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Monday Mourning – Good Night Dear Leader

A young salute: A picture of North Korean founder Kim Il Sung, his first wife, Kim Jong-suk, and his son, Kim Jong Il, is displayed at the Unification Hall at the West Seoul Life Science High School in Seoul

 

Oh, hello Mr. Seoul,

I dropped by
to pick up a reason

Stick around while the clown
who is sick
does the trick of disaster 

 

Asia was in turmoil last night as news of the death of Kim Jong Il hit the wires.  South Korea’s Kospi Index fell 3.4%, both the Shanghai and Hang Seng fell more than 2% at their opens but, along with the Nikkei, they all finished strong and down about 1.25%.  My comment on the matter to Members at 11:29 last night was:  

Meanwhile, Dear Leader has died and that shot the Dollar back to 81 and knocked the futures down half a point.  Asia is down more like 2% as no one is please with Jr. taking over in South Korea.  I always find that amusing when leaders who are hated die and the markets react negatively – as if the next guy could be worse.  Markets just hate uncertainty but China is in charge of N. Korea – I doubt Kim’s son is going to suddenly declare war or whatever it is people are worried about.  He’s just 27 and probably not suicidal

If anything (but I’m going to bed), I’d take oil long off the $93 line (/CL), which is where we liked them Friday.  Gold already zoomed back to $1,600 and has been rejected there and the Dollar doesn’t look that strong above 81 so far.  

IEF WEEKLYSo far, my logic is holding up as things have already calmed down and oil topped out at $94.50 at 5:30, for a nice $1,500 per contract gain in less than 6 hours.  I find it easier to trade futures off news like that than they are to play during the US Market hours as the moves internationally, still seem to make a little sense while the moves in the US market are often pure nonsense.  

Speaking of nonsense, David Fry agrees with me on Treasury rates as we are now falling below what you can get in an FDIC-insured deposit, which I consider the non-panic limit for rates.  Unfortunately, we do get plenty of panic at a drop of the hat these days and TLT shorts were our big loser last week but we stuck with them for January, hoping things calm down over the next few weeks.  

Europe is calm enough this morning with not much happening over the pre-holiday weekend (our own dear leaders also have families to shop for).  We began our 2011 PSW Holiday Shopping Survey.  With dozens of reports from around the World already in, it’s great reading and please remember – it’s even better if you contribute as well!  

On Friday, we stuck with our plan to get very cashy into the holidays.  You can get a full review of the week’s action in Stock World Weekly, which also features a rundown of Pharmboy’s 2011 Biotech Trade Ideas, with plenty of good entries still available in this very choppy market.  We were worried enough about the weekend to add an EDZ hedge in Member Chat – this time it was the April $21/25 bull call spread for $1, which has a 300% potential upside all by itself and is easily offset by short puts on many stocks we REALLY want to buy for less if they go on sale, like VLO, where someone will pay you .98 just to promise to buy the stock for $20 (now $20.67) in 30 days.  That’s a nice hedge!  

Of course the best hedge in the World is CASH and we were fortunate enough to hit our targets on most of our expiring plays in our White Christmas Portfolio, leaving us with just our GNW Jan spread, a bullish Jan spread on FAS (of course) and the aforementioned TLT position that went against us and was rolled to January.  

That brings us to over 95% virtual cash, which is something we can live with over the weekend.  If we catch a break and get a little Santa Rally (as we’re 100% bullish now with our 5%), then we will be thrilled to go 100% cash on Friday so we can, as planned, have ourselves a merry little Christmas with our 200% gains.  

The markets are closed on Monday and again the Monday after New Year’s and again on the 16th (MLK day) so lots of long weekends for us to go skiing this year so why not take advantage of it by setting yourself up cashy or market neutral and taking  a weekend or two this year to balance out the other parts of your life?  

Look at Kim Jung Il – rich, powerful… From the above picture it looks like he was a happy little baby.  Where did he end up?   As dead as anyone else at 69.  Money helps but it doesn’t buy you immortality and you still can’t take it with you and, as  pointed out by the Beatles 50 years ago, it can’t buy you love either (except in Nevada).  While Kim Jung Il may have left a bit of a mark on history as a brutal dictator, what about Henry Flagler, Stephen Harkness, Henry Rogers and O.B. Jennings?  Those 4, along with John D. Rockefeller, were some of the richest men in the World in 1900 – long forgotten now.  

Rockefeller was the lead partner in Standard Oil and amassed a fortune that put the others to shame and he was smart enough to hire PR people to take picture of him handing dimes out to poor people (his annual salary, at the time, was $60M a year – $2Bn by today’s standards so he could spare a few) and also smart enough to buy a few newspapers to make sure they thought those pictures rated page one coverage (a dime then would be about $3 today – if Bill Gates handed out $5s today, and the newspapers declared him a generous God, wouldn’t you find that a bit strange?).  

Speaking of rich people trying to manipulate the media.  Saudi Arabia’s Prince Alwaleed Bin Talak has invested $300M in Twitter, buying up 3.6% of the company.  Why?  Because the microblogging service is hailed as being instrumental in helping organize Arab Springs protests this year and building up a stake in the new media gives the Prince a degree of control – as well as useful inside information.  

I’m sure the Twits will deny he will have any influence – just as the WSJ insists that they maintain their journalistic integrity after Rupert Murdoch bought a stake or the way Rupert’s Fox News claims to be "fair and balanced" although, strangely, in the last 12 years – they haven’t found a single Democratic candidate to support anywhere in America, for any political office – Federal, State or Local across 25 network stations and 175 affiliates covering every single state in America.  Just a coincidence, I suppose…

That, to me, is the funniest thing about Kim’s death today – to listen to Fox News talk about HIS use of propaganda and the way he treated HIS poor people!  This is beyond the pot calling the kettle black, this is like the black hole at the center of the Universe calling the kettle black – except if the black hole at the center of the Universe did that, the sound would just get sucked up into the event horizon and we’d never hear it – but you know the black hole has got to be thinking that the hypocrisy of Fox News clearly knows no bounds!  

How many slaves died after living lives of misery – building pyramids for Pharaohs whose names are now long-forgotten and who’s pyramids are nothing but dust?  Even the Pharaoh would have been better off spending less time worrying about where to hide his burial chamber and spending more time with his family and friends.  As Ben Franklin once remarked: "It is only when the rich are sick that they fully feel the impotence of wealth."

It’s funny how the modern propaganda machine tries to change that one word, "impotence", into "importance" to create a new paradigm for the war between the rich and the poor.  Maybe one day, through cloning or whatever – the rich may be able to buy themselves a degree of immortality.  After all, that’s what the Pharaohs thought they were getting and they were willing to commit all sorts of atrocities on Earth in order to assure their own place in the afterlife.

The spirit of Kim Jong Il is alive and well, sadly in the very people who claim to condemn him…

Merry Christmas to all! 

 


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  1. Hi Phil,
    Would you short CL below the 93 line ?
    I am a new member. Your commentary has already become my morning "Market Feel"
    Appreciate all you do.
    Thanks,
    Sasanka


  2. PP for today:


  3. Phil – ( carried over from w/e):
    In searching for the best hedge to protect against a 20% drop in  pipeline MLP holdings (little/no cmdy pr risk), I found QQQs correlate best over the past 5 yrs with the MLP index, AMZ (btr than ERY,USO, etc).
    The Aug lows found QQQ@ 50 (now 55), 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.
    Tentatively looked at Apr 52/65 QIDs or Mar 24/35 Sqqq. This would be a buy  & hold til expiry hedge but low vol makes me wonder about getting filled.
    What would be your counsel as to preferred option chain and strike ?
    Thanks in advance


  4. @Pharmboy

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


  5. lol – why not sell 1/2 and cover the other 1/2 with the 5′s.  That gives you a profit on both, and if they go lower, you can either sell puts, or buy back and recover with something else….


