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Phuket Friday – Carnival of Madness

It’s party time! 

A lot of investors have been saying "Phuket" lately and they can only be referring to the annual Patong Carnival in Thailand, where the tourist bureau wants you to know the tuberculosis outbreak is "under control."  Actually, it’s an amazingly beautiful place with great people – must be why so many people keep mentioning it when starting at the markets this week

As I mentioned yesterday, we had to flip bullish because our bearish bets were no fun and we felt that A) the bottom was a little forced in order for Timmy to peddle his T-Bills and B) that Santa Clause is coming to town.  Actually, we had plenty of bearish bets from when the market was high so we needed the bullish bets to get BALANCE!  

Balance was the theme of our virtual White Christmas Portfolio and we added another $3,615 in gains over the past two weeks to bring us very close to a triple at $42,925 off our $15,000 start back on November 21st.  This is a very aggressive virtual portfolio where we are practicing the art of hit and run trading.  The positions we closed in the last 9 sessions were bullish bets with FAS, XLF, FAS, DIA, GLD, XLF, FAS and XLF and bearish bets with GLL, TZA, FAS (spread), USO, DIA, TZA, DIA, DIA, DIA, DXD.  See – BALANCE!  

We thought the market would go up and down (I know, such a stretch!) and the markets did, in fact go up AND down with an AVERAGE swing of 1.5% PER DAY but, in the end, we’re still consolidating around our Must Hold lines and right back where we were at the last options expiration day of November 18th – causing almost all puts and calls sold to sucker a month ago to expire worthless.  Isn’t it a funny coincidence how all that seems to work out for the Banksters?  

As I reminded our Members, our cynical motto at PSW is "We don’t care IF the game is fixed, as long as we can figure out HOW the game is fixed and place our bets accordingly."

I don’t know how many times I need to tell you oil is a scam before you’ll believe me but it was way back on June first, when I laid out our plan to break the speculators at the NYMEX, saying:    

"If some idiot is stupid enough to pretend to want to buy oil at $103 for July delivery – we are happy to sell it to them." This comes from our fundamental concept that oil is in no way, shape or form WORTH $103 per barrel and that, even if it were, consumers can’t AFFORD $103 a barrel and, even if consumers were mindlessly throwing themselves another $2Bn a day in debt ($10Bn globally) without cutting back on fuel consumption – that the Dollar, which oil is PRICED in, is also undervalued and will correct up and kill the PRICE of oil at some point. 

UUP WEEKLYThe Dollar was way down at 74 when I made that call (see David Fry’s chart), up 10% now and oil gave us a ride down to $89.61 in June and then back to $100.62 in late July and then to $75.71 in early August (wheeeee!), back to $90.52 in early September, then to $76.25 at the end of the month and then a huge run back to $103.37 in mid November – when I begged the President to give me the keys to the Strategic Petroleum Reserve so I could short oil and release it into the market while shorting the 600,000 open front-month NYMEX contracts.  

While I didn’t get the keys to the SPR, our short position, if taken against those 600,000 contracts at $103.37, would have made a nice contribution towards paying off the deficit as oil closed yesterday at $93.45!  At $10 per penny per contract on 600,000 contracts, that’s a cool $6Bn profit in a month!  

That was nothing compared to the original June trade, when I called for a short of 726,000 contracts at $103 and we caught the run to $75 in August for about $22Bn in potential profits.  Of course, you don’t have to be such a big shot trader – each single short contract yielded a very nice $28,000 in profit off a $7,560 margin requirement.

As value investors, we don’t change our mind on oil based on the charts.  When oil gets to $100, we begin to take up short positions, when oil goes over $100 – we take more aggressive short positions and, when oil still goes higher – we "back up the truck" and short some more.  As noted above, we don’t go 100% bearish – we went long on gasoline futures at $2.50 just yesterday (also a standard bet into the weekend) and we even went long on oil off the $94 line yesterday afternoon. If it goes below it again – we’ll get out but $94 is approaching oversold territory in the short-term. 

USO WEEKLYSCO (ultra-short oil) was one of our big winners in the White Christmas Portfolio as that was a trade we were confident enough to make with conviction.  Notice in the WCP list above we stick to a relatively small subset of things we can get in and out of quickly and that we follow closely like the indexes, commodities and the Financals – if you want to be a day-trader, you should stick to a few things you know AND UNDERSTAND very well rather than chasing after whatever stock some idiot on TV tells you to BUYBUYBUY or SELLSELLSELL.  

I wasn’t sure whether we should buy or sell into the weekend as I reviewed our White Christmas this morning as the weekends are so dangerous with Europe still in flux.  We’ve been playing "Cashy and Cautious" for most of the month and our net cash in play in the WCP is just $2,585 (using margin, of course) with 94% of our cash on the sidelines in our short-term virtual portfolio. 

My gut feeling was even 6% was too much but we get bored when we’re in all cash so I guess we’ll trade something – but I’m not enthusiastic about it, that’s for sure!  Hopefully we get on firmer footing over the weekend and Santa can really go to town but we still have $99Bn worth of TBills to peddle next week and those are not going to move very well if the markets are racing high so – No Virginia, there may not be a Santa Clause this year.

Have a great weekend, 

- Phil


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  1. A doomy look at cooper:

    Conclusion: copper prices will fall sharply, and that, says Hunt, is almost a given. 

  2.  Phil/RIMM
    Hi I sold 10 RIMM jan 27.5 puts ($4) as part of the original income portfolio trade .  Before I had the chance to roll to 2013, I was assigned 1000 shares of RIMM yesterday.  What do you think I should do?  Sell for a loss?  Hold it and sell some covered calls?  What’s the best move?

  3. The news at lunch time here in France was that the agency in charge of statistics was predicting 2 quarters of negative growth (a recession) which will of course put some more pressure on the government to close its books! Have no fear though, more austerity measures will ensure that the deficit is lowered! It worked so well in the past… Unreal! 

  4. “Vive la Résistance!” Whats the mode like there stj? Any complaints about inflation/weaker Euro?

  5. Phil—I have the WFR problem also—what do you think of taking the loss and switching to  TASR or HOV  I? will appreciate your thoughts and suggestions on spreads?

  6. Kustomz / France – I’m guessing the complaints of the average person are about jobs (not having them) and benefits (realized and unrealized cuts).   Inflation and Euro value are of greater concern to the investor class / wealthy.  But let’s hear what stjean has to say.

  7. France / kustomz – Tough to tell… I went to a shopping center this morning and there was a lot of people out shopping despite the dreadful weather -rain and very high wind. I guess being the Xmas season it’s expected. But based on conversation that I have had, no one seems very happy. The weaker euro as far as I can tell is not a big topic yet, except for the impact it has on the price of gas –  about $7.5 per gallon!

  8. Thanks JC

    stj, thanks for the info. Looks like Europe and the ECB is in a very tough spot. Im sure they would love to ease but commodity prices need to come way down and in that case the $ would have to rise much higher from current levels. Bernankes worst efn nightmare!  I hope your family is well and you all have have a great holiday!!

  9. Oil lines

    R3 – 98.51
    R2 – 97.25
    R1 – 95.83
    PP – 94.57
    S1 – 93.15
    S2 – 91.89
    S3 – 90.47

    Yesterday’s high and low – 95.99 / 93.31

    Breakout lines – 100.32 / 86.29 

  10. hi phil — what do you think of RIMM at this point ditch them or they are very chep now, I still have 20 March 22.5 short put --ouch at this point

  11. Friday 12-16-2011
    Dr. John L. Faessel
    Commentary and Insights
    Quote of the day
    “Broke nations are being bailed out by a broke transnational organization [IMF] bankrolled by a broke superpower in order to save a broke currency.”
    ~ MARK STEYN ~
    The Markets Drivers > EuroLand Bond Yields
    Italy 10-year (gross) bond yield – 6.43% off from 7.26% on 11-24
    Spanish 10-year (generic) bond yield – 5.11% - off from 6.7% on 11/24
    Bullish Patterns “still” intact – but good grief!
    Danger lurks. Put /call volume ratios jump. Key metrics are caving. Gold, copper and crude oil tumble but the Euro holds. Our stock market puts in an inside day on below average and lower volume.
    The fact that the key metrics have come loose from their patterns suggests that major players are more worried about the European mess. Cash is being raised. Big picture domestic sentiment is terrible and it’s worse in Europe. Is there any hope from those Brussels bozos?  And our administration refuses to harvest our immense natural resources. The hang-up re the pipeline from Canada to the USA says it all. Lunatics control to show.
    The Federal Reserve reports foreign banks tapped the dollar swap facility for $52.4billion of loans in the week ended December 14, substantially more than the $2.3billion borrowed the previous week.
    Ruling the MARKET – Again: “From a technical perspective the key declining Tops line resistance at (SPX) 1317ish that comes off last July’s top tick will be the overriding wall of resistance.”
    Correspondingly the lower trend line off “the” lows of 10/4 and 11/28 is at (SPX) 1183.
    The (SPX) closed yesterday at 1215
    Short term price support in the S&P 500 (SPX) is at 1214
    Channel support is at 1219
    Key (3-day) price support is at 1209
    Price support at 11/28 lows is 1158
    Price support at the August 8th lows is at 1101.
    Support at the October 4th lows is at 1074.
    50-day moving average resistance is at 1227
    Short term price resistance is at S&P 500 (SPX) 1225 then at 1245
    Channel resistance is at 1226
    The 200-day moving average resistance is at 1261.
    Thursday’s key indicators and metrics:
    ·     McClellan Oscillator is Neutral @ minus 101
    ·     McClellan was OVERSOLD @ minus 162 yesterday  
    ·     VIX – 25.11

  12. Thanks kustomz!

    Another quick thing about France –  I don’t know about inflation, but prices everywhere always shock me. It seems so expensive compared to what we pay in the US. I know that it’s hard for people like my parents who basically live on the small retirement benefits!  

  13. Phil--99B in Tbills? Are you expexting another dip in rates so Pharm’s 125-130 TLT becomes a possibility?

  14. PP for today:

  15. stjean
    I read your story about copper. He may very well be right in the long run when and if things ever stabilize. The question is how will we stabilize the world economies. If it is through inflation commodities will surge again at least in the short run. What say you?


    The FAS puts are looking good for now.


  18. HCBK surging after announcing they will extinguish $4.3billion in debt and take a 4Q loss. 
    "We’re doing just what our customers are doing: paying down expensive debt in this prolonged period of depressed market interest rates," said Ronald E. Hermance , Chairman and Chief Executive Officer of Hudson City.  "Calls of securities in our investment portfolio and mortgage pre-payments due to low interest rates have provided us with excess liquidity.  The interest rate environment and regulatory climate have limited the options for redeploying this excess liquidity.  We now believe that a more normal interest rate environment will not return before 2013.  After reviewing various options to redeploy our excess cash position, we determined that the extinguishment of higher-cost debt was the best use of that cash.  This is a market-driven action on our part."
    Mr. Hermance continued, "The extinguishment of this debt had no significant effect on our regulatory capital ratios since we reduced the size of our balance sheet proportionately with the charge to earnings.  More importantly, we expect this action will increase our net interest margin by as much as 20 basis points in the first quarter of 2012 as compared to the third quarter of 2011.  In addition, we now have greater balance sheet flexibility when growth becomes more profitable.  We believe that our ability to withstand the current ‘low for long’ interest rate environment is a testament to the strength and quality of our balance sheet.  We remain committed to guiding Hudson City through the current business environment and preparing for the eventual improvement in market conditions."


    TNA puts are also good, but the 43 put are right ATM now!

  20. FAS Strangle Experiment – No open position right now. I’ll wait until Monday to open a new strangle as weekends have been hard to trade! Good week in any case! I guess it’s the advantage of a market neutral strategy…

  21.  AAPL 50k    I’m going to start putting some trades into the portfolio which do not require so much micromanagement, by popular demand.   I’ve bought this morning 10 contracts bull call spread July 12  390/415 for 10.60 each.   This spread will yield 135 %  if AAPL is over 415 in July.   It has a high probability of success, and will require no management over the next six months.   

