 of the JPM short Oct $28 puts for $630, risking $170 (plus owning JPM for 15% off) to make $2,000.  

    1:00 PM On the hour: Dow -1.93%. 10-yr +0.69%. Euro -1.18% vs. dollar. Crude -3.46% to $85.12. Gold -1.96% to $1776.95.

    2:00 PM On the hour: Dow -1.82%. 10-yr +0.73%. Euro -1.1% vs. dollar. Crude -3.16% to $85.39. Gold -2.08% to $1774.85.

    The CBOE Volatility Index jumps 11% to above 34 as European drama and macroeconomic worries play out. Taking a longer view, the VIX hasn’t dropped below 30 since the S&P downgraded U.S. debt in early August – showing "market fear" is still on a hair trigger. 

    More on the VIX (previously): The oft-quoted CBOE Volatility Index isn’t the only game in town when talking about measure financial volatility. The Conference Board has developed its ownExperimental Monthly Financial Instability Index (.pdf) – designed to be more forward-looking and less trader-sensitive – that is flashing only a mid-range level reading on financial volatility.

    Obama’s Economic Quagmire:  (New Yorker)

    Jobs and the G.O.P. (New Yorker)

    Republicans Accuse Obama of Waging ‘Class Warfare’ With Millionaire Tax Plan (Fox News)

    Bartlett: Class Warfare, Republican Style (Social Science Research Network)

    The real truth about Social Security (The Economist)

    FHFA acting director Edward DeMarco says the agency will be offloading mortgage default risk from taxpayers by "expanded use of mortgage insurance and securities structures that allow for private sector risk sharing." (.pdf) One option on the table: Increasing the level of homeowner equity required to avoid paying PMI even higher than 20%.

    Effort on Home Loans Stalls (WSJ)

    Don’t expect relief from a re-start in Libyan oil production. Comments from OPEC’s secretary general indicate that the end of hostilities may not lead to the anticipated boost to world oil supply, because other group members are likely to cut their own production as Libya’s rises – "It is in their benefits."

    The precious metals break form, sliding even as fear shows itself on the equity, bond, currency, and other commodity markets. Gold gives up early gains, now -1.7% at $1,784. Silver -3.4% at $39.43.

    Another brilliant example of austerity at work:  Sources say the Italian government is about to lower its growth forecasts to reflect the austerity being imposed on the country. Currently at 1.1%, the 2011 estimate will be cut to 0.7%, while 2012 will be cut to "1% or below" from 1.3%. Private analysts are expecting growth of less than 0.5% next year.

    Rearranging the Deck Chairs (Tim Duy’s Fed Watch)

    Jeux sans frontieres: Silvercorp (SVM -5.7%responds to the latest allegations by Alfred LIttle, contending it is the victim of a well-organized scheme by short-sellers. The miner points out discrepancies in LIttle’s own research as well as questioning what expertise the firm has in analyzing ore samples "dropped" from a truck.

    Google (GOOG -1.1%) shares slip as focus turns to Eric Schmidt’s appearance before Congress later this week to testify about whether the search giant engages in anti-competitive behavior. Its situation strikingly resembles that of 13 years ago, when the feds hit Microsoft (MSFT) with an antitrust suit after a shaky congressional performance from Bill Gates.

    Apple (AAPL +2%) is outperforming strongly today, and creating new all-time highs in the process. A bullish J.P. Morgan notecould be playing a role, but investors might also be buying in due to the company’s low multiples relative to its growth rate

    Three lunchtime reads:
    1) Can China escape as world’s debt crisis reaches Act III?
    2) Will additional Fed action accomplish anything?
    3) Europe tests "This Time is Different"

  91. The guy who looks like he’s a newscaster from the 1970′s on CNBC is screaming in panic mode to protect the rich from more taxes crying how unfair it is. 

  92. That guy used to be on FOX Rustle..surprise surprise

  93. Phil on FAS, is that selling the October $9 puts, not calls?

  94. WFM making new highs while all this is going on. 

    Dollar finally broke 77.75 as expected – nice recipe for an afternoon rally!  

    Pensions/1020 – They’re coming after everything.  

    50 dma/StJ – I’m surprised energy is so weak. It kind of snuck down on us.  