  6. my outlook on them is that they will pull back some, consolidate and then move again.  Where, well, I think that depends upon the market conditions.  4.3X and 3.7X are pretty heavy in lower resistance.


  7. Monday 12-19-2011
     
    Dr. John L. Faessel
    ON THE MARKET
    Commentary and Insights
     
    Quote of the day
    “Christmas is a time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell the government what they want
    and their kids pay for it.”
    ~ Richard Lamm ~
     
    ALERT ! The BARRON’s Confidence Index * falls to new cycle lows at 66.9%
     
    EuroLand Bond Yields remain the central focus
    Italy 10-year (gross) bond yield – 6.68% off from 7.26% on 11-24
    Spanish 10-year (generic) bond yield – 5.04% - off from 6.7% on 11/24
     
    Friday’s highlight of trade: the Dow Transports were UP 1.53%
    More EuroLand Downgrades:
    On Friday the stock market pull back from session highs, but closed mixed after Fitch Ratings cautioned it might cut its credit ratings for Belgium, Cyprus, Ireland, Italy, Slovenia and Spain. Volume increased and was well above average.
     
    Fitch re Affirms France at ‘AAA’; But their Outlook is Revised to Negative reflecting heightened risk of contingent liabilities. The negative likelihood has materially increased, as has the risk of a much worse than expected economic and consequently fiscal outturn.
     
    The BARRON’s Confidence Index * fell to new cycle lows at 66.9% from 69.3% the prior week. It’s been six-weeks since it was in the 70’s.
    Just over four-months ago it was a relatively healthy 77.1. This is alarming to me. More on this in my next report…
     
    The Market picture remains constructive as "price" works toward some eventual technical denouement in the apex of a triangle. The wider oscillations of the past are now becoming constricted and price looks to go one way or the other over the next week or so. So far, the "sure bet" Santa Claus rally hasn’t really materialized.
    Again: “From a technical perspective the key declining Tops line resistance at (SPX) 1315ish 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.
    _______________
     
    Today’s market backdrop has European markets up around 1% as their bond yields pullback moderately. North Korean leadership succession is a question and Asian markets are all “off” a percentile or two; no one really knows what’s going on there. Chinese stocks continued their slide. The good news is that Chinese inflation is beginning to temper.
     
    The Baltic Dry Index Disputes Chinas Stock Market Collapse: http://www.mcoscillator.com/learning_center/weekly_chart/baltic_dry_disputes_china_collapse/
    _____________________________
     
    The (SPX) closed yesterday at 1219
     
    Short term price support in the S&P 500 (SPX) is at 1214 /1216
    Channel support is at 1219
    Key (3-day) price support is at 1209
    Support from a minor ascending lows line is at 1192
    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.
    Deepest ascending lows line off the (SPX) 666 (of 3/6/2009) is at 1109
     
    Declining tops resistance is at 1226
    50-day moving average resistance is at 1228
    Short term price resistance is at S&P 500 (SPX) 1231
    The 200-day moving average resistance is at 1260.
    Lower level declining tops resistance is at 1261
     
    Last Friday’s key indicators and metrics:
     
    ·     McClellan Oscillator is Neutral @ minus 53
    ·     VIX – 24.29


  8.  Thinking of selling BRK.B Mar 17 $70 puts or XOM Apr 21 72.5 puts.  Would like to own both eventually.  Thoughts?
     


  9. Oil Lines

    R3 – 94.72
    R2 – 94.34
    R1 – 93.63
    PP – 93.25
    S1 – 92.54
    S2 – 92.16
    S3 – 91.45

    As usual, Monday lines are really reliable! 


  10.  


  11.  


  12.  


  13. well, interesting times – a sign that things are not transitioning well in north Korea will be China parking troops on the border to keep refugees from crossing over. ok, they cross over now, but only in small streams – the Chinese don’t want and can’t handle a flood. just my opinion, but it’d be what the Chinese deserve for playing games supporting Kim Ilsung.


  14. Phil, I was just assigned RIMM after expiration last Friday.  I currently hold a full stock position with an average purchase price of $15.26 after collecting put & call premiums over the past  6-8 months.  I want to sell calls against the position & I am looking at the Jan 13 $17.50 for $2.00.  I don’t want to sell any more puts at this point. What do you think? Thanks.


  15. ARIA underwriters exercise their overallotment of shares.  Another 3.5M shares in the book at 10.42.   And it still goes up….wow.


  16. and for your entertainment (assuming it’ll be a slow morning) this is a wonderful old Korean/folk song called "2000 ri (about 500 miles) on a log raft" – describing the beauty of the Amrok river – also know as the Yalu, the border between Korea and China. The photos with the recording are of that area. Note especially the bitter photo of the sign denoting Chinese territory: http://www.youtube.com/watch?v=iIflr-Qu3_Y&list=LLVSxC1KUkEK2wBcCH-CHhbg&index=1&feature=plpp_video


  17. Jomptien, lost my internet yesterday afternoon, vis a vis your weekend post, Yes I’m familiar with Thailand, as farangs go…
     
    We’ll be in Phuket (Patong area) for the month of Feb, then up to BKK for a while in March. Not as familiar with the Pattaya area (putting on best Seinfeld voice" Not that there’s anything WRONG with that")   :-)   We’re mostly familiar with the islands and Bangkok areas with some light travel in the north. We’re looking to buy a place to spend maybe half the year (the cold half here) on the beach staying brown and enjoying the sanuk. Kids are all off to college now, Time for Mom and Dad to live  little. We love the Kingdom and the Thai people. We just missed out on a long term lease on a gorgeous  beach house in Kamala, but alas just a couple of days too late… Current thinking is to lease for a year, and see how we like the lifestyle on a full time basis before we commit.  
     
    Do you freehold, or have you formed a Thai corporation?
    Are you on a O-A visa? , Investment?


  18.  


  19. FAS Strangle Experiment – My FAS strangle for today would be a 53/63 strangle. Again, about 10% protection on each side. I’ll check later this afternoon and cash in the winning side(s). 


  20. FU TLT!!!



  21. Good morning! 

    Nothing exciting about the open – another pre-market pump-job that’s going nowhere.  If you see TBT below $18 (TLT over $122) then you know panic is still in the air and the flavor of panic we have this week is not the kind that is bullish for oil or gold or other commodities – it’s the kind of panic that says the Global Economy is weak and uncertain and most people would rather have cash.  

    CASH! 

    CASH IS GOOD!  

    Absent of some kind of stimulus, we have no reason to head higher and there are still the same boogie men in every closet that we had Halloween, when we fell like a rock at the turn of the month.  The Dow, as well as the other indexes, are in that triangle squeezy zone between the 50dma and the 200 dma and, as I’ve said for two weeks now, we need to fear a break below the 50 dma (11,800) as that’s likely to trigger the dreaded golden arches (for the bears) "M" pattern that can take us down to 11,200 (the middle of the M) or 10,400 (the Aug/Oct lows) by the end of January.  

    See – this stuff isn’t very hard to follow.  These are the same Big Chart levels we’ve been using since 2009 and the 5% Rule remains the best overall predictor of market behavior week in and week out (if you are into that technical stuff, which I’m not).  