  22. Cooper / dclark – True enough, inflation could very well mean that commodities will rise in prices. But his argument is that prices are distorted by the speculation led by all the Ibanks. So who knows where the "real" price stands now and where inflation would take them… Who knows if speculation will continue as is or if governments will take action. For me, too many factors to make long time bets! 

  23. stjeanluc,
    nice to get an informed insight  from an on the ground source
    merci et joyeux noel.

  24. are you surprised that TLT isn’t down today??

  25. AAPL / Iflan – Did you check that my status is correct in the portfolio?

    Also, please provide me with the prices for each leg in the new July BCS when you get a chance. Thanks. 

  26. Phil,
    I am agreeing with your observations on RIMM, I wanted your 2 cents on buying the March12/14 BCS selling the Mar13 puts for a credit of .49?  Seems like the grim outlook coupled with their latest beat will make investors a bit more enthusiastic as the beatdown fades and the reality that this company has substantial revenues despite its current woes. TIA

  27. Good morning! 

    Very simple today – down is death – clear enough?  

    We DO NOT want to make that "M" pattern so we MUST break back over the nearest support lines (resistance lines actually) or those 50 dma’s start bending down and the 200 dmas are already dipping and, once they go down – then we’re gonna party like it’s 1999 (or 2000 really, or 2008..). 

    The Dollar is still threatening at 81 but the markets are getting used to it so we won’t worry unless they get over 81.20 today.  Oil is NOT getting used to it though and laying around at $94.20 on the new contracts (/CLG2) where I do like them over $94 still.  

    I don’t like oil enough to like USO but I’m done betting against them for now but note the very bad technical picture if they don’t pop back over $95 by Monday 

    Meanwhile, CPI was double expectations at the core (up 0.2%) but, oddly enough, when the CPI is worse than expected in the core, they ignore it.  When the CPI has a bad headline number but a softer core – they tell you the core is the only thing that matters…

    Today is a quad witching day with pretty much everything expiring.  Index options expire around 11 so a lot of posturing and a lot of violent moves throughout the day.  These are generally bad days to trade but we do have our WCP positions to clean up (see update) and my very quick review is:  

    • GNW – Fine
    • SCO – Expiring worthless
    • FAS short $40s – expiring worthless
    • TNA $41 calls – Oh my god I can’t believe we got out even at $1.50!  
    • JPM – HOPEFULLY expiring worthless ($32 puts).  If not, rolling to whatever is the same next week ($31s currently .30) 
    • FAS Jan $67/72 bull spread – We’ll see on Monday
    • FCX Feb $33 puts – Monday
    • FAS Dec $61 short calls – should expire worthless, now .30 so stop at .50.  
    • TLT Dec $119 short calls – Now 5 at $2.47, we can roll to 10 short next week $121 calls at $1.40 each for a small credit
    • TLT 12/25 $120/119 bear put spread – I’m for spending .90 to roll up to the $122 puts (the $120s) and buy back the $119 puts for .30.  
    • TNA Dec $40/41 bull call spread – Should give us our $1 and, if TNA falls and the $40 puts go below $1.50, let’s cash those and leave the open short $41s – hopefully that won’t happen. 

    There, that wasn’t so bad.  Europe is flat overall and I expected us to do the same but, so far, we’re up almost a point with RUT and Transports leading us.  Volume was very good, as expected on options EOQ but that was the morning – we’ll see how we do as the EU moves into their weekend.  

    Don’t forget – 2 Fed Bears with Evans put off until 4:15 so he can slam the weekend mood!   Dudley is a huge dove but he’s at a hearing, not making a speech.  

    Friday’s economic calendar:

    8:30 Consumer Price Index

    8:30 Real Earnings

    9:30 Hearing: "The Euro Crisis and the U.S. Economy" (Dudley)

    12:00 PM Fed’s Fisher: Economic Outlook

    4:15 PM Fed’s Evans: "Econometric Tools for Policy Making" (.pdf)

    At the open: Dow +0.59% to 11939. S&P +0.65% to 1224. Nasdaq -0.28% to 2227.

    Treasurys: 30-year +0.26%. 10-yr +0.15%. 5-yr +0.07%.

    Commodities: Crude -0.2% to $93.69. Gold +0.73% to $1588.65.

    Currencies: Euro +0.21% vs. dollar. Yen -0.03%. Pound -0.11%.

    10:00 AM On the hour: Dow +0.55%. 10-yr +0.19%. Euro +0.09%vs. dollar. Crude +0.17% to $94.03. Gold +0.97% to $1592.45.

    Market preview: S&P futures +0.5%, following European stocks higher despite ratings downgrades for several major banks. November CPI came in flat, in line with expectations. Also helping were reports Congress may have forged a plan to avoid a government shutdown. Tech stocks are in focus, with RIMM -11% on a weak forecast and social-game company Zynga set to start trading

    The march to slavery continues:  November Real Earnings: -0.1 for real average hourly earnings M/M, -1.5% Y/Y. Real avg. weekly earnings -0.1% M/M. Avg. workweek +0.3%.

    Nov. Consumer Price Index: flat vs. +0.1% expected, -0.1% in October. Core CPI +0.2% vs. +0.1% expected, +0.1% in October.

    The House is expected to vote today on a tentative deal reached yesterday that would fund several federal agencies through the end of September and avoid a government shutdown this weekend. Separately, lawmakers continue to work on a deal to extend a payroll tax cut and long-term unemployment benefits.

    After 18 years of negotiations, Russia joins the WTO today, a move economists estimate will add 3% to its economy in the medium-term and 11% in the long-term. 

    Bespoke’s review of analyst ratings for S&P 500 companies finds 53% of all ratings are Buys, and just 6.1% are Sells. The data begs the question of whether investors should at least sometimes treat Neutral ratings as the equivalent of Sells – especially for a company like Groupon (GRPN), which fell after 6 IPO underwritersissued Neutral ratings, but none dared issue a Sell. 

    Investors are starting to lose faith in Bill Gross, and pulled ~$500M from Pimco’s Total Return Fund in November. That brings the fund’s cash outflow over the last 12 months to $17B, perhaps a drop in the bucket considering there’s $241B AUM, but certainly reflective of the fund’s year-long underperformance. 

    Will the ECB be carrying out QE on the sly with an ultra-long 3-year financing operation next week? One trader seems to think so, describing the manoeuvre as a "kind of like a QE backdoor." For traders, "It’s like a no-brainer – you take the money at 1% and you buy Spain at 6-7%. That keeps supporting the periphery."

    Spanish 10-year bond yields are off another 26 bps following yesterday’s strong debt auction, and even with the overhanging threat of a mass S&P downgrade for the EU. Italian 10 year yields are down 17 bps. Banks are looking forward to Tuesday’s loan tenders from the ECB, where they will be able to pledge their sovereign holdings as collateral for low interest 3 year loans.

    Last week’s moves by the ECB to widen what it would accept as collateral as well to make 3 year loans are looking like the real deal. On top of a wildly oversubscribed Spanish debt auctionyesterday, French yields are diving, 10 year OATS falling 9 bps to 2.92%, below 3% for the 1st time in 2 months. 

    EU Commissioner Olli Rehn breaks off bailout talks with Hungary over concerns the government will continue to push legislation through parliament that could undermine the independence of the central bank.

    Using ECB money to buy government debt "wouldn’t be logical," says the CEO of Unicredit, illustrating a variant view to the perception banks will use the new measures to play the carry trade. "I can’t think for a moment why anyone would want to (do that)," says another banker, "Everyone is trying to protect capital. It would be digging a deeper hole for yourself." 

    Irish Q3 GDP falls 1.9% against expectations for just a 0.5% decline, moving the country from among the EU’s best economic performers to the worst, save Greece. Q2 GDP is revised down to 1.4% growth from 1.6%. GNP – considered by some a better indicator because it strips out volatile earnings of multinationals – dives 2.2% vs. estimates of coming in flat.

    The yuan posts its biggest gain in 2 months, the PBOC setting the rate at ¥6.3352 and pledging stability for the currency’s value. Some market watchers speculate Beiijing could be keen to prop the value of the yuan now that speculative flows have reversed and capital is leaving the country.

    "Two mega developments will impact world copper consumption: the level of global business activity and substitution," writes Simon Hunt, a veteran watcher of the market. With neither factor boding well for the metal, he says, all that’s propping prices is copper’s financialization. This too will end; "copper prices will fall sharply, and that is almost a given." 

  28. TNA 40/41 Bull Call Spread – Well, alrighty.  Look at that puppy rock.  I’ll be cashing momentarily, PD.  Thanks!  (Who knows, maybe I missed an adjustment? Hope not.  But in any case, I "patiently" held this into today – limited downside etc – we were approaching 41 yesterday, etc. – Am I still in the dog house?)

  29. Research In Motion (RIMM -11.2%) falls to levels not seen since early 2004, thanks to its weak FQ4 guidance (III) and anunderwhelming earnings CC. Remarks about RIM’s QNX-based BlackBerrys being delayed until late 2012 stunned even many used to expecting the worst. In addition, RIM’s plans to invest $100M in advertising and price cuts to promote BlackBerry 7 devices are beingmet with skepticism. (transcript)

  30. Joyeux Noel to you too Roro!

    I plan on speaking to as many people as possible to get a different view… So far though, what I hear confirms the polls that I am reading – Sarkozy is not well liked! His big election slogan in 2007 was "Work more to make more money". The latest stats show that incomes are lower now… and people can feel it. That’s never good! 

  31. Hmmm.   My comment looks like it wound up at the tail end of Phil’s post.   Maybe that portends an ass-whuppin’?

  32. AAPL – You can’t tell from today’s action but my Fidelity alert says "There is a bearish pennant forming on the daily chart that will become active only if price breaks below $379. Downside potential for the pattern, if it becomes active and completes, is to the $365 area. The 200-day moving average was last at $366.36. The pattern would be void on a move above $384."

  33. stjean
    We don’t disagree long term. In the mean time, it may take quite awhile for his long term premise to come true for whatever reason. Disclosure: I hold a small amount of sold $33 Feb. puts on FCX.  Hope the weather improves in France. What state in the US has weather most similar to the weather in France? Thanks for the discourse.

  34. Phil,
    Just wanted to let you know I had a terrific start to the first week at PSW and that was after making at least several trading mistakes from position sizing to early exits to not taking a no brainer OIL short, electricity or not since blind trades can work especially with appropriate stops.
    Back to cash to sit and wait patiently.
    Best regards, and thank you very much for your sage analysis!

  35. Rule #1 is: ALWAYS sell into the initial excitement

    Rule #2 is: When in doubt, sell half

    That’s why I just titled the morning Alert "Take the Money and Run".  

    Oil hit $94.60 and stopped out at $94.50 but can be re-entered on a cross back over.   At this point, they’ll have to consolidate a bit at every major cross as there are so many burned bulls just trying to fix their margin issues.  

    Copper/StJ – Aside from the fact that 30% of Global demand was China stockpiling, if China now stops with all the construction – copper is in BIG TROUBLE.  

    RIMM/Kyw – I feel about RIMM the way I do about WFR (see end of yesterday’s comments.).  It’s too annoying to put more money into but too good to walk away from at this ridiculous price so I’d take $13,500 off the table ($9,500 loss, right?) and pick up 20 2013 $5/13 bull call spread at $5.35 ($10,700) and sell 10 2014 $10 puts for $2.30 ($2,300) for net $7,400 with an upside potential of $16,000 and that gets most of your money back if RIMM just holds $13 through next Jan.  That way, you have $6,100 on the side and your worst case is having to buy 1,000 shares of RIMM for $10 ($10,000) so you risk another $3,900 to get even at a much lower strike.  If RIMM crosses below $13, you can buy something like the June $17 puts ($4.70) as a momentum play to cover as well.  

    Did I say take the money and run?  Oh yes, I did but not useful if I don’t submit the comment.  Dollar holding 80.80 is the reason I’m worried, again.  