    TLT/Jerconn – Not necessarily as we could be going up due to insane Fed lowering of rates and that can push down TLT but that’s the point of a hedge, something that, if it’s doing poorly, means the rest of your portfolio is doing well.  The bonus on TLT is that it’s pumped up on fear so we could do better in stocks and TLT could go down anyway and, of course, if the Fed doesn’t ease – TLT will likely crash with the markets.  So, many ways to win and the only likely way to lose is if the Fed is giving away so much money that our stocks go to the moon.   A move up would not be a fluke but, if you look back historically, it is likely to be short-lived, which means we can ride out a move against us – as long as we maintain good portion control. 

    Financials/Mr M – Could be someone covering $10Bn worth of bullish bets.  You have to be careful drawing conculsions from those things.  

    Spies/Shadow – Yes but we’re not talking about the ones surrounding your home.  8)  

    FAS/Dan – Yes, sorry, that’s selling PUTS (fixed now).  

  95. Dollar drop once again coincided with gold $1,780.  That’s going to be the consolidation breakdown to watch in gold but over the longer term.  

  96. Phil, starting to like AGQ, perhaps going long the $180 calls?  AGQ is now below $200 for the first time in ages, if I’m not mistaken (or maybe the first time since your call a few weeks ago)

  97. Hey all,

    The Oxen Group went long on DFS this afternoon in the range of 26.00 to 26.10. We like them to continue a run-up into earnings and post-earnings breakout to 30. We played it with equity.

  98. Phil – what is your favorite way to short silver or gold right now?

  99. Phil — I agree, AGQ seems like an interesting trade here. What do you think of something like the Oct 195/200 spread at $2.35, selling the Oct 290 call for about the same? Or perhaps selling 3 290 calls and 3 145 puts against 6 spreads to split the risk? 

  100. the tell on the few daysmagical  sloppy buyer fails is volume…on heavy volume down days they dont have the firepower to lift us…today its light.

  101.  advance/decline line is -1,670 on naz yet its only down 20…not sure i have ever seen that.

  102. Any one knows the ex div date of NLY thanks

  103. Phil
    OUCH! I’m not even there now.

  104. Yodi/NLY
    I don’t believe they have announced the dividend yet.

  105. Actually the mark on the Oct AGQ 193/198 spread is $1.90 now. I’m offering $2 but no fill yet. That seems like a good risk/reward!

  106. Phil,
    Any trade ideas on WFM?

  107. rj_jarboe
    NLY thanks the div is one thing but I am Looking for the ex div date so to buy my puts back they will increase after that date again

  108. AGQ/Jerconn – You know you are a day trader when a month seems like "ages."   I’m not a big fan of betting them up because they suffer from decay and silver isn’t cheap.  I LOVE to short them when they do pop.  The premiums are outrageous but you ould go for something like the $197/205 bull call spread at $3.30 and sell ABX Jan $48 puts for $2.21 for net $1.09 on the spread on the hope that QE3 puts silver up to another level (for a net 650% gain) and, if not, ABX is a good stock.  

    Shorting silver and gold/Jrom – As I just mentioned above, PATIENTLY waiting for AGQ to go up near $250 is my favorite way to short silver (around $43 on silver) while this morning, in the main post, I put up a short spread on GLD which is a little chasey now but I imagine gold will "rally" back at least into the Fed and you can look for a good bear put spread/Short call combo.  If you are less sure, as above you can sell the ABX puts to finance a bearish spread so you won’t lose on both ends (or not likely, anyway).  

    AGQ/Kurt – What caused this sudden interest in silver?  It’s only up because gold is up but I do like your spread idea, using AGQ to hedge against itself but you will have mixed feelings on the way up.  I would not sell AGQ puts as they can turn catastrophic.  

    Firepower/Angel – I think they are happy to keep things low at the moment.  There’s no reason to do a stick ahead of the Fed, hopefully squeeze the Fed bears into giving in "for the good of the economy".  On the Nas – I think it’s because we were almost 10:1 down earlier and just now climbing back so very red but recovering. 

    NLY/Yodi – Should be last week of this month. 

    WFM/Dano – Too expensive for my taste but too good of a company to short.  