    From a technical perspective however, you will learn to make much better use of charts if you think of how the charts WILL look in the future.  To do that, you have to stop just reacting to them and contemplate what each of the lines really means and think about how today’s moves will affect tomorrows squiggly lines.  In this case, the 200 dma is flat and it takes a good 20 days to move the needle on that one so we ignore it.  See how fast we can stop worrying about things.  That leaves the 50 dma, which is bullishly marching upward and it’s either going to make a bullish break over the 200 dma (golden cross) or it’s going to be rejected there and lead us on a long road back down.  

    Don’t forget, if the 50 dma moves lower, it starts to exert a sort of gravity on the 200 dma and once that bends down, it’s BIG TROUBLE – as you can see how poorly we can perform when it’s just flat!  So, every day the Dow is below 11,800 is pulling that 50 dma lower and making it flatter so (if you think of it like an object in motion) – it ends up hitting the 200 dma resistance line with less force (and volume is another function of that force, which is also low – so less chance of punching through) and is more likely to be rejected and the rejection of the 50 dma at the 200 dma (11,937) is going to confirm the bending downward of the 200 dma – making it even harder for the 50 dma to get back over it next time, etc.  

    SO – where are we then?  We’re in a very uncertain area and it looks like we’ll get that bump within 2 weeks and this will resolve one way or another.  Meanwhile, outside of major good or bad news – we are going to have a tendency to stay in the range of 11,823 to 11,937 and that range will tighten up as the week progresses.  Probably a good time to sell puts and calls outside the lines but, again, the news is so volatile that it’s better to just stay in cash and wait to see who the winner is.  

    There’s a decent amount of data for a holiday week and Fed bear Lacker speaks at 1:15 so look for any rally we have this morning to choke around then.  More retail sales tomorrow, some note auctions that culminate in Wednesday’s 7-year offering and Corporate Profits will be a big deal on Thursday with Durable Goods closing out the week.  

    Monday Dec 19

     

    Jeffrey Lacker Speaks
    1:15 PM ET
     

    Housing Starts
    [Report][Star]
    8:30 AM ET

    Redbook
    [Bullet
    8:55 AM ET

     

     

    Weekly Bill Settlement

    GDP
    [Report][Star]
    8:30 AM ET

    Jobless Claims
    [Report][Star]
    8:30 AM ET

    Money Supply
    [Bullet
    4:30 PM ET

     

    New Home Sales
    [Report][Star]
    10:00 AM ET

    SIFMA Rec. Early Close 2:00 ET
     

    Equity Settlement
    12-22-11
    Equity Settlement
    12-23-11
    Equity Settlement
    12-27-11
    Equity Settlement
    12-28-11
    Equity Settlement
    12-29-11

    So let’s be careful out there – very uncertain times and a holiday ahead so no need to gamble – cash out and count your money and have a nice rest – next year is going to be very exciting to trade – one way or the other


  22. General question for anyone. In some cases preceding a corporate action of some kind shares will trade on a "When Issued" basis with the old shares and the new shares both trading at the same time for a brief period. The question is, can a buyer of the old shares participate in the corporate action or has the action already taken effect once the When Issued shares appear?


  23. Phil- Very good comments on looking at charts and trying to decipher the meaning-thanks. I have always believed they are a road map of where we have been but can help us in our quest to decide where we might be going- not that different from riding in a car-our surroundings always give us a clue as to where we are going. Often the charts tell us something is wrong before we actually know it as they represent collective ( sometimes silent) analysis and decisions.


  24.  @button,  instead of going so far out of the money, you goal now should be just to break even or get out with a little profit.  Since your cost basis is 15 ish,  I would start selling the front month 15 calls untill you work your basis down to 14.  Then sell the front month 14 calls etc.  Keep doing this until you reach your goal which is to be called away for a small profit.


  25. Phil, I bought the TLT Dec23 121 put and sold the Dec23 121 call. Would it be a good idea to roll them out to Jan exp. given that the uncertain market condition and the lighter volume of market participants til year end to have a technical breakdown of TLT? Or wait another day as it eased off pretty quickly after almost touching 123?


  26. Craig
    Thanks.  I was a little concerned about going so far out and I like that little bit at a time strategy.  That really is my goal to get out with a small profit.


  27.   http://slopeofhope.com/2011/03/a-fresh-look-at-the-analog.html
    Tim Knight posted this chart back in March.  Notice how the S&P since March has basically followed the "roadmap".


  28. Phil/Higher    
     
    What do you mean there’s no reason to go higher.  Haven’t you heard that Santa Clause is coming to town!!!!


  29. Phil/Blondie
     
    That was some bad lip synching at the very beginning. 


  30. That is not looking good. I guess a test of 1200 is likely.


  31.  @button,  I have done that recently with my ACI trade that sort of exploded.  I bought it at $17.25 in NOV then it promptly fell all the way down to $13.  So I was buying on the way down and managed to get my cost basis for just the shares down to $15.80.
     
    However, selling the front month calls at my "breakeven if called away" price and rolling along has allowed me to get actual cost basis for the shares all the way down to $14.45 after only 2 months.  At this rate the shares will be almost free by the end of next year and all I have to do is sit back and collect the dividend, or continue to sell front month calls if I get bored.


  32. I have updated the adjusted charts. It’s amazing how we cling to that line that is valid for a year now. Let’s hope we don’t break it again.
    http://www.pentaxon.com/psw/spy_worldcurrency.html


  33.  In case anyone is curious,  these are the type of nice boring income producing trades that I keep in my IRA.  Its kind of fun the check back in near options expiration and see how much I am going to get paid for rolling all my calls along.  Then I get to decide what stocks to spend this months "paycheck" on.  Its really boring but I never met a rich person who was upset that their ride from rags to riches wasn’t more exiting.  



  34. writing some Jan 34 puts on UCO, think it will be a QE3 New Year.


  35. Oops, I was just reminded I have a lunch meeting at noon but I’ll be back by 2.  

    Welcome Vsasanka!  No, I would not short oil at the moment because I think the Dollar is topped at 81 and that, for the short-term, should help oil hold $93 but the indexes and commodities "get used to" the Dollar after it holds a level for a couple of days and then they are able to march on their own again so we just need to see which way things break.  I don’t think oil is worth $93 but what oil is worth has very little to do with the price it’s traded at.  

    Now that we’ve blown the whistle on the NYMEX, there is now a push to drop WTIC as an indicator.  Maybe they will switch to Brent, which is more easily manipulated by ICE, which operates dark pool trading outside of US jurisdiction.  I don’t mind them switching to Brent as it will smooth out the Global fundamentals but the downside is that US Consumers will once again get screwed (so what else is new) as Brent trades about 10% higher on the average.  

    Anyway, so the story on oil is to wait.  This is going to be a crazy, choppy two weeks and I’d wait to see the Dollar over 81 and oil under the $92.50 line before slapping on a futures short (/CL) and, even then, with very tight stops.  If they hold the $93 line, however – I still like them long through the holidays but no way after, when a collapse becomes much more likely.  

    QQQ/8800 – I like the SQQQ better because it’s cheaper and that means a bit less effect from decay and usually more rollable.  I assume you’re not buying 100 or even 50 so smaller OI not too much of a bother, especially if you intend to ride things out.  My only issue is that you’re playing out of the money by 15% so you need a 5% drop in the Nas just to not being in 100% premium.  Your March $24/35 spread is $1.30 with a $9.70 potential upside but that upside needs a 66% move or a 20% drop in the Nas.  If, instead, you were to take the $19/30 bull call spread for $2.30, you are spending an extra dollar and capping your gain at $8.70 but that gain comes on just a 42% drop (14% on the Nas) and you have $2 of intrinsic value to start so the ONLY way you lose money on the trade is if your bullish Nasdaq positions go up.  You can offset them by selling a small number of June $19 puts for $3.70, say 3 for 10 longs and drop your net back to $1.30 and, if the Nas heads higher, you can stop some short puts out at $4.50 or $5 and roll the rest so it won’t inflate your cost too much and being in the money means you have a better chance to pull the spread before too much damage is done.  