  36. Money – I’m taking!  I’m running!

  37. Weather / dclark – Tough to say as weather varies greatly from region to region here… Southern France reminds me of S. California for example. But in my region it might be more like the Northwest of the US except a small area near Switzerland where my dad was born that is nicknamed the "Small Siberia" where they hold the record for lowest temperature in France at -42 celsius (before windchill factor). And usually plenty of snow! My dad recalls digging snow tunnels between houses!

  38.  stj…..Spot on..       July 390  37.08,      415     26.48   Thanks.  

  39. stj, do you know anyone in France that trades if so are they bullish/bearish, one more…is everyone using an IPhone :-)

  40. stjean
    Your country is on my "bucket list". I’m sure it is a beautiful country and I can’t wait to see it. I did not know about the varied nature of the weather. I heard the cuisine is pretty good there too! :)

  41. Phil
    I really like my position in HCBK (thank you). I want to increase my holdings, but would prefer a little advice from you before doing so.

  42. France / Kustomz – I have not spoken to anyone yet who trades (there is no huge pool of traders here like in the US). I have seen a lot of iPhones, but I doubt that it’s the majority of phones… They are expensive after all!

  43. Phil--/RB still a go at 2.50

  44.  dclarck – We should make the next PSW gathering in Paris!

    BTW, you mentioned FCX in a previous email and they have been weak since last August but have bottomed around 29 in October. But you might be good until February… And you can always roll! February 33 roll nicely to Jan 13 20 so plenty of room. And whatever is in between! 

  45.  Phil, on RIMM how about the below
    Jan 13 bull Call 15/25 funded by selling Jan 13 Put 10 , for 0.36?
    At 10$ Nomura says RIMM is prime target for takeover.  Whats your POV?

  46. RIMM
    Don’t write off Blackberry yet. Yesterday I was in a Dominican public taxi, a Toyota Corolla with three adults including the driver in the front and four adult passengers in the rear seat. In spite of the somewhat cramped conditions two of the passengers were busy Blackberry messaging the whole journey. The attractive young woman next to me submitted multiple requests to boyfriends in the US for Christmas presents including a fridge and a TV and swore undying fidelity to all of them. She also told me that she loved her Blackberry, a gift from an ex.
    So do not underestimate the role of the Blackberry in international trade and commerce and its effect on sales of refridgerators and TVs.

  47. stjean
    Not sure we would get anything done other than picking up a few pounds for the ride home! :)

  48. US and European markets are moving in opposite directions today. very rare. work of the witches I guess.

  49. stjean
    I am hoping to exit in Feb. with something positive. I did not plan on holding FCX long term. Thanks for the suggestion.

  50. Jmm, I think I met that girl in Thailand… he must have offices there too.  :-)

  51. How George Soros ended up with MF Global’s client money

  52. Italys 10y creeping back up over 7%, in this type of market it doesn’t matter till it matters…like awoken by a train horn thats strapped to your head. HAHAHA just being dramatic…carry on.

    700 Euro for an IPhone, yea thats a months salary for some people.

  53. A note on trading the BCS and possible takeover, what is the added risk of say RIMM being bought while having a BCS on? is there more risk, If so how?

  54. Viva L’austerity!

    WFR/Savi – See end of yesterday comments.  I wouldn’t try to "fix" a loss on WFR by moving into another speculative stock.  What’s wrong with selling puts on T of PFE or MO or CHK…  ?  When you are behind, just think about what you can do CONSERVATIVELY – to get even.  

    Shopping/StJ – Yes, I intend to go to NYC this weekend to scope out the action.  Last weekend before Christmas better be busy.  I don’t know about you but I went to Mass at Notre Dame one Christmas – it was fantastic.  

    RIMM/Gucci – See above and yesterday’s EOD comments.  March $22.50 puts are $9.20 and you can roll them to 2x the 2014 $15 puts at $5.10 for a $1 credit and let’s say you had $2 for the original puts so $1.50 net per new short put is net $13.50 entry on 4,000.   So not too far off track with RIMM at $13.50 now and you can pick up the  $5 puts for .50 and you limit your entire downside to $10, which is where you are now except this would be 2x.  If you don’t want to go 2x, you could just roll to 1x the 2014 $15 puts ($5.10) and then sell the $15 calls for $3.80 so $8.90 sold there and you end up with .30 less than you collected on the puts at a much lower strike and, if RIMM hits $15, you buy to cover and you are in a buy write for $15 less what you collected (assume $13.50/14.25).  The danger there is RIMM getting bought for $20 but you’re down $7.50ish now so not worse for you until $22.50.  

    Broke to the 4th power/Rustle – That about sums it up but, as long as we’re all willing to extend and pretend – who’s going to blow the whistle?  

    Dollar fell below 78.80 on a sharp dip, now trying to get back over but still hope for the bulls if it fails.  

  55. 630 for GOOG they are on a mission

  56. gmarts — Did you give her that blackberry? :)

  57. Anyone who is interested in FX trades: I guess the swiss national bank is out of ammunition pretty soon. I guess they own an empire of Euros already and their balance sheet will burst pretty soon. It was a fun game to go long on EUR/CHF above 1.24 and out somewhat below that price. but during the last two days the patterns have changed and it might be a good idea to keep that long position now.

  58. TLT flying???

  59. I meant long on CHF and of course short on EUR/CHF, sorry.

  60. TBills/Jabob – No, I think 125 is the upper limit and can’t be held (sub 2% on the 10-year is below core CPI).  Anyway, the Fed is backstopping the short-term so they don’t need to crash the market to sell out.  

    Dollar back over – that was fast!  TLT zoomed up at the same time so head fake – oil falling below $94 now.  

    10 QQQ TODAY $56 puts at .57 in WCP have very little premium, stop at .45.  

  61. Christmas Mass / Phil – Always a crowd pleaser… A great uncle of mine is a monk in a trappist monestary and listening to all the monks singing during Xmas mass was always touching even for an avowed agnostic… 

  62. IWM Money / Phil – I think that it’s the only thing to watch today. The TNA 43 puts are in play now and might need to be rolled later today if we keep getting weaker.

  63. stjeanluc / monk — Ooohhh, a Trappist Dubbel or Trippel would be a great way to close the week.  Going to have to hit the bottle shop this afternoon!

  64. I started writing Jan calls on the remaining position of my long SCO for Jan.  Got a very nice premium for the 44′s.  Looking to possibly go long UCO into a hopeful QE3, just biding my time for now.

  65. Rainman – Indeed, unfortunately, my uncle’s place (about 10 minutes from where I am now) doesn’t do beers! 

  66. Rain, no phone from me, just a couple of ladydrinks… "me too old fall in love" . Favorite line in Thailand is " Water buffalo die on farm, mom no have money, you help!"

  67. Good thoughts from Barry on "job creators"

    Entrepreneurs create new ways of doing things. They see the world in a slightly different light, and that allows all kinds of new approaches and new business models to bloom. When people discuss “Job creators,” they are really talking about the more complex subject of creative destruction.

    The business of the future is to be dangerous to the business of the present . . . 

  68. gmarts / water buffalo — reminds me of fletch clip:

  69.  Does anyone have a preferred app/site/software for statistical backtesting? Thanks… 

  70. It ‘s always tough to listen to these hedge fund guys as you never know what position they have, but this guy says that banks in Europe are insolvent. From Barry’s site.

    “The problem with Europe is that almost every part of it has gone wrong now. The banks are undercapitalized…If banks were hedge funds, and you mark them to market properly, I would say that probably most of them are insolvent. [Most of the banks in Europe are insolvent right now] if they were marked like I am at a hedge fund, yes.” 

    He does mention that he holds no position though!

  71. Phil TLT its BS not a flight to safety the Feds pushing yields lowah…$ eh

    Rumors 2 days and running someone or more than one gets DG today after Londons close..if not maybe EUR gets afternoon bullish story and they rip heads off. I’ve got mine tucked

  72. dclark / stj / FCX — I’ve owned FCX @ $50.79 since Feb and am still up 21%!

  73. Rain, nice  :-)    So THAT’S the guy responsible for ll those requests lol. FWIW, young wide eyed guys in Thailand are often referred to by the local girls as "ATM’s". Favorites include northern Europeans, and young Aussie blokes.

  74. How George Soros ended up with MF Global’s client money
    1. Jon Corzine figured out a brilliant trade in the European debt market.

    2. Corzine leveraged the trade to the hilt. He had the trade on with uber leverage. In fact, MF Global ended up with a $6.3 billion trade.

    3. The Greek and Italian bonds tanked (rates went higher) over concern about a possible default.

    4. MF Global illegally took segregated customer funds out of J.P. Morgan to meet margin calls in an attempt to survive the trade. It was the legislated responsibility of the U.S. government to protect this from happening.

    5. MF Global’s clients (without their knowledge or permission and as an illegal manuever) became the default counterparty to MF Global’s trade. This is a fact Congress has not yet figured out.

    6. MF Global puked about $1.5 billion of the trade, but it filed for bankruptcy when it was finally unable to meet further margin calls.

    7. KPMG peddled perhaps half (or more) of the trade to George Soros. The actual amount reported was $2 billion, but at a discount.

    Final point #8: MF Global’s segregated account holders became the default counterparty to Soros’ trade.

  75. And that is the difference between Soros and Corzine.  One waits for  great opportunities in weakness and the other is clueless about the market unless his GS buddies are fixing it.

  76. rain
    Very large premiums on FCX especially 2013. What was your original position?

  77. gmarts, when it comes to Thai girls ATM stands for Ass To Mouth.  I have no idea what they are referring to, but their meaning is simply irrelevant.  

  78. …learning so much about Thailand today! What a bonus to all new members. :)

  79.  AAPL portfolio.      Phil’s suggestionQQQ 56 puts above are good downside protection for AAPL holdings.  Ten for .78.   Stop at .45

  80. Just sold a TZA position I got into early this morning and someone payed be .02 more than I was asking! Makes want to buy it back..

  81. Lapper, TMI

  82.  Phil,
      I’m not too keen on the future prospects for Best Buy, so I’m wondering what you’re opinion on sold Jan 12 $29 puts (rolled out twice from original $37s) would be?

  83. MF Global — The sickening part of the whole MF Global debacle is that the funds are frozen and can’t be traded. I think the government should be bailing out the clients to save face. This hedge fund shut down because of the debacle and being afraid she couldn’t protect her client’s money: Introduction of her letter to clients:
    It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.
    The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

  84. Thailand, shame what happens their. I know talking about here is just for a laugh but, its disgusting revolting and inhuman what they do to children…personally I would castrate every fkr that goes there for boom boom. Sorry but its reality.

  85. QQQ – Thanks, PD.  Actually noted that in time – bought a little higher than ur entry – but 30% gain already.

  86. Oil took a big dive to $93.30, maybe last minute rollover selling as Europe closed – hard to say. Tempting but, at this point, maybe just give it a pass.  

    My computer just crashed so I’m super annoyed.  Not the computer but Chrome.  I lost everything I was writing, which was a lot so forgive very short answers and feel free to re-ask if I miss or am unclear.  

    QQQ puts hit .85 and pure greed not to stop at .80 in WCP (2,570+ on Nas).  Should be a .10 trailing stop once we clear .90

    HCBK – About time.  Their problem is they have too much money.  

    Wow, I lost the Money plays?  That was ages ago!  

    FAS Money/StJ – Not worth taking a chance at .08 on the short $58s – it could happen.  We can sell 2 next week $58 puts for $1.80 and 1 next week $62 call for $1.60 (we are supposed to be selling calls, right?) as the longer puts seem pretty safe. 

    AA Money/StJ – Yawn until we get back to $10.  

    IWM Money/StJ – I’m pissed about this because I had said take money and run on $43 put, now .72 (was .30).  We’re not dead yet and I’ll assume that little dip was just the EU closing and the Futures options rolling over so let’s sell another Jan $39 put at $3.30 and also a Jan $46 call at $3 for another $630 of premium collected.  If the $43 puts hit the money at the close, we can roll them (if over .25) to Jan $35 puts (currently $2) and sell another call (because we should be more nervous).  