  109.  RUT still lagging. See if we can’t stick 700+ this last hour…

  110. NLY thanks Phil

  111. DF -has put in a good bottom. a conservative entry is sell Mar $8 Puts @ .75, buy Mar $9/10 BCS @ .24, putting .51 in your pocket.  worst case, stock put to you for net $7.49.  if over $10 you earn 71% on the modest margin requirement.

  112. I wish PCLN would pull a NFLX ;-(

  113. Manimal
    As a technical kind of person, I see the RUT as failing 700 today, lets hope Phil’s 697 holds and round off to 700!

  114. FU PCLN!!!

  115. DF – same end numbers but to clarify, i bot a synthetic 8/9 for .24, sold a mar $10 call for .75. Enter it any way you like.  the quotes for the $8 put is at .90 and the bcs is .38. giving about same net entry (.52) 

  116. Phil – Looks like we get a second chance at September’s dozen.  A lot of them are currently better opportunities than they were a couple weeks back….with SNDK being the major exception.  Of those names (listed below), which do you like best based on the assumption that Ben spells out QE3 tomorrow?  In particular, where does Alcoa belong on the priority list?  Thanks in advance.
    Sept’s dozen (including bonus names):  MRO, INTC, AA, BRCM, HPQ, SWY, X, SPLS, SVU, SNDK, MRO, GNW, HCBK,

  117.  That’s an idea…

    The EU countries in the study can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%.
    Six countries – Ireland, Italy, Spain, Britain, France and Germany – can write off more than 50% of their outstanding debt.
    France can virtually eliminate its debt – reducing it to just 0.06% of GDP.

  118. DF/Scott – good call! 

    PCLN/Jabob – Not even a momo stock.  With PCLN the strategy would be to go very long-term short and play for a big market crash or terrorism.  To that end, they make good insurance as they would take a dive with everyone else for the same reason they can outperform – there’s no actual business of their own, just transaction fees essentially.  Also, in the long run – I imagine the airlines, at least, will eventually figure out how to freeze these guys out.  They tried before the crash but efforts got derailed but PCLN is worth more than the airlines so they are just foolish not to try again.  

    Now 77.50 is holding for the Dollar – that would be a good fail into the close.  

    September’s Dozen/GS – AA, X, BRK.B, SPLS, MRO, GNW and HCBK should get the most direct aid but it depends HOW the Fed pumps money in.  BRCM, INTC and SNDK got away, HOV is coming back (was $1.15) and HPQ is much cheaper.

    Nas green!  

    Great idea StJ – Shows how overstated the crisis is.  

  119. From Forexlive via FT
    The FT reports that German industrial giant Siemens pulled more than a half-billion in euro deposits from French banks and put them on deposit directly with the ECB (I didn’t know corporates had that options…)
    A major vote of no-confidence in the European banking system, including the German banks, if true.

  120.  look at xlf…right when its about to fall apart again it just gaps higher for no apparent reason….msb greece is close to deal with troika-fin minister..ok so  there was a small reason..ha

  121. Phil – within the international spectrum of financials, CS appears to be the closest to its March 2009 low (~20%). On a relative basis, everything from UBS to RBS are trading ~2x higher than their 2009 lows. With vols as high as they are you can sell the Oct $22′s at $1.10 which creates an entry point ~10% from the 2009 lows. Good trade? Anything that concerns you about the sector at the moment?

  122. Kurt/AGQ — Glad to talk about silver; it’s been awhile.  The premiums on AGQ are stupid….last week of August I sold some December 570s for $4 and change…by my calculations, that’s about silver at $64.  Even for December, that’s a whole lot…  Down to $1.20-ish today.  If you are careful to sell premium on a silver "way up" day, those silver bugs will pay up big time for AGQ calls. 

  123. angel – You and your rumor mill!

  124. Phil,
    TLT breaking down, can I find resistance around $110/111?

  125. I guess angel’s rumors, or should I say "reliable sources," might be correct.  Would explain the vertical jump since 3:10 or so.

  126. oh lohdddd its alll fixxed!! say haleluliah!!

  127. $  < 77.50

  128. Exec,   Are you sorry JRW wasn’t around to talk you into that last $2.00 run up in TNA  It followed his lines perfectly

  129. Wow, Greece is "fixed" again – who’d have thought?  

    BCS Oct $10 calls are .85, 10 in the $25KP.