    Market turning ugly, led down by Financials taking a bath on news that the Fed will go with Basel capital requirements, which are very strict.  I think it’s just a buying opportunity below $12.50 again (XLF) but we should wait and see how low they can go.  

    Also, as usual, the Republicans just wrecked the markets by cutting the payroll tax after they supposedly passed the bill on Friday – it’s almost surreal how much the Republicans seem determined to play the role of cartoon villains here.  

    FAS Money/StJ – We’re down to $56.80 but we sold the $58s for $2 so no big deal yet.  We’ll have to ride out a test of $12 on XLF which is another 2.5% which can drop FAS 7.5% down to $52 so I think the Jan $50 puts are safe enough but those Dec $58 puts, now $3 could turn ugly so I think selling 1 Jan $56 call for $6 is prudent protection if $12.25 doesn’t hold.  Otherwise, I’m still bullish.  

    IWM Money/StJ – At $41.50, I’m not too worried about that one yet.  If the day ends up negative or we break below 11,800 – then it’s time to sell another call and you can currently get $2.75 for the $45s.  

    AA Money/StJ – I’ll start getting worried if we can’t hold 11,800.  

    XOM/Knight (EVERYONE) – I would keep my cash until next year!  

    RIMM/Button – When you are behind, try to get even, not to win.  You can sell 2013 $13 calls for $3.40 and that brings your net down to $11.86 and you can always roll those to 2014 $15s (now $3.60) unless RIMM gets bought.  Since that’s your plan, if you want to be more aggressive, you can take that extra $1.40 and buy the RIMM 2014 $13/17 bull call spread at $1.20 and now, if RIMM gets bought, you pick up another $2.80 and you are out at net $15.80 with a $3.94 profit, which is not too bad.  If RIMM falls more, you can buy back the short 2013 calls with a profit, take your 2014 $13s (now $4.30) off the table and leave yourself in the stock with the short 2014 $17s and a couple of more Dollars back in your pocket.  

    OK, I have to run to a meeting so try not to let the markets go to hell please!  

    AAPL (yes, AAPL!) weekly $375 puts are $1.35 and make a nice disaster hedge but take the loss if they fail to fail $380 by 1pm or if AAPL goes over $385, which should be about a .50 loss.  By the way, if you are looking at a trade like this and thinking .50 is about where you should get out – don’t forget that should also be what you consider a great profit on the trade if you get lucky the other way.

    Dollar below 80.80 is still bullishly hopeful. 


  36. VZ- Phil- your comments please- I have a b/w in an IRA – sold 12-Jan p/c (35′s)for net $30.55. Considering rolling the caller along to 13-Jan for an additional .95 and putting in an order for the putter at something above the current quote for 13-Jan puts  (3.95) anticipating a bit of a pull back for a better price.


  37.  Hi Pentaxon, are you going to update the VIY indicator?  It was trying to go bullish for the end of January but took another dip last week.


  38. Sucking – i think TOO MANY people are closing out for more cash at end of year…. what a drag!


  39. what about the YE 401k push…seems Santa would come albeit with lighter volume which seemingly could push this up to the higher boundary in the next week or two, in turn wall street bonuses may be batter than if it is left to drift lower. I find it hard to beleive without a real news event that things will crash before January…my two cents




  40. JR
     
    Are you trading today?


  41. /Bought to open 20 Dec weekly QQQ  56 puts for dsp in the AAPL portfolio      1.53 ea.


  42. SPY calendars are working nicely.  I would get ready to roll down the 123 weeklies to 122….


  43. exec Im no JRW but, im short and staying short watching /ES to fail 1202 ..just sold a small portion here.
    I wont be shy about adding on further weakness today….just for a day trade.


  44.  BAC is having an epic battle at the $5.00 line.  


  45. I am a buyer at 1200…..


  46. rdn4evr:
    great I have a fan. ;-) I like my indicator too, but generally people think that is just too much of a crystal ball. I have uploaded the most recent charts. I’d say the rally is out of sight. The "firm trades only" indicator couldn’t get over on the bull side. So it’s predicting more downside to come or at least only a very weak recovery (if you take it very verbatim), anyway certainly no rally in sight in the view of this indicator.


  47. TLT/jabo – thx.  It only made sense with all the T-bills being sold, uncertainty in the EU, and earnings being weak.  I cannot say I have been in TLT the entire year, as it is too much for my little account, but I do do the directional trades when they make sense.  I know that inflation is a worry, but capital preservation will win every time, no matter what ‘inflation’ signals. 


  48. craig/IRA – good stuff.


  49. Money Portfolios / Phil – Thanks. So we’ll keep an eye on XLF (now 12.30). DIA is already below 118, but I guess we can wait until end of day for a decision on entering the IWM Money trade.


  50. angel – maybe 1180 for a bounce…I don’t think 1200 holds.  People are going home for the year, taking their gains & losses with them.  But, using the JRW signal, SPY 121 weeklies for 1.26 jfor a day trade.  May head higher off the trend line and PP.  Out at 1.15 if it fails.


  51. FAS 67/72 jan BCS – Sorry, anyone who recalls, lost track of most recent posts. Are we riding this bull call spread deeper into January? Wondering if I missed a warning or adjustment. Thx in advance.


  52. @Pharm
     
    1209 is the S&P line you should be looking at for the day to trade off of for a bounce, else 1192 is next support.


  53. Hi Phil,
    I had sold and rolled my WFR Puts from $9 till $7 and finally I got assigned. What do you suggest I do. my cost basis is $7.
    Sell covered calls to reduce cost basis. but there are not really very juicy premiums on the call side…
    hurting….
    TIA


  54. palotay / BAC – as scary as the stock is, you can buy the 2.50/5 LEAP BCS and pay for it selling the 5 puts for a mostly free trade, but it’s only interesting if you believe that Buffett has enough sway with the Pres to keep BAC from failing…


  55. All / How do you get alerted to Phil’s trades when a email isn’t sent out?
     
    Since I’m in cash and going to stay that way until Jan 1, I was looking for a way to get alerted when Phil posts a after hours or late night trade.  An example would be the 11.30pm /CL trade last night.  I would have been all over that but I hit the sack around 10.30 to read a book.  
    If I had some type of audible alert, or txt message alert, I would have gotten up and paid for my "mcmuffin".  Any ideas on the tech front?  I’ve tried a few RSS readers, but none of them are great.  Maybe I missed one.  
    Help is appreciated!


  56. The Oxen Group went long on oil with UCO at 36.95. Liked the bounce off the 200-day MA on crude, and it looks like $93 is good floor. Sanction meeting tomorrow on Iran and inventories should create some upside.


  57. BAC / MrM, Palotay – I have been off BAC for a while, but really, there is a reason the premium are crazy… I would stay away from that company. There are other financials better worth your time and money.


  58. PDLI/Pharm – my take on PDLI has been a diminishing royalty stream, like a winding down. what strength/future do you find appealing for these guys?


  59. DMND - For those of you that didn’t get in at 31 when Phil said "The June $36/44 bull call spread is $3 and you can sell the $20 puts for $2.50 for net .50 on the $8 spread." it appears to have perhaps found a bottom at 27.  So the adjusted version of Phil’s original trade would be the JUN 31/39 BCS, selling the JUN 17.50 P for a free trade.
     