  87. dclark — on 2/22 bought @ $50.79 and sold the April 50c’s and 45p’s for $5.09 been rolling ever since.

  88. I’ll be surprised if they try and save this..


  90. Phil
    I really like my position in HCBK (thank you). I want to increase my holdings, but would prefer a little advice from you before doing so. ……..If your computer will cooperate with you!

  91.  QQQs above are now over 1.00.    Stop placed at .80 now so there can be no loss on the trade.

  92. Phil:
    Great call on the QQQ trade!

  93. LMFAO sp cuts Spains Canary Islands hahahhaa..good Lord

  94. Whoo eee! Head rush from the elevator going free fall!

  95. SPY plunging almost exactly to the bottoms of the phantom candles from yesterday 1600-1700 time zone. Does anybody have a solid explanation for this phenomenon? It seems to appear with some frequency.

  96. FDX is/was up 13% in 2 days, I’d say that accounts for almost all of the Transportss outperformance so maybe we should ignore that and discount a good bit of this rally.  Fed Ex is to the Transports what AAPL is to the Nasdaq – a disproportionate influence.  I don’t complain about FDX because they are generally more closely correlated to the other Transports but to think AAPL’s performance has anything to do with other 4-letter stocks is just silly.  

    So much for needing a stop on the Qs!  

    Oil down to $93.17 – did not think it would fall apart this hard and it probably isn’t, this is probably just a BS spike down.  

    Dollar back to 85.85.

    TLT/Jabob – Not when it’s coming into the weekend and the Secretary to the Undersecretary of Agriculture in Estonia might say something to freak people out in Europe.  

    RIMM/Sage – I like the spread but what will you do if they have a triple analyst downgrade on Monday and they open at $11?  As long as you are comfortable with that – it’s a good trade. 

    TNA/NF – Something about counting chickens springs to mind…  I see .95 now for the spread and I’m in favor of taking that in the WCP (TNA $40/41 bull spread).  

    QQQ/WCP – The $56 puts are now $1.05 and I don’t expect more than $1.15 so I’d say let’s take this and run, we can always buy $55 puts (now .16) if they fail to hold $55.  

  97. QQQs – F me, PD, that was a sweet call!   Wish I could be online all the time.

  98. phantom candles/gmarts:  I always assumed it was because HFTs will quote-stuff (putting in and quickly withdrawing orders at microsecond speeds in order to manipulate markets and run stops/check for orders) and it shows where the GTC bids/offers are.

  99. FAS Money – I bought back this week 58 Puts as they were already back at $0.15.

    Sold 2 58 Puts for next week (now 1.96) and 1 62 Call (now 1.45).  


  101. Kinki, That’s about my take as well, It shows somebody where the real standing bid is…. Any other explanations?

  102. LLY – FWIW -  shares recently traded at $40.72, up $0.68, or 1.7%. They have traded in a 52-week range of $33.46 to $40.48. Volume today was 1,343,711 shares versus a 3-month average volume of 8,611,960 shares. The company’s trailing P/E is 9.74, while trailing earnings are $4.18 per share.  Buying April $40 puts (just a few).

  103. IWM Money – Selling 1 Jan 12 39 Put (now 3.45) and 1 Jan 12 46 Call (now 2.80) 

  104. By the way, my logic on the Qs is that, at $1.15, I would stop out at $1.05 anyway and we don’t KNOW it’s going to go to $1.15 so we risk losing a dime and it only cost .15 to buy the $55 puts so why not lock in the .48 profit on the first set and just get ready to switch horses if we have to?  

    Also, of course, I’m watching the news and the indexes and our levels etc and thinking the sell-off is overdone so I wasn’t that into riding them out anyway.  

    French weather – I don’t know about the French but I’m pissed when I go to London and it doesn’t rain.  That’s like going to a rain forest where it doesn’t rain – it’s SUPPOSED to rain – it’s part of the experience… 


    TBT Jan $19 puts can be sold for $1.45.  

  105.  Why Obama wiil win:  "How ignorance promotes democracy: "
    Excerpt: "One might expect groups with uninformed members to be particularly susceptible to tactical behavior by minority subpopulations. If that tactical behavior involved some sort of active proselytizing to accelerate conversion to the minority opinion, one would be right. But Couzin et al. show that when the tactical behavior involves intransigence, uninformed individuals have the opposite effect. Their presence allows the majority to wrest control back from a manipulative minority. In each of their models, this occurs because the uninformed individuals tend to adopt the opinions of those around them, amplifying the majority opinion and preventing erosion by an intransigent minority. In this way, adding uninformed individuals to a group can facilitate fair representation during the process of information integration."

  106.  AAPL portfolio:   Anyone who still owns the Dec 390/385 bull put spread should be out of it by now.  Exit price right now is less than 50 cents, which would give you a  + $1100 on the trade .   (I and others exited yesterday).  

  107. Phil
    Darn missed the QQQ trade by 5 minutes and you are already out.  Just a suggestion, have you ever thought about or maybe you have implemented in the past, setting up an AOL or MSN account so when you make a trade in the WCP or income portfolio you blast out the message to the member group real time.  Just a thought, as I have missed a few trades my mere minutes because I didn’t refresh the chatroom until too late.


  109. Pharm - I’m a little confused.  If ARIA is expected to drop to $10.40 on Tuesday, is opex (11 is max pain) the only reason it’s strong today?   In yesterday’s post you were expecting it to dump down to the offering price…

  110. Gingbaum
    You win some, you lose some. Sometime you can get better prices than the what Phil posts. It works both ways from what I see. He can’t do everything. Be great if he could!

  111. TNA Chickens – Come on, Big Daddy.  I do learn some as I go – two steps, one step, etc.  I got close to our max poss gain out of that spread earlier today.  Grazie.

  112. Thanks Roro, glad to have you on board!   

    Region/StJ – Near Lyon?   I have cousins there, spent a summer once.  


    HCBK/DC – I wouldn’t chase today’s move, let them settle down and we’ll see what Jan earnings look like. 

    IBM down $5 – that’s 40 Dow points right there!  

    XOM still positive despite big drop in oil lends credence to theory they are spiking people out of longs.  CVX holding $100 too, no change for them since oil was $100. .  

    (/RB)/Savi – I think we’d better wait for some kind of bottom signal at this point.  They failed $2.50 so no play until they’re over.  

    Paris/StJ – I like that idea!  Same trip for me as Vegas. 

    RIMM/Dpast – I like it.  I think they get taken out for near $20 if they don’t come back over $15 by next Q.  Shareholders should be fed up enough to take an offer by then.  Actually, with all the negative hammering on this stock – I wouldn’t be surprised if someone big isn’t accumulating them now.  

    89.95 – Brutal move by the Buck!  

    Oil $92.50!  

    QQQ TODAY $55 puts at .22 so 20 in WCP risks losing $240 if we stop at a dime.  

  113. /DX seeking highs of the day.

  114. Blackberrys/JMM – Whole different story in emerging markets where old tech is good tech.  That’s why I think it will take many years for RIMM to die – even if they can’t adapt.  

    Euro $1.3011, Pound $1.5483, Yen flying back to 77.80 from 77.60 bounce.  

    I’m not feeling it on the new Qs and they are still .22 and we don’t need them in the WCP so let’s just pay the trade fees and get out.  

  115. Region / Phil – Here is where I am now – roundabout. My daughter is in Lyon where her boyfriend lives!

  116.   something causing german sov cds to surge over last hour…+4.0% to 106.67 bps…most other euro cds flat to lower

  117. Short-term interest in the US since 1831. Last time we hit these lows was during WW2! Crisis time I guess!

  118. I would speculate that investors are not going to stay long over the weekend and take the chance that France, Britain and the Eurozone break ranks, tanking every risk asset on the planet.  

  119. let me be the first to say WHEEEEE

  120. Wouldn’t surprise me to see the dow up 50 today.  This is quadruple expiration, the ups and downs like this are pretty normal.

  121. SON OF A BITCH – Chrome crashed again!  

    Something must have changed in my computer somehow – this sucks!  I said such brilliant things too!  8)

  122. Hungary deal….which is no deal.  Do you think they would note that here in the US? NO!

    The European Union and the International Monetary Fund have broken off preliminary talks with Hungary on a financial aid package because of concerns about the government’s intentions to curtail the independence of the country’s central bank.

    A spokesman for EU Monetary Affairs Commissioner Olli Rehn said Friday that the EU decided to break off the talks "in close coordination with the IMF" after the government gave no indications it would change the central bank law, which is being debated in Parliament.

    Amadeu Altafaj Tardio says in a statement that the EU and the IMF wanted to discuss the law during formal negotiations with Hungary, expected to start in January.

    In a policy U-turn, Hungary said in November that it would seek new IMF-EU support.

  123. Chrome, used it once for a week..dont like unstable compared to FF

    N the saves just keep comin..

  124. Oh no, we lost the part where I said that the markets dropping just because Fitch put countries with 7% bond rates on credit watch was stupid – WE KNOW they are a credit risk you morons!  

    Sorry about that, I just realized I didn’t write it.  

    So bottom call here and all that. 

  125. Dear Phil, I am naked short 25 of the TLT today 121 calls.  TLT is 122.38.  Should I just buy back the calls for the loss or is there some other way out you would recommend?  Thank you! 

  126. Not witches Pentax, Fitches…

    Soros/Csaw – Eventually, he ends up with everyone’s money.  

    Bull calls/Sage – Its great when your company gets taken out, it squashes the premium and you can kill the trade ahead of schedule.  

    SNB/Pentax – I don’t know that they are out of ammo so much as the current tranche may be exhausted and they have to have a committee meeting to print another batch of fresh currency.  What do they have to lose.  The EU is 20x the size of the Swiss economy and their paper is weak so the Swiss can print as much as they want and trade it for the World’s second largest currency for the price of ink.  They can keep doing this, exchanging fresh paper for Euros – until the people holding the Euro finally decide to stop accepting Switzerland’s fresh paper and deflate the value of the Franc to the Euro – WHICH IS WHAT THEY WANT TO ACCOMPLISH!  Under what possible circumstances would they be motivated to stop?  Hell, we should buy a Greek island and create a currency and start exchanging it for Euros.  If it all goes well, maybe we can get a big loan from the EFSF too!  

  127. All the bears pray with me to the market Gods…O please pretty pretty please Market Gods send this market straight to hell… AMEN!!

  128. Monk rock/StJ – I love it.  Also love the service in Latin, makes it sound so much more official.  

  129. ISTA being courted…remember them?  AMGN CEO and CSO stepping down.  Big things coming for AMGN……The CSO was from MRK when he did not get the top spot at MRK, and he brought a ton of MRK people to the west coast.  AMGN tried real hard to be a pharma company, but it did not work out that way.  Should be interesting.


    VRTX – selling April $30 puts. 

  130. Kust – Next week…..not so much, but after the new year…. UR will be answered.

  131.  stj…..for the record…….AAPL port…….10  QQQ puts 56 Dec    bought  .78    sold   1.00     +  $220

  132. For an earnings play, The Oxen Group likes Bed, Bath, and Beyond. We like buying $65 calls and selling the 55/52.50 puts for January expiration. Nice 11% on put spread and calls can be really exciting on earnings.

  133. CHK Jan 22.5 puts are $1.1, and 22.42 is the 52wk low

  134. stjeanluc – Are you planning on rolling (or buying back) the Dec 11 43 Put (TNA)?

  135. I trust ya Pharm, I don’t have the patience :-(

    If we are trading technicals, as has been the case for the past few months then technically the charts are bearish as F (i focus mainly on /ES)
    Money bags just wont let’er go..and I know as soon as I throw the towel in..JAHROP

  136. Hi all,
    We were burglarized last week so I’ve been doing a lot of research on surveillance equipment to upgrade our system. 
    Check this out. 
    Big brother baby!!!