  130. those finn monekys are sooo special

  131. Mr. Stick is turning those DIA calls into a thing of beauty…

  132. Once again the bears take it in the tailpipe.

  133. Stockbern,
    Actually I’m helping bid a job and haven’t looked at the market much today.  My buddy just called and bitched about the stick (he never learns either) so I just checked the market. 
    Tomorrow is another day and being mostly cash makes work easier.

  134. problem with the msb hes all pipe and NO crankshaft i fear

  135. TLT setting up a very ugly candle on the daily chart.

  136. Hmm…looks like some people started to have doubts about the "reliable source" on Greece at about 3:39PM.  I think we’ll need an official statement now.

  137. XLF/Angel – Any excuse was good for a rally – the real question is why did we fall on no real news.  People are just amazingly impatient and everyone plays like a day trader – whatever the last rumor is they think is a market direction.  

    CS/Trader – I’m sure they have exchange issues but, in general, I think they are solid and I was about to pick them for the $25KP above when I decided BCS was a little stronger for a quick pop.  

    AGQ/Esco – Good point.  

    TLT/Tech – They’ve had strong support (annoyingly) over $110, that’s why we wait for these silly spikes to short.  You have to be careful with them as the Fed can send them 10% in either direction – depending on how they are going to spread the wealth.  

    CNBC immediately rushes in a guest to scream recession into the rally.  

    Dollar holding 77.50 so no big finish likely.  

    Reuters reports Greek finmin Venizelos saying the country is close to a deal with the Troika following this evening’s conference call. With the Greek situation seemingly fixed, stocks and the euro rally. The common currency is 120 pips off the lows, -0.8% at $1.3680.

  138. Phil/AAPL
    thanks for your AAPL trade idea this morning.

  139. I was saying this morning that soon this market will be driven only by bots, but we should say bots and rumors! This is insane – we have fixed Greece 250 times in the last year and every time it’s good for a big stick! Soon they’ll be programming bots to spread rumors! Or is that done already! It’s a joke… Forget fundamentals, just a waste of time. Spread rumors… if it’s good enough for Cramer, got to be good enough for PSW! 

  140. very narrow rally don’t get too excited…but the levitation specialists are helping alot today

  141. In general, when buying calls in the Russell 2000, is there a consensus among you experienced folks to favor IWM or TNA, or is it entirely situational?  If situational, what are the criteria that would cause you to favor one over the other?

  142.  escohen – I agree, I miss silver… I stopped trading it when it got all range-bound, but I think some decent spreads might be a good way to make some money. I like your idea of selling the way OTM calls on up days. I’ll have to remember that. So far no fill on my 193/198 spread, even $.20 above the mark. I guess it’s better to play the more liquid prices.
    Phil – it seems like silver and gold are stuck in a range at this point, and playing it seems fairly low risk. I like silver and gold because I have more of a feel for them than most stocks, but I’m trying to branch out also. 

  143.  Boltdude – From my experience I prefer IWM when trading options. You could drive a car through the TNA bid/ask and you could get burned quickly with a sharp move in the ‘wrong’ direction. That being said the gains are amplified when TNA moves in the ‘right’ direction. JRW could speak wonders on TNA but I believe he solely trades the equity.

  144. AAPL has gone bananas today. The $400/450 January ’13 trade with the short puts that Phil recommended last week is starting to look like a winner. I had my other AAPL LEAP position collared until Friday when I decided to set it free--unleashed might be a better term, as it is turning out.
    Interesting on a day like today to see which stocks lead the reverse. AAPL of course, but then out of the stocks I own or follow closely NLY and CIM (both close to ex-div dates) MSFT,  IBM, and AEP (American Electric Power) are the lead dogs, so will follow up to see if the same sectors continue to take the lead.

  145. boltdude / 2000 — I use IWM options. The bid/ask spread on TNA is usually too large for quick trades.