  60. TRW still here or on vacation?


  61.  SPY Calendar / Pharm,
    "SPY calendars are working nicely.  I would get ready to roll down the 123 weeklies to 122…."
    I see that the 123 calls (both the short weekly and the long quarterly) can be rolled down to 122 calls for a debit of about 8c.
    The other choice is to buy back the short weekly 123 calls and sell short the weekly 122 calls for a credit of 33c, while leaving the long quarterly calls at 123.
    I think you indicate the second choice here. Am I correct?
    How do you manage a trade like this? Do you hold for another couple of days as long as SPY doesn’t go out of range? This "adjustment" expands the downside window for breakeven from about $117.75 to $116.75 while also increasing the profit potential if SPY were to stagnate at the current price through the end of this week. Which is very nice, of course.
    With your Bear Put Spread recommendations on SPX (which are also working nicely), this adjustment aligns nicely.
    It would be great if you could spend a few minutes coaching us on calendar trade management, picking the different scenarios and walk us through how you’d manage the trade depending on how the market went. Thanks for your insight.


  62. DMND – not enough margin buffer for me to take on (another) speculative play, but our household sure likes their nut thin products. Seems to me they have been coming out with a number of ‘hit’ (and expensive) products lately. I was very suprised when they took the huge knock they have. P/E must have been outrageous because here at 12ish would seem to be about right when things are stable.


  63.   BTU It has come down from 72 in April to 31.50 in August now at 32. 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 32.00 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. 


  64. stjeanluc / BAC – Agreed, I was just throwing out ideas. They have quite a perfect downtrend line on the one year chart, I wouldn’t be a buyer until they break through that.



  65. I definitely agree StJ, I just thought it was interesting.  I’m staying FAR away.


  66.  Phil:  You’ll be glad nor surprised to know that a sophisticated project like pyramid building could not have been pulled off by Herodotus’s "100,000 slaves" story.  Nor was it built by aliens or Jews, for that matter, as occasionally reported:.
     http://www.bbc.co.uk/history/ancient/egyptians/pyramid_builders_01.shtml
     
    http://blogs.discovermagazine.com/80beats/2010/01/11/egypt-finds-tombs-of-pyramid-builders-and-more-evidence-they-were-free-men/


  67. Stop placed on the QQQ puts in the AAPL port. ………1.34


  68. McClellan Oscillator – been mentioned a few times on the site.. new to me. Here is a summary about this indicator from the McClellans..


  69. lflan:
    What’s your stop price on the QQQ puts for AAPL 50K?


  70. UCO looking good.  Oil bucking the market today.


  71. 1.34


  72. Phil……Any predictive value (in minutes or hours) of seeing stock price falling and option price increasing simulataneously?   


  73. Phil/AGNC: bought stock at $27.79 and sold Jan.$28 C at $1.30 for net  $26.49 with plans to also capture dividend of $1.40 which went ex dividend on 12/20.
    got exercised on 12/16.plan to rebuy stock today but would lie your input on which option to sell. thank you


  74.  Guys, any body know where one can check the schedule of Treasury auctions and their result?
    Thx in advance.


  75. why is TLT so srtong today? DXY?


  76. scottmi / McClellan — Not to be confused with the McClelland Indicator: http://www.mcclellands.co.uk/product-range/, To read this indicator you must open the stock cabinet and check how many indicators are available. If there are a number of indicators and each is more full than empty, we are in a bull market. If the number of indicators are few and more than half empty, we are in a bear market. 8)


  77. breadth is dreadful today


  78. UCO / David – what is your stop on this trade?


  79. AAPL showing strength today.


  80. Sell the QQQ puts.


  81. QQQs….out for 1.37


  82. dflam
    AGNC playing the same stk however I feel if you were assigned it would not be a good idea to buy stock today as the same will be much cheaper after 12/20 I rolled and got out of puts as the puts have the lowest price today and the will be much more expensive after dividends.


  83.  Phil, any thoughts one why GNW is going nuts today? Thanks!


  84. Phil,
    Thanks for the SQQQ strategy insights


  85. Mr Mocha -

    We took 1/2 off already for 1%. We have a stop of 2%. Final target is 38.00.


  86. Oh good, looks like I didn’t miss anything – flatlining as expected.  

    Dollar 80.83 and that’s not good.  TBT $17.50, also bad but the brave can short the Jan $18 puts for $1.03.  

    XLF still $12.32 but rejected at $12.40 not too pretty.  Oil $93.85 after another failure at $94.50 that’s starting to make an ugly pattern and gold $1,595 also making an ugly pattern with another rejection at $1,600.

    Dow refuses to lose 11,800 and that’s a good sign – we should look over our Dow components later and decide how much danger there really is.  


  87. When shares/Pak – I know with MOT, for example, when the spun off FSL, you could still trade the combined shares or the new splits but it was very thin – just like you can trade pre-split FAS options.  In general, I’d stay away from those unless you are an arbitrage genius. 

    Your welcome Jthom.  I agree charts are A tool, my problem is when people think they are THE tool.  "When all you have is a hammer, every problem looks like a nail" and all that….

    TLT/Winning – Yes, as of Weds we would have to roll them but not on a one-day 1% jump.  The Dec $121s are $2.80 with TLT at $123.66 so no premium left but the Jan $123s are $2.80 so for no money out of pocket, you can improve yourself $2 in exchange for giving up a month.  I think they calm down sooner so I’m in no hurry to roll but you don’t want that roll to get away from you (begin costing you money) either.  At the moment, the Friday $121 puts can be rolled up to the $123 puts for .48 and that’s the correct move if you intend to stick with them.  

    Lip syching/Rustle – Yeah, they make bands do that on those shows – I’ll bet she had never lip synched before at the time.  I think it’s amazing that people WANT to see bands lip synch in the first place – several have been exposed for it yet people still pay hundreds of dollars to get good seats to see them fake it.  Madeline loves this Japanese band who’s lead singer is a hologram for goodness sake – people actually pay to see it in concert!  


  88. And while we’re waiting, how about a "Caption Contest" !!

    From Slope


  89. PDLI – I still see them as generating cash, so for the next few months (June) like their ability to do just that.  It is a smaller position.

     

    SPY calendars – write up is here.  Much like the AAPL plays that Ifan does, I cannot give you a specific thing to do, as there are infinite scenarios that could play out. I always try to play with a delta of 0.3X for both, so that theta can decay.  I figured this week would be more down or sideways, so that is how I chose the strikes.


  90. JRW- I bet I know what that guy would like to have done with that- LOL!


  91. Amazing line tracking Pentax – actually a very bullish channel we’re in all the way down to that 160 line, which is probably the -5% line at 1,173. 

    SPY in world currency

    Rags to riches/Craig – Good point.  

    VZ/Pstas – So you are in for net $30.55/32.77 and it looks like $35 is in the bag (+$4.45).  Now you are going risk $34.45 for what exactly?  Rolling the caller to the Jan $35s for .95 makes you another .95, less than 1/4 of what you made in this cycle.  I’d take the Jan $35 caller ($3.80) and roll him to 2x the April $37 calls at $2.40 and take the extra dollar and add another and buy 1x of the 2014 $40 calls for $2.05.  Now you’ve raised the call away (still in the money) by $2 on the stock you already have and added a spread that 50% premium ($1.75) but, since you sold 2x the premium, if VZ shoots up so fast you can’t roll, you get called away on the stock and then you have 1x the net $1 credit spread ($2 extra from the stock you made between $35 and $37) which you should be able to roll up with no problem or add more long calls with the cash you get from the stock.  So no upside problem and downside you have good coverage and can follow through with your very smart patient put selling plan.  