  137. Phil, tthanks for your feedback, i decided to go a bit more bullish (greedy?) and bought :
    RIMM Bull Call Jan13 $15/30 and sell Jan13 Put 10$ for a net of  $0.80c on the 15$ spread. 
    If this goes as planned, next Jan i will upgrade to Premium Membership:-)

  138. Phil/TLT,
    do we wait until the bond auctions on Mon/Tues for a bear put spread on TLT?

  139. Beer/StJ – I never touch the stuff in France, not when there are so many good reds to sample.  And my beloved Pineau des Charentes – very hard to get in the states…

    Water buffalo/Gmarts – And who can say no to a line like that?  

    Solvency/StJ – We know everyone is insolvent, that’s why we suspended mark to market.  If you have $1M and lend out $10M against homes with 20% deposits (less mostly) and those home fall more than 30% in value and you have to declare the current value of the home as your only asset – you are insolvent.  Does that sound like anything that may have happened perhaps – for the last 20 years?!?  BUT, those homes have already paid you quite a lot of money but it’s mainly been counted as interest and not applied to principal so a bank may have already collected $100,000 on a $200,000 mortgage and have a $40,000 deposit on the $240,000 house but, since they only amortized down about $30,000 after 6 years – the loan still shows an impairment to the bank of $170,000 so a home that drops 30% in that situation, is "under water" by $10,000 in mark to market, even though the bank has collected $100,000 and can sell the home for $160,000.  

    The fact that the bank has collected $100,000 over 6 years and has no reason to think they won’t get $400,000 more in the next 24 years.  The bears/sharks are trying to force a mark-down event at the bottom of the cycle so they can swoop in and buy distressed assets – it happens every time in the bottom of a cycle but this time it’s being done on a global scale as our "too big to fail" IBanks consolidate their control over every aspect of the market – from the Government down.  Banks are supposed to be like Buffett – if you write a $200,000 mortgage, you will collect $500,000 over 30 years at 6%.  The banks are not supposed to care about the value of the underlying home from day to day or year to year even, as long as the mortgagee is making their payments.  

    Tucked/Kustomz – Good position!  

    Euro and Pound finally made their goals with Dollar on the 80.90 line, oil flying up to $93.85 with 40 minutes to the close ($95 would be nice for our bull trade) but we need that Dollar to break lower.  

  140. Jan SCO bcs,
    Jan 37/40 in for $1.25, out for 1.80, for a net of 0.55 (44%),
    Jan 35/40 in for net 2.35, out for 3.50 for a net gain of $1.15 (49%).
    I actually caught myself thinking about an EDZ spread the other day "I am not seling yet because it is ONLY a 50% gain"
    Take The Money and Run

  141.  rainman: FCX
    I’m curious.  When you have a long term hold that you roll puts and calls on do you sell some naked as well?  what are your other long term favs?

  142.  Iflans expiration day aapl put play worked very well today with 380 pin

  143. @Canuck
    I’d be careful about doing an SCO play now, you might want to wait.  If we have a QE3 in Jan, you will see oil spike back up, and if word leaks out that there is a very good chance it will happen, oil will start moving much higher by 2nd week of Jan.

  144. Rustle/SCO -
    to clarify, I have closed those trades at a profit and am  98% in cash now – but thanks for the warning.
    seeing TLT up where it is with NO panic in the markets makes me nervous and am waiting for year end window dressing by fund mgrs who want some type of Christmas bonus.

  145.  And again I crashed but this time the comment went through.  I guess I have to reboot computer and hope that helps but I don’t want to give up my Chrome – I loves my Chrome like it was the family water buffalo!  

    Thailand/DC – I love the serendipitous aspect of getting lots of smart people together to chat every day.  Did you know Thailand means "Land of the Free"?  Yep, we stole it from them…

    BBY/Kevin – I just asked to have an installation done and they are backed up until Dec 29th – just saying…  You could always flip to WMT.  I see the Jan $29 puts are $5.90 and I guess you did not DD but 2 rolls from the $37s and the 2013 $25s are $5 so another 15% discount as you move forward.  I like BBY, they make money, their competition has been wiped out – they generate service revenues in a steam that’s not going away because most people can’t even lift one of those big TV’s, let along wall mount them and then forget doing all those wires.  Like IBM, they are growing the high-margin service revenue and they don’t care if they make money on the hardware – service and support are where the money is.  I’d short XRT and sell the March $53s for $2.30 as it’s super-unlikely that retail sales are phenomenal.  That lets you roll to the BBY June $25 puts at $3.60 so now you have premium sold on both sides and you just roll the loser if you have to but it’s very possible that Retail turns in a drab performance while BBY is a stand-out. 

    80.86 but not really perking up the markets yet.  I guess too many head-fakes by the Dollar to move the needle at this point.  

  146.  Hey Pharmboy, I know you’re sick, but do you have any calendar suggestions for us?

  147. Pineau des Charantes (or french grappa) you should have told me ia have a bunch of it in my cellar!!

  148.  clarification on aapl put:  I was referring to his suggestion to buy the same day put in anticipation of AAPL moving back toward the pin price.  Could have bought the 380 puts for .17 selling for .80 an hour or so later.  low risk craps roll as Phil would say

  149. GS to MS….

  150. Phil / DMND – I’m down about 50% on that June 20 put from earlier this week.  hold or roll down in light of the SEC investigation?  I have the 36/44 bcs too from your recommendation.  thanks. 
    HOV – I spoke to Goldman housing analyst yesterday who makes case HOV equity is zero.  are you still confident in that name?  She likes Beezer much better and one of my newsletters makes strong case for going long on Pulte. 

  151.  Thanks Lincoln…….I needed a bit of support on that play after Phil took me to the woodshed the other night on it.    :)     But I listen to him, as we all do.  

  152. Pharm LMAO!

  153. rdn – I was just looking a those, but I want to see the close first….stick or stick it….that is the question.  SPY 119w Ps/119q Ps are what I am watching on that side.  Calls are 123s, maybe 124s…..

  154. VIX is rising, TLT continues its ascent….

  155. Sex Tourism/Kustomz – The great shame of that is it discourages regular tourists from going there.  You can thank the US Navy for getting that culture going during the big one.  

    Nice NF! 

    HCBK/DC – I’d wait until Jan.  A bit chasey now and who knows what will happen over the next two weeks?  

    Thanks DC. 

    Phantom candles/Gmarts – Sure, they flush the stops to see where resistance is and, from that, they can construct a program to hit a realistic target the next day or later the same day.  If I know I can get the S&P down to 1,210 before I hit significant buyers – I can jam it up to 1,230 pre market (very cheap to do) and then dump all my positions at an average of 1,225, selling maybe 1/2 at the top and 1/3 at 1,220 and 1/3 at 1,215 and then I start buying right above the buyer I found yesterday, knowing I have support right below me.  VERY PROFITABLE!  

    All the time/NF – We usually do fliers like that on expiration day and people tend to only remember the ones that work but the point is to try to take things that have a 50/50 chance of paying where the upsides are occasionally a triple or better – that way, even if you are 50/50 – it works out well. 

  156. Here goes the NYMEX in 10 mins – time to paint!  

  157. Shopping report, big box strip mall parking lot packed, spent 30 minutes in the photo pickup line at Walgreens because of a woman who couldn’t get the roll of film out of her camera. Post office, no line, walked right up to the counter! Sold out of Christmas stamps. :(

  158. 50/50 Plays – It’s like pot odds risk/reward.  Sometimes you gotta call or bet into whats out there.  

  159. I think I may have hit on the greedy side yesterday when asking about getting out of the TNA 40/41 BCS, legged out and profited from both sides thanks to this mornings pop! Thanks for the idea…but may have been ill advised risk taking, an ex-CBOT guy I still have it in my blood!

  160. Phil/Thailand, "Free Land" actually I think they got it from us as it was the 50′s I believe they changed from Siam. I live there

  161.  80.86

    Sorry Ging, those systems are not good for day trading.   The point is to learn HOW to make the trades, not to worry about missing them.  Why was that an opportunity, what kind of trade did we make, what stops did we set, what was the catalyst.  We can’t have a site where 500 people make the same trade – maybe you can get away with it with stocks but not with options.  Better if you put in the time to LEARN how to identify opportunities and, like JRW or Ifaln – Find something you are comfortable specializing in that fits your own style and time-frame.  Then, before you know it – you’ll have your own trade ideas and you’ll become a contributor to the group!  


    TNA/StJ – Looks like the Dec $43 puts ($1.80) can roll to the Jan $35 puts ($2.30) and put .50 in our pocket in exchange for waiting a month.  

    80.83 – oil $93.90.  Not helping the indexes though.  

    You’re welcome NF! 

    Compte/StJ – Wow, you are practically Swiss yourself!  Do you ski out there?  

    Wow 80.80!  Oil flew up to $94.40 – congrats on that one!!   Indexes are starting to wake up as well..

  162. dclark41 – thanks for the comments, maybe an idea for the future as it would be very helpful for everyone. But I totally understand that Phil is very busy, I still don’t understand how he does everything he does all at once…quite the multitasker for sure…I should take lessons

  163. OK, SPYs are ready, as I think 122 is the pin.  On TOS, you can sell the 123w C & 119w P and buy the 123q C & 119q Ps for $1 debit, no more than $1…..

  164. Lincoln / FCX — The puts are always naked in the same amount as the covered calls but I’ll occasionally/rarely sell extra puts if there is a BS spike low. Long term favorites change with the landscape but for 2011 my protein/food picks did well: DF (Jan) +51%, SFD (Mar) +42% and WFM (Jan) 61%. I had TSN in there as well but cashed it out at some point for a return I don’t recall but am watching it for another entry. SNDK has been good this year as well (Dec ’10) +57%. These are all 1/4 or 1/8 positions that I’ll be sticking with this year (AFAIK). As I pass the 50% profit mark, I’ll get more aggressive on the puts (doesn’t mean you can’t still roll) selling closer to the money since you have built up some cushion to soften the blow of a forced put.
    Don’t get me wrong here, not all my trades do that well. I have full positions in dogs too that I’m trying to dig out (CCJ, FNSR, GLW, WFR). I’m find that the doubling down before being profitable has been pretty destructive (mentally and monetarily), especially if you end up with a full position 40% down and your opinion starts to change (GLW, WFR). @ 40% down you now need a 66% gain to recover and you often have to go pretty far out in time to sell calls for a pittance at break-even strikes and your locked in until new options appear in the chain which is often too late if the stock pops. I haven’t decided on a strategy to dig these out yet (I’ll sit on CCJ and FNSR. GLW and WFR I have problems with). GLW I might consider converting to some sort of BCS like Phil did for WFR and RIMM. More likely I’ll dump these two to offset gains for tax purposes (I hate thinking like that but hate the drag even more — it sucks to have your losers be full positions). I think in the future I’ll take my lumps before doubling down if doubling down means being in the red (or too close to it).

  165. Pharm / ARIA – What a nuthouse!  11 is max pain, and the offering is at 10.40 on Tuesday, so I’m confused – are you as surprised by today’s move as I am?

  166. Awful ,lot of capitulation on the board re: WFR & RIMM.  Same capitulation by analysts.  That either means we are bottoming or everyone is right and they are going BK. I can’t see either one going much lower than this but…..

  167. WCP – I played this portfolio in pieces.  Not always matching the number of contracts – and missing a trade or two.  And i spread the plays out over 4-5 diff ports – depending on where I had room to maneuver.  But it was really cool to watch and learn – and my gains were not insubstantial.  So, thanks, PD.   
    You’re right about "learning" rather than just catching the play (tho that’s nice too.)  These past two weeks – from learning more here – I managed to make smart(er) and more conservative income plays on weeklies I "know" (for better or worse – like NFLX.)  One huge lesson over the last few months is patience:  don’t make the weekly BCS or BPS if you can’t wait it out – as opposed to freaking out every hour of the day.  Tho the NFLX (and AMZN and AAPL trades this week) bear call spread opened ugly on rumor, as PD said:  absent QE3 this week, it was likely to finish under 77.50.  As it did and should have.  A month ago I would have overplayed it in many ways.
    Anyway, ur reco re an even more mellow AMZN play – possibly returning about 17% a month and only watching a short call,etc – got me thinking about creating my own form of WCP – but around $ I would put into 529 plans or already have in Coverdells.  Doing one for each of my two girls.  I like the idea of having a definable set of parameters and a certain kind of goal.   I can’t replicate all your quick hits, but it’d be fun and useful to watch $x grow into "one year of tuition, etc" – we’ll see.  More later.  Thanks.