  146.  Hi Phil,
    Trade idea on UUP?  Would you buy UUP 22P and sell 22C for a small debit ($0.12)?  Hope is that UUP will stay well below $22 and calls will expire worthless while any drop in UUP to lower than current level ($21.85) will make this trade positive.  Another idea is a calender spread, buying UUP Jan 21C and selling Oct 22C for about $0.87.  Both trades are trying to time short term peak in UUP while hoping to position for longer term up movement in UUP (well first one is just a short term trade with very small commitment, second is a somewhat larger entry for longer term).  I missed out UUP move from $21.25 to $21.85 and now trying to catch up.  Comments appreciated.

  147. i have several dozen growth stocks on my monitor pages up 1-5% today…naz breadth -1474….market thinks that we are in for sustained stagnation, NOT RECESSION that is why huge growth stock outperformance lately….credit markets think recession.

  148. You’re welcome Maya! 

    Rumors/StJ – Also once the top selling album of all time (yet no one ever plays it anymore).  

    Russell/Bolt – TNA has a big bid/ask spread, which makes it bad for day-trading options as you get killed by the spreads.  IWM options are very liquid AND have weeklies, which is also nice.  I like to do bull call spreads with TNA, taking advantage of the ridiculous premiums but, for trading, I prefer the IWM.  

    LOL Kurt – I don’t know if I would call moving to silver "branching out" from gold.  They move pretty much in synch.  

    At the close: Dow -0.97% to 11398. S&P -1.02% to 1204. Nasdaq +0.12% to 2309.
    Treasurys: 30-year +1.25%. 10-yr +0.59%. 5-yr -0.819%.
    Commodities: Crude -2.55% to $85.93. Gold -1.81% to $1779.65.
    Currencies: Euro -0.82% vs. dollar. Yen -0.33%. Pound +0.55%.

    Market recap: Stocks bounced off big early losses on a report that Greece was close to agreement on a plan to win release of a new round of bailout funds. Tech shares led the recovery, while banks were battered. Dollar strength held down gold all day, even when equities were getting thrashed. NYSE decliners led advancers nearly four to one.

    Home remodeling activity jumped 24% Y/Y in July to the highest level since BuildFax began tracking data in 2004. It was the 21st straight month of gains for the index. "As millions of Americans believe that they will not be able to secure a new home… they are more and more turning to renovating and remodeling their current properties," BuildFax says.

    Hugo Chavez orders the nationalization of the gold industry – giving companies 90 days to form joint ventures with the state in which the government would own a minimum of 55%. "All gold that is produced from mining operations will be turned over to the Republic," goes the official decree.

    Chris Mauro of RBC Capital Markets notices a schizoid pattern in the recent behavior of municipal bond fund investors of flocking either to ultra-conservative short- to intermediate-term funds or riskier high-yield funds. At the same time, the biggest outflows have been in broad-based national long-term funds, which generally stick to investment-grade credits.

    Down sharply again today, the formerly charging real has lost 11% of its value against the greenback this month. While a flight from risk assets is a factor, the surprise Brazilian interest rate cut in August in the face of worsening inflation numbers looks like the true catalyst. BZF -2.7%

    MKM Partners thinks Operation Twist could weigh on regional banks, given its potential to increase borrowing rates (based on short-term yields) and decrease lending rates (based on long-term yields). It recommends bank investors interested in protecting themselves buy puts on regional banking ETF KRE.

    FDIC chief Martin Gruenberg thinks banks need to lend more, for their own sake. While profits have been surging, much of the growth has come from reduced loan-loss provisions. In Q2, these reductions boosted BAC‘s profits by $2.5B, and C‘s by $2.2B. But as provisions reach historical norms, banks will need to lend to increase their bottom lines.

    Nomura doesn’t expect the FOMC to cut rates on excess bank reserves when it meets this week, as some have demanded. However, it does expect more color on its inflation and unemployment views; and like others, it thinks a version of Operation Twist will be announced. Nomura also expects Fed chiefs Plosser and Fisher to dissent from the latter decision. 

    BofA (BAC) finds a way for brokerage clients to keep their debit rewards in place by guiding them to credit card offers with similar terms after the Fed caps debit swipe fees at $0.21. The move – sure to be well-received by customers who love their debit card perks – isn’t quite altruistic considering unregulated credit card swipe fees generate a cool $40B a year for banks and cardholders will pay interest if they carry a balance.