    BAC 2013 $2/4 bull call spread at $1.17, selling $3 puts for .70 is net .47 on the $2 spread.  You could instead sell XLF April $12 puts for .90 to diversify the downside risk and drop it to .27 on the $2 spread – essentially a free look at BAC long-term as long as XLF doesn’t totally collapse (again) and, of course, the short puts are rollable. 


  92. LDK – very strong today!


  93. NF/FAS 67/72. As far as I know no adjustments have been made. I assume Phil referred to this spread in his letter this am.


  94. JRW / Caption
    "Sir….a present for your wife.  May it bring her much happiness"


  95. Does anyone know where I can go to retrospectively review past option prices on a day by day or hour by hour basis?  


  96. 5,000 BlackBerry PlayBooks Stolen From A Truck Stop
     
    http://techcrunch.com/2011/12/19/5000-blackberry-playbooks-stolen-from-a-truck-stop/
     
    They just can’t catch a break… (kinda like the Giants this weekend)


  97. All lines are being held, I am already thinking the AAPL puts are not going to work.  They are still $1.10 so little harm done and good for riding out the uncertainty but no sense in letting them go lower when we’re generally holding up.  


  98. IMF having a hard time getting the funds to save Europe. Somehow they expect Italy to cough up 23.5b.


  99. Well that drop was unexpected.  Rolling calls to 122 on SPY.


  100. Ilfan – TOS has thinkback ability for the options.


  101. Phil,
    $DXY spiking to 80.9;
    Any trade on TNA you would recommend?
    Thanks


  102.  I see the games are beginning…


  103.  Ilfan – you can also copy the symbol for a specific contract in ToS (right click, select copy) and paste the symbol by pressing ctrl-V into a chart to plot data for the symbol on a graph.


  104. Caption:
     
    "Enjoy life today,  for the marrow may never come."


  105. FAS/WCP, NF – We were going to see on Monday.  The Jan $67s are still $1.90 and the $72s are $1 and the original spread was $2 so, if we’re giving up, we can pull the $67s and get $1.90 back and then hope the $72s expire worthless and we lose net .10 on the deal.  BUT, with FAS at $56.64, it only takes a 28% move in FAS to get to $72, which is a 9% move in XLF to $13.20 so the question is – are you confident enough that XLF will not retake $13.20 in the next 30 days to risk short FAS $72 calls?  Since $13.20 was the top of the top in December – the answer is "pretty sure" but I’d rather risk only getting $1.50 off the table to be VERY sure and, since we only get net .90 back if we kill the whole trade – waiting is the winning play at the moment. 

    WFR/Rehat – Very long-term recovery program for them, I’d cash at $3.75 as they don’t pay a dividend and pick up 3x of the 2014 $3/5 bull call spreads at .70 ($2.10) and sell 2x of the 2014 $3 puts for .85 ($1.60) so you net $3.25 off the table and your worst case is you’ll own 2x at $3 (plus whatever you already lost) and your upside potential is another $6 (3x $2) if XLF gets back to $5 by then.  Don’t forget, if they get bought, you cash in early and if they pop way up, you cash in most early and, if not, for an extra $2.75 you end up doubling up your number of shares to sell 2015 calls against.  

    Oh no, Dollar shot up to $80.90 and knocked us down hard – that’s messed up.  

    Didn’t catch a reason… 


  106. Lightened up a little more…

    BAC…. broken


  107. Phil, reason very simple, you were thinking of letting the AAPL puts go…my bad, sold them at 1 PM as per your initial instructions…


  108. Phil – RE: "Didn’t catch a reason … " 
     
    Well, just make up a reason … that’s what the MSM does! ;-)


  109. Phil: WCP:  Would you recommend any changes to our FCX short puts?


  110. EU agreement is 50 Billion Euro less than expected on the planned contribution to the IMF Bailout fund.


  111. It was a thing of beauty watching them condition the markets at support levels then…they side step as sell orders come pouring in.

    Hey hey yea GOODBYE


  112. FAS – Thanks, herr and PD. I wish I could say my reasons for just waiting matched Phil’s analysis, but, alas, they did not. Maybe a piece of same but nothing so cogent. I mainly know that FAS can move very fast, that the reasons we opened hadn’t much changed if at all and that ya gotta chill on a bull call spread – or don’t bother playing. Doesn’t mean, of course, there are never adjustments, but it’s not a freak-out-early trade. Thanks, PD. Its like tennis for me – when I started 35 years ago: plateaus of learning/improvement only – and the plateau may stretch longer than expected. Can only play through it to next skill level. Now my one-handed back hand will crush you. Lol.


  113. of which we all know the IMF fund is scam, as they do not have the funds to bail out the EU!  What crap.  Just reset things now.  This is going to be a slow, painful death spiral….

     

    On a more somber note, my HCV write up is almost done.  Here is the preview.


  114. Maybe

    Santa Claus isn’t coming to Wall Street: Merrill analyst

    8 reasons why investors are selling into 2012

    And here is just one:

    7. Cost of the bailouts will triple

    The longer that governments kick the can down the road, the more likely the road washes out. Countries are acting as if time is on their side, and they can just wait out their creditors, force the private sector to take 70% losses, and print money at the last minute if necessary to paper over the mess. But the longer they wait, outside experts believe, the more likely that countries default, banks go under, millions lose jobs, loans go unmade, and the crisis deepens. Figure the cost tops $5 trillion !


  115. This euromess will only be over when Deutsche Bank needs a bailout and Ackerman calls Merkel and tells her to change her tune and let the ECB do what everybody agrees is needed.  Sadly, it is only a matter of time for this to occur and in the meantime the cost of her policy error to the world grows larger and larger.  History will not be kind to Merkel on this one!


  116. Phil, Pharmboy-
    VRUS offers an arbitrage play where the the stock price action and options action are sending contradictory signals.
    Sell 1X Jan 130 C @  5.80
    Buy 3X Jan 140C @ .15 (.5 each)
    If stock stays below 130, get to keep the entire 5.75
    Loss between 135.80 and 142.10
    Profits in case there is a competing offer on the table above 142.
    My guess is that this is a binary deal. Either it goes through as planned and closes at 137 in Q1. 99% chance.
    Or if there is a bad result in the PSI-7977. then the deal is off and the stock tumbles to much below pre-acquisition levels. Very unlikely <1% chance.
     
    On the upside there is very little chance of a higher bid. But to protect yourself from this possibility I have bought 3X the 140′s just in case. They are 5c.
    The 130/140 spreads @5.80 could cost you $4.20 if there is a higher bid. The long 140′s will offset that if the bid is > $142.10. And whatever bid comes will have to be more than $5 to make it worth everyones time and the penalties for the deal not closing.

    Now there is the possibility that the stock hits 135.80 or more by Jan 21. But judging from the uncertainty in the trial data and the holidays, its unlikely we close the deal by Jan 21.
     
     
     

     


  117. lv – do you really think Merckel is the only one?  If I were an ECB member, and my country was ‘playing by the rules’, I would run, not walk away so fast….that even if I paid the price now, it will be much better than later. 


  118. FU PPT…they need to let nature take its course..


  119. VRUS/onc – I think that is a great trade if you have kahunas to play it.  GILD is one dumb company, although the company fits into their portfolio nicely.  Other potential bids, well, that premium is pretty darn high, so I am not sure who would come in to outbid them….


  120. Actually, AAPL is holding up very well in this environment…


  121. ‘the great dear leader has a moment of self doubt!’


  122. i like th eway the ecb thinks..’italy bailing out italy’


  123. Phil, when do you advocate closing one leg of a spread? In the case with FAS, why not buy back the $72s and wait out the $67s? TIA.