  168.  Phil…..Tell me what you think of this.

  169. Might see a stick if /DX can get below 80.78

  170. NF**X – I thought you can’t buy stocks or options in 529 plans. In NY I have to go with the state mandated Vangaurd funds. Could you do that in Coverdells although the max we can put in is $2000. 
    I have been looking for a vehicle that will let me trade tax free in a education fund.

  171. @Nicha
    I’ve never seen a 529b plan that you can do anything but select the funds offered to you.

  172. Hey you found Jeff Macke, what no straitjacket?

    Depending on how much they can squeeze the EUR we may close 1210..Im hoping for 1190 but that seems like a stretch

  173.  no mr. stick this week???

  174.  rainman: thanks
    reading your first paragraph I was going to send you a check and ask you invest it for me… but alas you too are human ;)
    always useful to hear how others think.  as i progress I’m narrowing the range of my gains and losses, guess that’s what hedging means.

  175. Pharm – thx for the VRTX july 25 put idea.  

  176. Chrome/Kustomz – I was loving it until today.  I haven’t tried Firefox – I hate to change things but IE was such a nightmare I tried Chrome and have been using that since.  I’ve had this new computer for a couple of months now and never had an issue at all – been able to run all my stuff all day.  I think one of the 20-something tabs I have open must have some bad code or something… 

    TLT/Ron – No biggie, you can get them next week!  The $121s are $1.40 and the next week $122s are $1.34 so for .06 you move them up a buck – you’ll get them eventually – just always try to make a little progress and always know what your next roll target is and don’t let that roll get away from you.  

    Computer guy/Pak – Believe it or not, I used to be the director of network sales for Entre Computers, certified by Novell, MSFT, Banyan, SUN etc. to do all kinds of complicated crap.  I don’t blame the equipment unless it is the equipment but (and I also used to be a pretty good Foxbase programmer) these programs are like Chinese to me these days and that’s even more frustrating because, when Dos first came out, I knew what every operation was doing.  Now it’s generally – WTF???

    BBBY/David – You like them at $65 enough to spend .82 on the Jan (I assume) $65 calls that are 6% out of the money but then you are, is that selling the $55 puts for .60 and buying the $52.50s for .35 to help fund it?   What’s the point of that?  You’re risking $2.50 to get a quarter. I’d take the Feb $55/60 bull call spread at $3.60 and sell the $57.50s for $1.60 and not Jan because, if you are wrong, you will hold your premium better and all BBBY has to do is hold $60, now  $61.20 to give you a net $3 profit (150%).  On the downside, you can pull the spread at $2 or less if you are wrong and then you are in the short $57.50s for net $0 and you can roll then to the Jan $38 puts (now $1.50) and if you don’t REALLY want to own BBBY for $38, why on earth would you be long at $61.20?  

    CHK/Deano – Great idea selling those.  

    Gigapixel/Exec – That’s some intense stuff!  Wait until they get that on video, they’ll be able to watch you 24/7.  London already does



    RIMM/Dpast – Well good luck to both of us then!   8)  

    TLT/Canuck – Yep, prudent to wait.  If they "fix" Europe over the weekend, the Dollar will fall and so will TLT but look what happened this week so – waiting is fulfillment.  

    LOL Canuck – It’s a slow process…

    Speaking of EDZ, never anything wrong with a little EM coverage over the weekend.  April $21/25 bull call spread is just $1 with a 300% upside that’s right on the money, cheap insurance in and of itself and you can sell the $13 puts for $1 to pay for it (38% off) or VLO Jan $20 puts for $1 or Jan $75 puts for .90 or 2 BA Jan $45 puts sold for $2.50 will pay for 5 of them – $2,000 upside at $25 and worst case is you get BA for 35% off.  

    JPM short $32 puts in WCP are now .15 with JPM at $31.93 but we’re weak with a half hour left so not worth waiting to close.   Other than that – all went as planned – very nice!  

  177. mrm – sorry, I saw that earlier and forgot to respond.  So, my premise was that JEF and Co. screwed everyone out of their position b’c ARIA moved down to 10.40 b’f they announced the offering of stock (closed at 10.42 on Wednesday!!!!).  This allowed everyone to get in at the offer price pre-announcement (21M shares, right), and then they could cover on the way back up.  My theory still holds that all that bought that day, and now b’w today and yesterday, almost 20M shares have traded….there you go.  Where did they bounce today, at 11.46, so out with a cool $1/share….I still think they move it below the offer price in the coming month, hence my wanting to cover hard over the next few months.  MRK ain’t gonna buy them now, as that offering increased their valuation, and sales are not in yet.  They could get to $12, but after that is a big ??

  178. FWIW – I am out of ARIA for now.  Will get back in below $10.

  179. Ging
    Trying to trade every trade will not end well. I think everyone here has tried that without success. Phil is right (as if he needs me to say that for him!). Learning a few trades, especially the short term variety, works way better than trying to write every trade you read. Hell, I even called an oil short yesterday on that BS story about Iran closing the Straits of Hormuz. I enjoy watching his short term trades (I might do one or two a week at best if it involves what I like: USO, EDZ, QQQ)  and watching how he adjust throughout the day. Are you a new member?

  180. LOL Phil, ‘fix’ Europe over the weekend.  The EU can’t wipe its own arse, how can it get off the pot to fix anything?

  181. Thanks Pharm 

  182. Thailand
    Never been there, but my nephew met a Vietnamese woman in Thailand and married her.  Sounds like a recipe for disaster, but there is a moral to the story somewhere. Her parents had emigrated from Vietnam to Canada, where they have a restaurant in Manitoba. She is a Canadian civil servant and was able to take a year off on paid furlough to travel overseas. No such employment benefits exist in the US, which is probably why there are so many single women. They now live in Canada.

  183. Pharm, thanks. I’m going to keep my position, that guarantees you your entry at 10 -- if I get out, it would go straight up after that 8) .

  184. Something smells with VRUS… They are off their highs, and GILD is buying them for a bundle.  So, either GILD is walking, or there is value to buying the stock in here or buying some ‘cheap’ put spreads, cause they are going down.

  185. OK, that last post made little sense, but you get my drift….137 is the offer, so a 10% premium from here.  Phil, find a play on one or the other happening.  Just need to find a closing date.

  186. 1Q 2012 is the information I can find….I dunno….

  187. This closing action looks very bad with USD dropping now at 80.73 and indices not budging.

  188. Thanks everyone, I learned a lot today, as usual!

  189. saw this in the news today. This is about India but much of their work is in Thailand and Cambodia. Good fortune for them and those they can assist.

  190. dclark41.
    I am a new member for a couple months now so I am just getting my footing and trying to figure out what the group trades in terms of options. I trade full time and typically trade oil and gas stocks and haven’t traded ETF’s much at all. I like that there is a variety of industries and companies in this member group to broaden my scope.  I have traded options quite a bit but not the 3-ways – typically singles. I have been reading all the posts in this group and try to follow the rationality behind the option trades (and I must admit it is daunting some of the complex strategies the way Phil describes ideas haha) but I find that i can’t seem to participate in any of the ideas since I am to late to refresh my screen. I certainly don’t want to do all the trades, just a few here and there (maybe pay for my subscription haha). I have to admit though, in a month of following the chat rooms I feel a bit more comfortable and have "attempted" some more complex options strategies on the oil and gas stocks I typically trade. These markets I find are quite the gong show technically. Do you know if Phil is going to start a new porfolio in january?

  191. Button – i’m watchign that to. like a real lid on things. wondering if that is an option expiration effect..

  192. Pineau/Angel – if it’s red I’m coming over.  

    DMND/Terra – Oh it’s not the sort of play where you can worry about 50% here or there.  DMND is at $26.90 and $3.40 for the June $20 puts is simply fear-driven.  Not much to do but wait on them but the $36s can be rolled down to the $30s for $2 and you can roll the $44 caller ($1.80) to the Jan $32s ($1.30) for .50 and you can figure if that sale expires worthless, you have 5 more ahead of you so just $1 a month and  you can be ahead regardless of what DMND does between now and June.  

    On HOV, home builder equity is a function of bistromathics and should be ignored at all times.  Rather, you should think of HOV as an organization that is capable (because they have proven it over the past 100 years) that they can make $1Bn so spending $112M for them at the current valuation when they have $350M in the bank plus another Billion in steeply marked down inventory AND tax credits (taken by marking down that inventory) and their cash burn for all of last year to keep the pilot light on while they wait for a recovery was $59M.  Think of them as a seed that you plant which one day, with the right conditions, can become an oak tree.  

    80.75 but no market pop.  At least we stopped falling. 

    Legging out/Sage – If you have a feel for the intra-day moves, it’s the best way to go.  I don’t call it that way usually because most people DO NOT have a feel for the intra-day moves.  

    Free land/Jomp – Oh that’s right, it was Siam!  Silly me.  Siam used to be a big deal, they had the whole peninsula but the people always called themselves Tai, right?  You live there – I’ll come visit…  

    80.72 – finally having an effect but a bit late for a stick. 

  193. Have a great weekend all!

  194. Scottmi,- I don’t know if that was the issue but I loaded up on TZA at the close as well as picking up the EDZ BCS for April.  I guess we will see on Monday. Have a good weekend.

  195. Portfolios/NF – Sure, if you have a lot of cash (think margin) laying around in an account, you can structure those conservative but margin-intensive plays and, if you $125K put aside for college in 8 years – if you  make $25K a year, wouldn’t that be nice?  $100 here, $200 there – it all adds up.  

    There’s the bell!  

    Have a great weekend everyone – I’m still catching up on comments…  

  196. Ugly close and the $ was weak to boot, I feel better sitting on my shorts while in my shorts ;-)

    Phil thanks for all the hard work you put in.. day in day out

    Pharm your a saint..I mean that

    Great weekend folks off to an Xmas pahtay, I’ll have a few for all you guys..great weekend to all and stj your probably getting ready for bed…sweet dreams… :-)

  197. Have a good weekend all,

  198. VRUS / Pharm – somebody just bought a half million shares, so perhaps not so gloomy after all, it was just Lloyd driving down the price to get a better entry…

  199.  Phil, your struggles with your computer today remind me of the press release issued by GM after Mr. Gates took a shot at the auto industry.  I’m sure you’ve seen it before.
    Microsoft vs. General Motors
    At a recent computer expo, Bill Gates reportedly compared the computer industry with the auto industry and stated "If GM had kept up with technology like the computer industry has, we would all be driving $25.00 cars that got 1,000 miles to the gallon.
    In response to Bill’s comments, General Motors issued a press release stating: If GM had developed technology like Microsoft, we would all be driving cars with the following characteristics:

    For no reason whatsoever, your car would crash twice a day.
    Every time they repainted the lines in the road, you would have to buy a new car.
    Occasionally your car would die on the freeway for no reason. You would have to pull over to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue. For some reason you would simply accept this.
    Occasionally, executing a maneuver such as a left turn would cause your car to shut down and refuse to restart, in which case you would have to reinstall the engine.
    Macintosh would make a car that was powered by the sun, was reliable, five times as fast and twice as easy to drive – but would run on only five percent of the roads.
    The oil, water temperature, and alternator warning lights would all be replaced by a single "General Protection Fault" warning light.
    The airbag system would ask "Are you sure?" before deploying. 
    Occasionally, for no reason whatsoever, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key and grabbed hold of the radio antenna.
    Every time GM introduced a new car, car buyers would have to learn to drive all over again because none of the controls would operate in the same manner as the old car.
    You’d have to press the "Start" button to turn the engine off.

    Have a great weekend all.

  200. Bleier/Iflan – Playing for a bank run?  A 2008 disaster?  AAPL dropping 50% – what am I supposed to think?  Of course we’ve papered over the financial crisis – it was a paper crisis so paper is the solution, isn’t it?  Blind men touching an elephant – that’s all these "experts" are…  

    VRUS/Pharm – We talked about that a while ago.  Too many outs for GILD so easy to make a rumor that they are using one, even if not true.   What GILD got was a pretty cheap call on VRUS being successful over the next 6 months.  