    Siemens (SI) withdrew more than €500M from a large French bank and deposited it with the ECB 2 weeks ago. In total, Siemens has €4-€6B parked at the central bank. A source says the company is concerned about the health of the unnamed French lender and also gets a better interest rate from the ECB.

    Casino stocks tied to Macau are outperformers on the day, as the ties between Las Vegas and China deepen. A whopping 72% of Wynn’s (WYNN +1.8%) Q2 revenue came from Macau, while both Las Vegas Sands (LVS +1.3%) and MGM Resorts (MGM -1.1%) are leaning on their Chinese operations to knock out earnings beats.

    Shares of Chipolte (CMG) are up 5.5% on heavy volume as the stock breaks through technical barriers and attracts institutional investors. The company isn’t backing down after staring down the barrel of a loaded recession - opening a new Asian fast-casual restaurant in Washington DC that could be a harbinger of a whole new franchise. - Now, the trick is to get over there and scope out the place and see if they are doing well.  

    Analysts expect Best Buy (BBY) to shutter its 11 U.K. megastores, opened in partnership with The Carphone Warehouse, as they struggle with strong competition, weak demand, and cultural shopping differences. Merrill thinks closing the stores, which ran up a loss of $98M in their prior fiscal year, could cost Best Buy nearly $95M. 

    Nomura’s Gus Richard, who rates Intel (INTC) a Neutral, thinks 2012 could be a rough year for the chip giant, as consumer demand remains weak and buyers wait for the fall arrival of Windows 8 (MSFT). Richard has high hopes for Intel’s low-power Haswell CPU platform, but it’s not expected to begin shipping until early 2013.

    A blog post from Deloitte cautions against extrapolating the market value of Facebook based on the $500M investment by Goldman Sachs. The problem? Goldman didn’t make an arm’s length transaction, and stands to gain from the investment through investment banking fees and private wealth management services – making that oft-quoted $50B equity valuation a bit suspect.

    This may be a first, at least for an actively traded stock: A company repurchases stock, then says it repurchased too much and sold shares to get the cash back. That’s the story at LDK Solar (LDK-6.4%), which says it sold a private placement of ~4.4M shares.

  149. UUP/DrMTV – I am no longer interested in UUP.  The Euro is too low and the Fed is about to print more Dollars – not good for UUP at the moment.  I wouldn’t short them because people do panic into the Dollar but the last time we played them long was very frustrating and 78 is a tough line to cross.  Your spreads are fine if you want to gamble in that direction but you are playing the middle of the longer-term channel (see weekly chart) but you are acting like it’s the top of the range.  I’d stay away unless they get too high, around $23.50 or too low, around $20.50. 

    Not Recession/Angel – That’s what I keep saying.  We are priced for recession – it’s up to the bears to prove it now or we drift up.  

  150.  Phil — haha, that would be funny. Actually I traded much more silver than gold, but I’m holding gold long-term (well until I think it’s played out). When I said branching out I mean stocks and other things besides PMs. I’m starting to get more comfortable and successful with those trades, but I still feel like I have a better sense of PM movement and I can jump in and make a good call and make decent money, where it takes a lot more effort to make 1/2 as much with the other plays. But I’m getting better, and I’m really looking forward to Vegas.

  151.  Speaking of Vegas, anybody book a hotel recently? I made the stupid mistake of putting it off until now, and I just noticed that Vdara is now up to like $600 for two nights with taxes and resort fee. I’d love a decent place nearby for $100-150 a night, or at least less than $300. 

  152. Kurt/Vegas — there are (still) all kinds of prices and….by the way, are people hanging out on Monday for the trading day?  I booked a flight home at 5:45 p.m. on Monday.  And, if so, where? I”ve been travelling, so I might have missed this part of the discussion.

  153.  Hi Phil,
    Need to roll over 5 contracts of SQQQ Oct 24C, bought @4.73, as a result of a calender spread/ panic hedge. My break-even price for the same is about $3.55. Would you be able to recommend trades that can make this into a useful oct hedge while optimizing cost?  Thanks in advance.

  154. Kurt,
    Do you want to stay at the Orleans Hotel?  It is off strip, but we could share a cabs to dinner/poker on Saturday night and to Cafe Moda on Sunday and Monday.  LVModa suggested it.
    Let me know,

  155. Kurt – willing to share a room? If so craigzooka has a room at the Venetian.

    I waited too long to book my air ticket and got stuck with a sucky flight!