  124. spain’s in for 15 billion….now thems huevos not dollars!


  125. Anger – so where on the wave of financial risk/oppty falls Anger? this is a disgusting market. 


  126. Dow below 11800, RUT below 715. Is it worth going short withTZA and SPXU


  127. Buying back the 119 SPY calendar puts.  That’s good enough.


  128.  Closing the 63 Calls in FAS Strangle.


  129. dsk
     
    “The problem is that they are still in denial,” he said

    Read more: http://www.businessinsider.com/dsk-no-firewall-exists-europe-has-only-weeks-2011-12#ixzz1h15QsxXm


  130. Alerts/Burr – Can’t send out an Alert every time I have a trade idea or that would be half your mailbox.  There are tons of RSS readers and you just need to find one that’s configurable but I super do not recommend having yourself woken up at 3am to make a trade.  IF I happen to be up AND I happen to see a set-up with a good possibility of success, THEN I will say something but I’m still wrong as often as right – that’s certainly not worth losing sleep over.  Right now, for example, we just spiked down on a Dollar spike up but, as the Dollar is between 80.80 and 81 – there’s no trade as we don’t have resistance to work with.  We do have breakdown weakness but we already hedged that earlier with SQQQ and EDZ on Friday and, of course, if you are in cash – the whole point is to have a nice, relaxing holiday – there’s always going to be another trade…

    DMND/Mr. M – Good adjustment.  

    DMND/Scott – It’s all about accounting issues.  Possible embezzlement by someone in accounting dept but I do not believe there was systemic fraud.  Obviously, others think otherwise and it will take some time before we see who’s right.  

    BTU/TXChilli – I certainly like that one.  They are a great company to establish a long-term position.  Just bear in mind that they CAN go back to $18 but they can also go back to $70 after that.  I don’t think they have a loser position in the next election as Obama likes "clean" coal and the Reps like dirty coal or any kind of coal.  The only reason coal isn’t bigger is because we are miles away from peak oil but we’ll get there one day.  

    Pyramids/ZZ – Ah, that’s a debate for another day.  

    Predictive/Pharm – If a stock price falls and an option price (calls, I assume) go up at the same time, you have to look at the delta VIX moving faster than the delta decline in stock price plus maybe a simple lack of transactions at the strike keeping the last sale unrealistically high.  If I actually see sales going off at a higher than expected price – that can predict some bottoming action – sometimes a fund will begin layering in calls before they begin buying the stock to lock in prices.  Almost a no-lose if they know that they are buying enough to move the needle back up.  

    80.94.  

    AGNC/Dflam – At $28.97 the call premiums are crap but I’d sell the the 2014 $27s for $2 and the $20 puts for $5 to knock the basis down to about $19, with 2x at the same if they fail.  Since they have little premium, if AGNC does fall down below $25, you can buy back the current caller for maybe $1 profit (delta is .73 but I doubt it would hold up) and then sell 2x the $25s for $2 or more (now $4.50) as you have the offsetting puts which would be pumped up to about $7.  If they head back up, you can buy more stock or stop out 1/2 the callers and, if not, you’re well covered.  

    TBills/IZega – I don’t know a good place that collects them.  

    TLT/Jabob – Strong Dollar means people don’t need as much money for the TBill as they expect the value in Dollars to increase relative to other currency.  Also, TIPS auction went off negative and that means people betting on deflation, not inflation at the moment.  

    Oops, that’s the Bell – what a crap day.  I’ll keep catching up on comments. 


  131. Pharm – Yeah, many more will have their place in the hall of shame for misguided policy moves.  The ECB is trying to do stealth QE to limit the rise of sovereign yields and at the same time make public statements that appease German politicians but are contrary to required actions.   Once the solvency of DB is in question due to downgrades and italian default scenarios, the charade will be over.


  132. FAS Strangle – As planned, I closed the winning side of the strangle today for a 50% win. The put side is only 5% away so the plan for tomorrow as usual will be to sell a set of calls closer to the current price and see what happens with the put side.


  133. New levels for tomorrow:

     

    IWM  69.62,  70.10,  70.54,  70.96,  71.59,  71.89,  72.15,  72.56,  72.98,  73.24,  and  73.51


  134. Isle of Man TT – More exciting that the market. WAY more.


  135. Money Portfolio / Phil – I guess we wait until tomorrow to see what happens now as this finish is pushed right to our downside limits! XLF finished right at $12.25… 


  136. Isle of Man TT / Scottmi – Just as dangerous though! 


  137. JRW  What are you projecting tomorrow open?


  138.  LVMODA: off topic
    Is your club anywhere near where the Pawn Stars on the history channel is?  Kind of looks like you neighborhood.


  139. FU Egypt and Syria!!!--disgusting…
     
    http://video.msnbc.msn.com/msnbc-tv/45725844/#45725844


  140.  Pentaxon – Thanks – I’m sure your crystal ball is just as good as anyone else’s!  That indicator doesn’t look good for February anymore.  But, it does look a lot like the period in summer of 2010 where there was a pretty good tradeable bounce in July prior to the August low before we went up up and away with the QE2 announcement.   That’s probably where we’re going to be in 1st q 2012, without QE3 it’ll look like 2008.


  141. AAPL bucked the downward trend in tech all day.  Now take a look at the last 5 trading days in AAPL.  Actually, look carefull at the last 10 days.  Do you see a pattern?    Every day  except one the stock is selling for more at 10 a.m. than it is at close.  An on the one exception day it is even.   Now look at today’s action on the Jan 380s.   Closed yesterday at 14.88, high today of  16.80 and close at 14.75.   Note the 2.00 difference between yesterdays’ close and today’s high, about 2.00.   Now look at the 390s.  Close yesterday at 10.24, high today of  11.60 and close today at 9.83,  the difference between yesterdays close and todays high of about 1.40.   This was with AAPL working in about a 4 point range all day.  It likes a 4 to 6 point range during each day.  So AAPL wants to swing, and I’m going to swing with it tomorrow.  I’m placing a sell order on our 5 Jan 380 puts of 17.50 …..placing this before tomorrows open.  If they dump out I will buy back later in the day.  On the Jan 390s I will place a sell order for 1/2 or 7 of them for 12.50, again, believing I can buy them back cheaper at EOD.   Now check with me early a.m., as I may change the prices (but not the plan) depending upon premarket action. 


  142. chasw / Open

    No, "they" can do anything premarket; just new lower supports !!

    Good hunting !!


  143. Lincoln -  Gold and Silver Pawn is located on the edge of the old downtown area and my place is in Chinatown west of the strip.  Most of the Vegas area has that same run-down look of tired 60′s/70′s cheap construction…lol!


  144.  JRW,
    Caption: " No try without vaseline!"


  145. GNW/Tarpoon – Just getting slammed with Financials I think.  

    Caption/JRW – "North Korea seeks to destabilize Israeli economy with giant irradiated pickle exports."  Actually, it looks like the guy in the back right of that picture was already thinking of a good one….

    Past options/Iflan – I use the Quick Chart function in TOS (right-click on any symbol) and, if it doesn’t fit there, I copy the code to the Active Trader chart, which has more room.  In active trader, you must have a "." before the symbol.  That works on Paper Money as well.  I also use Investools for backward option charting – also very good but subscription.  

    Stolen Playbooks/Burrben – At least that’s an indication of SOME demand!  What would really suck would be if the truck is found abandoned later on with the cargo intact and a not from the thieves that says "Sorry, we thought they were IPads."  

    And no mentioning the Giants!  