    As long as you learned something 2Nifty! 

    Comfort/Gingbaum – So you are doing the exact right thing, learning various strategies and getting a better handle on the broader market so you can apply what you learn to the sector you know best.  All you need to learn now is patience and you’ll be on your way to enlightenment!  Yes, we will reset a new $25KP in Jan.  

    You’re welcome Kustomz, enjoy the party.  

    Oldie but goodie Beaufleurs.  

  201.  Make a lot of mistakes, after a string of halcyon weeks.  But I’m stubbornly long — two wrongs don’t make a right, but three lefts do.

  202. Ports – Thanks.  With care, it sure seems better than just having the Coverdells invested in a handful of mutuals.   

  203.  Phil,
    !st weekly close on the US $ over 80 all year, right?  That’s dollar bullish long term is it not?
    Any wisdom you can drop re: the rest of the year?  I’m off to mexico to sit on a beach… Not sure how good the interweb will be, so I’m staying mostly covered, but what’s your bias?

  204.  Sorry guys, had to go pick up my kid at the train station in the town next door and took me longer than I thought… Hope everybody got to roll the TNA put in the IWM Money! I’ll update the portfolios tomorrow morning and respond to any questions.

  205. Thank you very much! Have a great weekend!

  206.  Phil: Entre computers?
    There’s a name gone by.  Did they sell AAPL products, or everything but?  I’m listening to the Jobs biography and it’s interesting to learn what he and Woz were doing while I was training for the future of $300,000 mini computers.  I was with Four Phase Systems and we scoffed at Apple whose building we passed walking to our headquarters.  Fast forward a few years and Apple had bought,torn down and totally redeveloped the site of our manufacturing plant for their own HQ.

  207. Trades/Gingbaum:  I don’t know if its been mentioned before but some of the best trades to go into are the ones that Phil is losing on.  So whenever Phil posts a portfolio update you can look for the ones in the red and consider yourself lucky to get in at a cheaper price.
    I also keep a word file of all the trades that Phil posts up and I keep an eye on them so that I can get in when they hit his price levels.  Some stocks just shoot up and run away as soon as he calls them out and never return, but many stocks are old favorites and in this market environment will give you several chances to get in at good prices or cheaper.
    Of course, some stocks are downright EVIL and they will curse even Phil (RIMM and WFR are recent examples), so u gotta watch out for those.

  208.  AAPL 50k repair strategy:  O.K., so AAPL has moved in the wrong direction for us this week and the acct. is down about 20%.   What to do?  Here’s my repair strategy for next week.  I’ll try to condense the discussion.  All trades closed out this week were profitable.    These included  a bull put spread Dec 390/385 and 2 downside protection plays, TZA and QQQ.  We hold long calls, Jan 380s and 390s, both in the red.  We hold some Jan 390/385 bull put spreads,  and today we bought  some July 390/415 bull call spreads.   So if AAPL moves up on Monday I will hold ground.  If AAPL moves down on Monday I will extinquish the calls and convert them into longer term bull call spreads, and I will sell lower priced bull put spreads.  I know Phil doesn’t like those plays, but I do.  I’ll tell you why.  They may not be indicated for stocks in general, but for AAPL, a stock that is eventually going to turn, they are a good way to "follow the stock down" and take profits on the way.  And the profits are taken by selling premium.   For example, the next weekly Dec 370/365 bps sells for $70 on $500 margin, for 16% profit as long as AAPL stays above 370.   Or, for more safety, the Dec 365/360 bps, which sells for $38, or 7% profit for the one week hold.  7% a week would be 350% on the year; quite acceptable.   I’ve been selling these bpspreads in other accounts for weeks, with very acceptable results.  I’ve taken no losses on these plays.  They just have to be set up properly and watched.   AAPL will not continue to drop, but if it wants to fall over the short term this is a way to take profits along the way.  But I don’t think it will be necessary.  All news out there suggests AAPL product moving well, and at some time institutional investors will have to put more of this holding into their portfolios.  We’ll just have to wait for the turn, and massage the portfolio to protect it more until the turn occurs.  

  209. Fukushima Reactor finally reaches cold shutdown
    But the clean-up process is going to be a long hard slog, and the contamination of the surrounding area has been much worse than TEPCO has lead on.     

  210.  DD & COP for "Income type Portfolio"?
    Phil, have any opinion on these two.  They both yield a 3.8% div.  I’m considering doing a put sale and BCS.  
    Correct me if I’m wrong, but when you are short the puts, you do collect the div.

  211. Phil, 
    This article isn’t linked in the "Virtual Portfolios".  I think it should be

  212.  Mad Hedge Fund Trader Throwing in the Towel on TBT:

  213. Iflan, Thanks for the trade info yesterday. Here is the latest status on the AAPL portfolio. I have listed all the trades since it’s a weekend recap. As usual, let me know if you see anything wrong.


  214.  Burrben – short puts
    There is an advantage to selling puts before a dividend comes out, because the premium is higher to take into account hte dividend, however you do not get the dividend directly.  This is the explanation from TradeKing chat:

    If the shares pay dividend, the dividends are factored in the prices of the puts. Writing naked puts does not bring dividends directly but the premiums of the puts are higher via the call/put parity


  216. Phil, You are always welcome in Thailand.


  218. Thailand is the only country in SE ASia that was neve colonized I believe, the people are pretty proud and always friction with Cambodia, sometimes leading to military clashes but minor and never any real threats to anyone except on the border by land they both claim as there is a World Heritage site there, meaning pride for the country and $ for the politicans.


  220. This is the FAS Strangle Experiment trade recap. There is no open position at this moment.


  221. I think the FAS Strangle should have it’s own tab!  So far it’s kicking the butts of the other portfolio’s and it’s a straight forward concept.

  222. Interesting add-on to that $50 billion lent out to the ECB this week through the Fed’s swap line, according to ZH, around the same time the Fed also bought $30 billion in MBS.
    So it looks like there was a $80 Billion bailout by the Fed, most likely of a European bank this past week.

  223. Bullish forecast for AAPL earnings …

  224.  diamond….Makes you want to go buy some AAPL calls, eh?       

  225.  I completely agree Burrben, the strangle looks real good.  I followed the trade all week, and did great.  $1350 in profit, off 10 contracts, $25k in margin in my PM account. That is a 5% return on margin in a week!
    I’ve decided I’m never going to stay in the trade overnight, since that is when it is most exposed to a black swan type event.  This restriction may reduce some of my gains, but it seems much safer this way.  Since the trade is pretty much delta neutral, intra-day moves are pretty easy to recover from, or at least stop out with a minimal loss.

  226. lflantheman – I have done very well with AAPL options over the last 3+ years. I am glad that you are now doing the AAPL PSW portfolio so that others on this site will be able to greatly benefit (over time) from AAPL as well. I like your thought process!

  227. On SA, Phuket Friday has been transformed into Festival Friday, does not quite convey the same tone.

  228. I’m not lovin the new TOS "home" screen.

  229. I have been trying to download the TOS desktop software to a new PC and continue to get an error message. No on responds to tech support. Anyone know what the problem is or a work around?

  230. Hi all,
    Sharing the following market perspective from Schwab, which is not provocative / predictive, just middle of the road type.  I found this view as "calming", particularly if with help of Phil and others on this board, I can "implement" strategies that allow me to build a portfolio to handle S&P 500 range between 1000-1400 in next 2 years?  Thoughts / comments? 
    My current portfolio is troubled, with failed trades (e.g. TLT/TBT taken from this board but improper asset allocation resulting in disaster and others initiated by myself) and a few put writes (thanks Phil!!) working, though triggering margin issues on a dip.  I am still trying to unlearn my bad habits and get basics of "rolls" and "cut losses, take gains
    Please let me know if this is useful to members on this board.

  231. FAS Strangle / Burrben, Palotay – This really started as an experiment and I never meant it to become one of the portfolios we track for the long run. But it has been fun so far and it is working! The rules are pretty simple as well so no real need for guidance – it all comes down to your own risk/greed factor.

    As far as not keeping it open overnight, I believe that it will reduce your potential gains greatly. It is a lot more risky of course and that is a decision that you need to make. There has been some decent one day gains, but some days, the trend is constant in one side and it kills the trade quickly so you either have to get out early with smaller gains (or none) or be willing to close one leg and risk an overnight hold. I believe the risks are somewhat mitigated by the premium – as I mentioned before, there are usually some good roll options even just a month out and all you need is a one day rally to let you out.

    On the other hand, the trade is only 4 weeks old and we have not had to face a major problem which is why I want to keep on running it for a while and see how we can deal with that. 

  232. Monk rock / Phil – Don’t know about the Latin services though… I was brought up in a more "progressive" catholic home so I missed that! 

    But I was exposed to the Latin singing at my uncle’s monastery and that was always touching! BTW, talk about the simple life, my uncle entered the order when he was 12 years old and he is now 87! Looks happy all the time and in relatively good health. There is something to be said about the lack of stress in your life! But he has some good stories especially about what they went through during WW2. I plan on interviewing him to collect them all as I am afraid this history will disappear when he does and that would be a shame!

  233. Beer / Phil – I would not want to touch the beer in France either, but the Trappist monks in Belgium make some delicious stuff… As far the Pineau des Charentes is concerned, it’s true that it’s pretty hard to find in the US! And with our stupid liquor laws, getting it shipped would not necessarily be easy either! Want me to pack a couple of bottles on the way back?

  234. Swiss / Phil – Well, my dad was born in the Jura mountains on the Swiss border. From his home, you could walk to Switzerland (and some did for various reasons!). Since we had no money growing up, downhill skiing was not part of the activities, but we did some cross-country skiing which is better exercise anyway. In any case, the slopes in the Jura can’t rivals the Alps for downhill! But it’s a beautiful (if not cold) region in all seasons! 

  235. Good morning!  

    Please partake in our Holiday Shopping Survey if you get a chance – it’s really good for us to get a handle on things from people we already know, rather than random quotes from the MSM where everyone has an agenda.  

    3 lefts/ZZ – Reminds me of how we end up fixing some trades!  

    Dollar/Peedle – As you say, FIRST week over 80.  That means if next week is under 80 or even the week after that, then the move over 80 will be a spike that gets tossed out.  You have to be very careful about making assumptions on breakouts – especially as you stretch your timeframe to find the last instance as you are now talking about a 1/52 effect on the average.  What I think is more significant is the way the Dollar rallied last November, finished at 81 last Christmas/New Years, and then fell off a cliff to 72.70 through April.  

    The Dollar is not up because the US has their house in order or because our economy is strong or because we have a good balance of trade or because our money supply is stable or because of strong payroll demand or – well, you get the point – the US Dollar is ONLY "strong" because it’s a less-scary alternative to the Euro and Yen with the Yaun not all that exciting either.  The Dollar is stronger this month because they have pushed the gold/silver as an alternative story past the point of sanity and even the oil bulls have cut back their contract exposure by about 1/3 – all that money plows back into Dollars and makes it stronger. 

    So betting on a strong Dollar is betting oil, gold and the Euro will go lower.  Mostly it’s the Euro, which was at $1.2891 last Christmas and had been at $119.13 in June of 2010, when the Greece thing first blew up.  Now things in Europe are "worse" with even France under attack but the Euro is at $1.30.  Does that indicate that the Euro could suddenly fall hard and we have a major market crash brought on by Dollar strength?  Yes it does.  Does it also indicate that, despite all the hand wringing, the EU has managed to instill a tremendous RELATIVE amount of confidence in their currency in the last 18 months?  Yes it does.  

    So, in absence of a real shock to the system – I don’t see the Euro getting back to those panic lows and, therefore, I don’t see the Dollar coming back much over where it is now because no one WANTS to have 70% of their assets in Dollars (from and International wealth point of view) – Imagine if 70% of your money was in Euros or Yen – what a pain in the ass!  