  156. chavez…another little pussy bully treating his countrymen to a shitburger…

  157.  Dan, the Orleans looks good for the money. I’m fine with that. I’m not looking for a luxury suite or anything, just something clean. Sharing a cab sounds fine to me. I actually reserved a rental car a while back really cheap, I think it’s $40 for the two days. If that makes more sense, I’m happy to share that instead (or just pay for it and whoever is coming along can chip in or buy me a drink or whatever). If parking’s an issue, cabs are probably a better idea. I’ll send you an email, in case I forget my address is I’m flying in on Saturday around 4:45, and back on Monday afternoon after the trading day.
    Nicha – Thanks, I saw that from Craig, but I think I’d rather get a decent room somewhere. 

  158. I would add that I like the Orleans as well – Large, clean room and feels like you spent a helluva lot more than 100-150 a night.
    The casino and the food offerings are no big deal though…. 
    The Southpoint and the "M" are south of town and are good values, due mainly to the fact they are south of town. (no more than 20 min.) The Southpoint was built by the same guy who built the Orleans. The M had just been picked up by Penn gaming and cost a cool "B" to build. The M is a very cool, contemporary hotel, built by the same guy (Tony Marnell) that built the Rio and my fave, the Bellagio.

  159. Kurt and I have booked the Orleans.

  160. Today’s levels.

  161. BBY/UK
    "Analysts expect Best Buy (BBY) to shutter its 11 U.K. megastores, opened in partnership with The Carphone Warehouse, as they struggle with strong competition, weak demand, and cultural shopping differences."
    I would have thought that the "big box" concept would be somewhat handicapped in the UK by the fact that many people, especially younger folks, students, residents of London, etc. are reliant on public transportation to get around and therefore prefer to shop in pedestrianized shopping centers which are common in the UK, with a mixture of stores, restaurants, pubs, and cafes. In many historic cities (e.g. Chester) you have to park your car on the edge of town and take a bus to the shopping center. This makes it easy for the guys to look at computers while the gals look at fashion, and then meet up for a coffee somewhere else. There are huge crowds in shopping centers in the UK at weekends.
    The kind of business that do well in independent locations, which are often found in converted factories and mills that have their own parking, and where people do drive to as a specific destination, are often garden centers or DIY stores. To be successful as a stand alone big box store there would need to be a big advantage on price or delivery charges.
    There may be some cultural differences, but surely BBY knows this or can find out. Duh!
    Note the lack of cars!!,r:12,s:27&tx=54&ty=23

  162. Vegas/Orleans — I saw Don Rickles at the Orleans not so long ago…great show…very old school Vegas.  Rental cars….too hard to park, too much alcohol involved….who needs the worry?  Cabs everywhere.

  163. Pharm - MNTA fell big today based on rising competition, you seen any opportunities here based on their pipeline?

  164. When are the dates for Vegas? Just curious.

  165. Italy downgraded….

  166. So much for that late day stick… S&P futures lose 15 points in AH. This is a joke! 

  167. Vegas/I4real — Saturday evening Oct. 8th, Sunday the 9th…and (I think) Monday the 10th

  168. LOL, at the rate the news flows these days, Italy’s downgrade will be a long forgotten memory in the morning.

  169.  Is anyone coming in on Friday night?  I still have to book hotel / flight as well.  I was thinking of staying some extra time past monday.  Anyway going to be in town?

  170. Surprised EWI didn’t drop much in after-hours trading after the Italy downgrade.

  171.  Guys – Can’t make vegas – daughter’s b-day. Hopefully catch the second annual.

  172. Dow Jones Tomorrows News Today    
    Just a FYI, I found this link from another service I use.  It’s a good summary that I print out to see what’s coming up tomorrow.  It’s free.  Just change the dates in the link.