    That’s why you have this relentless campaign that gold is money, which is very much the same propaganda campaign they had in the 70s when they convinced people there was such a thing as "Petrodollars" – people HAVE to put their money somewhere – the IBanks just need to corner a market and then run a PR campaign to convince people it’s the best investment they can make (Housing anyone?).  Right now it’s TBills as the Banks are smart enough to know to get out of any paper that isn’t paying them more than 3% and they have to dump it on SOMEONE – fortunately, there’s one born every minute…

    Entre/Lincoln – Yep, I was a big mac fan back then.  I still keep my original Macintosh on my desk (it’s a big desk) – we’ve been through so much together, I couldn’t bear to get rid of it!  I was forced off Macs when I started my own company as they did suck for business back then but I still can’t find a program I like better than Hypercard.  My Dad was a systems analyst and I’ve had a computer in my home since they were the size of a refrigerator, after college I went into PCs because I knew it was going to be the next big thing.  At Entree, it was my job convincing F500 companies that was the case but I realized as I did that job that the real money was in consulting so, once the margins began draining out of the PC biz, I switched to consulting, which was more fun for me because I got to work in dozens of different industries at various levels.  

    Big Chart – Holding up for the moment, very critical which way we break now.  Still in the drift zone so all meaningless inside (2.5% either way) but down is much more scary as we can pick up momentum, break the next support and fall a very fast 10% that’s going to make the Secret Santa Plays a very tough call next weekend.  

    Evil stocks/Kinki – AAPL was one of my evil stocks.  As was CAT, GE, IBM, INTC, VLO, JPM, ISRG, MCD, CROX, SIRI….  It’s a very good point that the ones that go against us (when we still like them enough to DD or roll) are usually the best entries, especially for people who don’t have time to watch every day.  

    AAPL/Iflan – I will only point out that AAPL has such a tremendous market share that there is not much room for improvement.  As I noted the other day, RIMM STILL has a tremendous market share and STILL makes good money – it’s just not exciting anymore and competition leads expectations going forward to go lower.  I also believe AAPL should be over $500 but then again I think RIMM should be over $20 as well…  It’s good to be aware of the downside potential before overly committing to a rescue.  

    Don’t forget, when you’re behind, you play very conservatively to get even.  Losing 20% means you need to make 25% to get even, losing another 20% would mean you need to gain 66% to get even – a slippery slope.  

  236. DD/Burr – I like them and COP as well but they are more the kind of stocks, like KO, CAT, MCD, IBM..  that I wait for a real catastrophe to make them so cheap I can’t stand it.  While you may think that day will never come – it’s come several times in the last decade and especially COP I wouldn’t consider over $50.  DD has very solid support at $40 but was low $20s in the crash and let’s say there’s a 25% chance of a crash – then I’d want to target, statistically, $35 (25% of the difference below) to offset the possibility of things going south.  If not DD, then keep looking and find companies that are closer to levels that have already proven to hold when the world seemed to be ending 3 years ago – those are the ones you can pick up with more confidence like (just thumbing through my watch list) AA, BAC, C, CHK, HOV, HPQ, JPM, MON, SKX, TM, VLO, WFR, X…  If you can find one or two of those companies you like enough to invest in, I think the upside is better than you get with the others and, more importantly, in an uncertain market, less room to fall (hopefully).

    Thanks Burr, I forget to move them sometimes.  

    TBT/Deano – Well, we could have told him that ages ago.  What an annoying thing to play!  

    Thanks for all the work on tracking StJ – Very much appreciated!  FAS strangle works best because it sells the most premium but does carry an extreme risk in a major market-moving event because, at $60, a 5% move in XLF is a $9 move in FAS.  The key to these trades is accepting that risk and, at this point, it’s more relaxing because even a $9 move against you would only wipe out a month’s gains – the trick is to get those months under your belt before you get stung.  

    Thailand/Jomp – Thanks.  My plan in 2013 is to spend a couple of weeks at least on each continent, reestablishing some business connections and looking for investing opportunities.  I’ll certainly be in the neighborhood.  

    Fed/Kinki – Not at all surprising.

    That first Dilbert was great Diamond!  

    The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more

    If you think that’s bad, wait until Watson begins replacing 100,000 call center jobs a week!  

  237. Jomptien, If you don’t mind the question, where in Thailand are you living, Thai or farang?

  238. No overnights/Palotay – That’s a good idea!  

    Seeking Alpha/Rpme – They routinely take out anything that might offend people.  It’s a funny thing once you go for sponsors, across the board content becomes more and more watered down.  That’s why I love Jann at Rolling Stone, who never forgot why he went into publishing in the first place.  

    TOS – Mine seems to be the same as it was before after the update, just more spreadsheet-looking.  

    Schwab/DrMtv – That is a nice summary.  

    Uncle/StJ – That’s very cool, you should just grab a camera and try to get him to recount his life history.  As to Belgium beer – I don’t touch wine in Belgium!  I’d love a bottle of red Pineau if it fits but I’ll be there in the summer so no biggie if it doesn’t.  

    Jura/StJ – I’ve skied Trois Vallees but not north of there.  

  239.  Here’s an interesting tidbit:   We frequently speak of AAPL ‘pinning’  the weeklies and the monthlies near strike prices on Fridays.  Myth or truth?   I went back 13 weeks and calculated the deviation of the closing price from the nearest strike on each friday.  The average deviation was 71 cents, and the stock closed under the strike price much more often than over ( 10 of 13 times under).     The average deviation should be 2.50 and the down/up ratio should be about .50 if this is random.  We here at PSW know it is not random.  This has implications for trading at the end of each week.  If we can know with fair accuracy that AAPL will close within 1.00 of the nearest strike, and that it will probably stay under the strike, then this can certainly be traded.  My next project will be to determine if there are are any earlier-in-the-day predictors of which strike price it will pin.  I’ve been fairly accurate in intuitively knowing this, but a more accurate way to determine it could lead us to an end of week investment strategy on AAPL which could be very helpful.  

  240. When you get a move like AAPL got in the last 5 mins on Friday, it makes me wonder if the goal was to push people into the money and force them into the stock next week.   It wasn’t in line with the Qs or anything, just a big jump right at the close.  

  241. Evil stocks/Phil: Point taken.  The TRULY evil ones lie in the accursed realm of leveraged ETF’s. 

  242. Phil:Malls busy in Houston.every store owner I ask "how"s business" say "bus is good". long line at Barnes & Noble to checkout yesterday which surprised me.
    Read article "17 reasons why Euro will Fail". Outright scary.Buy Gold?

  243.  FAS Strangle – In addition to not holding overnight, would it also be prudent to buy some long dated calls and puts 20% in either direction, to further reduce our risk?  That way we have a backstop?  I’m not exactly sure how much that actually helps (besides reducing the margin requirement on the short calls/puts).  I guess it would guard against an absolute disaster.  I’d be interested in hearing anyone’s thoughts on this.  I made over 5% on margin this past week, without trading on Friday, and never holding overnight.  5% a week is more than enough for me!

  244. Phil,
    In searching for the best hedge  to protect against a 20% drop in a pipeline MLP portfolio (little cmdy pr risk), I found QQQs correlate best with the MLP index, AMZ, going back 5 yrs (btr than ERY,USO,etc).
     The Aug lows found QQQ @ 50 (now 54), inverse QID hi @ 65 (now 47) and SQQQ hi @ 35 (now 21). OI for QID is a low 2-400, SQQQ even lower @  100, whereas QQQ are >15K. This would be a true buy and hold hedge til expiry.
    Tentatively looking at Apr 52/65 for QID or Mar 24/35 for SQQQ; however low vol makes me wonder about getting filled.  
     What would be your counsel as to preferred option chain and strike, given the above?
    Thanks in advance

  245. Phil,
    Sorry, no idea where the cyber garbage came from:
    In searching for the best hedge  to protect against a 20% drop in a pipeline MLP portfolio (little cmdy pr risk), I found QQQs correlate best with the MLP index, AMZ, going back 5 yrs (btr than ERY,USO,etc).
     The Aug lows found QQQ @ 50 (now 54), inverse QID hi @ 65 (now 47) and SQQQ hi @ 35 (now 21). OI for QID is a low 2-400, SQQQ even lower @  100, whereas QQQ are >15K. This would be a true buy and hold hedge til expiry.
    Tentatively looking at Apr 52/65 for QID or Mar 24/35 for SQQQ; however low vol makes me wonder about getting filled.  
     What would be your counsel as to preferred option chain and strike, given the above?
    Thanks in advance

  246. Erased the garbage……

  247. Pharmboy,
     Evidently the demons of cyberspace were active when I initially sent the above.

  248. 8800 – its a copy & paste thing from either the internet or word in IE.  Happens quite a bit, so no worries.  I don’t usually modify/erase, but in this case….the strings can sometimes break the site/post.  Happy Sunday.

  249.  palotay
    I was thinking the same thing.  Doesn’t the trade then become two short calendar spreads?

  250. FAS / Palotay, Burrben – Holding a long strangle against the short strangle was the original FAS Money trade that we did from July to September. The only issue for me is that even if you do reduce the margin requirements, you still need to come up with the long strangle cash and 10 contracts in each leg is not cheap now that FAS is at 60! I would need to go back to the original trade to see if the long strangle helped on the way down – FAS went from 24 to 10 during that trade (August was brutal) and we still made 60% in 17 weeks. But if I recall well, the long strangle profits only helped cover the cost of rolling the long strangle! That kinds of defeat the purpose! We ended up rolling our short options to the next month and skipping weeks and we made out OK when the market recovered. And I think that this plan still works… You keep on selling the opposite leg every week on the way and you can make some decent money. But it does take patience!

    This is why, I think you have to take it slow at once and use only excess margin to enter that trade because it can move fast against you!

  251.  BTU It has come down from 72 in April to 31.50 in August now at 33. Low in 2008 was 18.50. I think its mainly the worry about China. Their Australian mining revenues have increased 25% in 2011 represents 40% of revenues and produces 36% EBITDA vs 26% for US mining so its much more profitable. I think their Asian business might slow, but I don’t see it shrinking even if Chinese real estate is in a bubble. I think they still build infrastructure to keep people employed since that is what they have been doing and thus still need coal for energy. 
    Can do a Jan 2013 B/W 33.00 entry selling Jan 13 30 C & Ps for 14.90 net 18.10, giving a 60% annual ROI and breakeven at 24. Or just selling 2x puts for the same dollar return since the dividend is 1%. I plan on watching some more with the chart still drifting down but would do the trade @ 31. Would appreciate your thoughts. 

  252. Gmarts/Thailand,
    I am a farang (US) and live in Jomtien Beach, outside of Pattaya on the Eastern Seaboard. Are you familiar with the area and Thailand?

  253. @Pharmboy
    What’s you outlook for OPK mid-term.
    I have it at basis of $3.45.
    Want to cover. but not sure if by 5C or 4C.
    May be half and half?

  254.  There is an error in my last post re whether ‘pinning’ occurs with AAPL.   I stated that the average deviation from the $5 increment strikes should be 2.50.   That should read 1.25.   That still does not change the premise.   

  255.  Asia looking pretty ugly

  256. Asia looking VERY ugly.
    North Korean leader Kim Jong-il died on Saturday, according North Korean state television, which said Kim died of physical and mental over-work.
    One poster on MarketWatch commented that it is a great pity he did not take Jon Corzine with him.

  257. One poster on MarketWatch commented that it is a great pity he did not take Jon Corzine with him

    That is some funny stuff.

    I prayed to the market Gods all weekend..hopefully it pays off. If anyone deserved to go it was that guy, thats for certain.
    Although it seems like an over reaction by the markets in my opinion.


  258. they should be rejoicing not selling off..this is the best news out of asia there since general tso sold his chicken recipe to house of tang

  259. no reason to rejoice.
    It’s new unknown instability for now.
    Nobody even no what happened.
    It might as well be a coup

  260. KJi-
    He was an amazing golfer- Shot a 38 his first time out, with 5 holes-in-one. Safe to say the press would report he died of natural causes in any circumstance.