  173. MNTA/mrm – wow, we got out of them when they were up in the $19s.  Well, they are making a generic Copaxone (TEVA’s flagship), and if they get approval, they may fit very well with SNY’s Sandoz unit.  With a P/E of 4, and a nice pipeline, I think selling a few puts at $10 is worth the risk.  Let’s see if the volatility is higher later on to get a bit more $$ for them.  Watson is marketing generic Lovenox with Amphistar Pharma.  Stay small wit this, but long term, they are still a good buy b’c of the Copaxone entry possibility. 

  174. Pharm - thanks!

  175. Good morning!

    Looks like the 3am trade was on this morning and that bodes well for the markets today.  

    Dollar smacked down from 77.87 to 77.34 and the markets doubled that move, now up about 1% in the futures.  Oil jumped back to $87 and gold is back at $1,795 so all going about as expected into the Fed.  

    Asia came back into the close with Hang Seng and Shanghai up half a point, the Nikkei fell 1.6% but was catching up from being closed Monday and the BSE jumped 2%, back over 17,000.  Europe is having a "Greece is fixed (again)" rally and they are up over 1.5% so we’re gonna have fun, fun, fun ’till Bernanke takes our TBills away

    Those bullish plays from yesterday morning are going to be looking fantastic.  

    SQQQ/DrMTV – Never let those things drop more than 50% before adjusting.  As it is, you have about $1.50 left (was $2 in the morning) and at this point you are best off spending $2 to roll to Nov $21s and selling the Oct $24s to someone else for $1.50.  It puts you in a $3 spread for $5.25, which is not sexy but the $24s should roll to a higher Nov vertical if we crash and, if we don’t, then you’ll have an open, lower Nov call.

    Big Chart – Good signs that the Nas and RUT held their lines yesterday.  The other indexes are mid-zone so no real support and could drift either way.  We may be pushing right up on those Must Hold levels tomorrow afternoon with either a pop over or a massive rejection on the Fed. 

    BBY/JMM – Also BBY’s business model doesn’t mesh with UK shoppers.  There are a couple of electronics chains in the UK and they have lots and lots of small stores right in towns that are like old fashioned stereo stores (Dixons used to be a camera store in the old days) in the US where you generally have very knowledgeable salespeople who are used to customers that ask a lot of questions and kick a lot of tires.  BBY is more like a warehouse where you get your own stuff.  Dixons, opened up some Mega stores and they have an established reputation for quality and service in the UK but I don’t think those are doing well either.  You are right, without a huge price differential, which is hard to establish until they get a foothold, there would be little reason for shoppers to make a "special trip" out to a big box store.  Plus the timing was awful, not much they can do about that.  Unlike US, when the British don’t have any money they stop spending it on TV and other stuff they don’t need.  I like that photo of Chester, thank goodness there are still places like that in the World! 

    Debt/Joe – Good points. 

    Vegas/Esco – Yes on Monday, I’m planning on being back at Cafe Moda in the morning doing live commentary from there. 

    News/Burr – That’s pretty good. 

    Bonds/Joe – This discussion has been going on for 100 years.  There are always swings when bonds outperform stocks and vs. vs. – it used to be people invested almost equally in both but now, like our politics, people seem to be all bond or all stocks.  If you compare performance of just holding stocks to bonds, bonds can make a better case but if you compare the performance of well-hedged stocks where you sell options premium to bonds – bonds are a joke.  

  176. Phil
    You talk a lot about the 3am trade and infer that there is a pattern in which depending on how the 3am trade goes, give some indication of how the market will react that day.
    Would you mind explaining the trade and the impact on the market.

  177. Phil/BBY.
    Yes, good point that Dixons and Comet are not doing very well either, and that cannot be due to Amazon competing without paying sales taxes, because Amazon UK has to pay VAT. It’s stupid, but its the economy.
    I was in that shopping area in Chester a few years ago on a very cold Saturday in early November, and the whole street was jammed with thousands of pedestrian shoppers. (Most city centers are pedestrianized these days, since they all have ring roads (beltways) and traffic no longer needs to go through city centers. London also has a hefty "congestion charge" for bringing any passenger vehicle into the city.) 
    Some US retailers were getting it right, though, because Kentucky Fried Chicken’s olde worlde restaurant (no drive-in, of course)  was filled to the rafters at 11:00 a.m. with people (mostly young) waiting for tables and a line that went out the door! Meanwhile some of the stuffier local restaurants did not open their doors for lunch until midday.