    TNA/Jasu – Temping but I want to see the Dollar confirm up or down first.  Unless you are uber-bearish and need an upside hedge, I’d avoid taking aggressive upside plays like TNA as the trend is not your friend at the moment.  

    AAPL/Jerconn – I forgot I said that, it was the right call, even though it would have worked out to hold them in the end.  

    Reason/Diamond – Yeah, I’m funny that way, I like to see something real…

    FCX/Etrad – No, I’m confident in the target holding but may be painful to look at for a while.  Copper is not willing to give up $3.30 – even with all this bad news.  

    $50Bn/LV – I suppose that’s why the drop, disappointment.  Meanwhile, Draghi is pumping about $1Tn into the economy through the back door and no one seems to notice.  

    Tennis/NF – Good analogy.  Now we saw a pretty violent market move down but XLF held $12.20 so building evidence that supports bottom theory around here.  

    Reasons/JRW – I have to agree with that one.  How can they let this go further – it’s insane!  

    VRUS/Oncmed – Those plays are fun but make sure you have the math right.   You spend .45 of your $5.80 so max gain on a drop is $5.35, not $5.75.  At $140, you owe the caller $10 ($4.65 loss) and you don’t get even until $42.32 as the one covering the calls will never make money for you so your loss window is $135.35 to $142.32 but that’s EXACTLY what the offer price is so, essentially, you are just betting on a + or – move of about 3%.  The spreads are too wide to even suggest an alternative – it’s a very dangerous game is all…

    FAS/Winning – That would take us from being the people selling premium to being the suckers paying it.  Not only that, but you propose to INCREASE the premium we pay by 200% AFTER the trade is clearly off track?  No thanks.

    Anger/Scott – I know the 5 stages of dying are supposed to be Anger, Denial, Bargaining, Depression and Acceptance.  Since we have denial and depression on this chart, I’d say anger fits in just fine between anxiety and Denial – let’s see if that holds up. 

    Shorting/Spiyer – If we follow though, then plenty of time to jump on short train but hard to trust low-volume sell-off based mostly on Dollar up in more Euro-panic – it’s just getting old.  

    Money/StJ – Waiting is fulfillment.  

    LOL L4!  


  146. From Leaf West at Slope.


  147. Caption/JRW: "I said I GIANT NUKES not CUKES YOU IMBECILE!"


  148. A good assessment of RIM’s present value by NYU professor Aswath Damodaran.
    Living within your limits: Thoughts on Research In Motion (RIM)
    He thinks the stock is undervalued, but only if they stop R&D and milk its current business and return profits to shareholders.
     
    "As a potential stockholder in RIM, here is my unsolicited advice to the management of the company. Rather than fight the critiques of your product (that it is closed, corporate and limited), embrace them. In fact, I have names for your next few models: the Boring Blackberry, the Blackberry Funsucker and the Blackberry Stolid. Let’s face it! The primary market for Blackberries is composed of paranoid (often with good reason) corporate entities that worry about their employees revealing business secrets and playing games on their iPhone and Android Apps, and you will appeal to them with your "cant have fun with these" Blackberries. Disband your research and development teams, forget about product revamps and don’t even dream about more Playbooks. In effect, accept that you are an "old company" and behave like one. Your stockholders will be deeply grateful!"


  149. kinkistyle / Giant Cukes
     

    rofl smileys



  150. Anger/Denial – well, between my disgruntlement, and DSKs assertions of denail.. tells me we’re at the start of a ride down… get on your ultrashorts!


  151.  Kinki
     
    Thanks for the laugh! Much needed after today’s market.


  152. denail.. oops! "denial"   
    and PS.. as i’m ‘capitulating’ out of my longs, almost surely means we’re going to get a huge bear rally.  Once i finish getting all sold off that is. And considering that likelihood just makes me angrier! Grrr!



  153. BTW if we hold current levels and bounce – the graphs may look as up trend?


  154. I received this today, make of it what you will, written by GS Dec.13th, so it’s not exactly hot news, but is interesting. I am translating the intro, the rest is GS in English: [sorry if the yellow highlighting remains, couldn't get rid of it]
    "Tomorrow the BCE is opening a large line of credit for Euro banks, which purports to lend them all the liquidity they might need at 1% for 3 years; if the take-up is substantial, it could cover all their liquidity needs for 2012-2013, perhaps reducing both bank and sovereign risks and holding down rates."  [LTRO = long term refinancing operation]
     
    From GS: We may be in a position in 10 weeks time where EU banks have secured an incremental €1,000 bn+ of 3-year funding to variable rate equal to ECB rate, and thereby completely pre-funded all their needs for 2012 and 2013 – ‘must-read’ report and ‘must-listen-in-to’ conf call replay. Jernej Omahen’s EU banks report quantifying the implications of ECB’s recent announcements and the replay of his accompanying conf call are both mandatory reading/listening for anyone with an interest in the equity market and/or bank sector. The bottom-line is that we are likely to be in a position in 10 weeks time where the EU banks sector has secured an incremental €1,000 bn+ of 3-year funding to a variable rate equal to the ECB rate (currently 1%, market pricing in further decline in 2012), and thereby completely pre-funded all their needs for 2012 and 2013, at a rate which is 300 bp+ cheaper than market funding (if available at all). This should reduce funding risk substantially and potentially generate significant amounts of capital (e.g. €1 trn x 300 bp = €30 bn per annum). Given that the bank sector has u/p market by -3% since the ECB announcements, and only is up +3% from its all-time market-relative low in late November, this seems to be overlooked by market. Even though the sovereign crisis will continue to be a major headwind until resolved (our best guess still late 1Q/early 2Q), it looks like banks should be in a decent position to o/p into and after the Dec 20 and Feb 28 LTROs. Sovereign yields could also benefit if perceived risk of bank system back stops decline, and/or some banks start using 1% 3-year ECB funding to buy sovereign paper at 5%+ yields (more likely at short-end of curve), which in turn would be supportive for risky assets overall.


  155.  "Tomorrow" refers to December 20, 2011.


  156.  Ah, and Phil, "When all you have is a hammer…." correctly has quotes around it — I borrowed it myself, and added it to a comment last week.  "Hope is not a strategy", however, is an original of mine.  You can imagine that the context of its coining was not a happy one.  I have become very clear on the distinction since then; I’m glad you find it useful, 


  157. patent lawsuit/Iflan:  I think this may be only a minor victory for Apple.  The patent ruled in favor of Apple covered the process of searching for a phone number in an e-mail and tagging it with HTML.  Kind of a narrow patent on a specific function (that is quite generic, but i digress).  
    The lawsuit was over 10 separate patents, I believe, and all were dismissed except for this one.  So HTC can take that function out and ship it without that specific function.   Though I bet someone hacks it or makes an app for it the next day.
     
    "Water is fluid, soft, and yielding. But water will wear away rock, which is rigid and cannot yield. As a rule, whatever is fluid, soft, and yielding will overcome whatever is rigid and hard." – Lao Tzu


  158. zero:
    Did you receive that story from a friend or directly from GS?  It will have a major impact on markets if true.  Don’t you think?


  159. Anyone know how to scan for stocks that are trading for less than their net cash per share?


  160.  DC:  The original Goldman piece was sent to me; I don’t have a GS account, but work with people who have access to their material.  It came out on Dec.13, as mentioned, and GS itself seems surprised that the news — it’s not a secret – has had so little impact.  The variable seems to be whether the banks take the ECB up on it; many seem to feel that accessing the facility would show weakness, and might be a bad idea for them.  Given their capital position, in the aggregate, I think many of them will get over it and draw down.  I hesitate to call something a game changer when the news has been in the market for a week and hasn’t changed anything I can see.  But it appears to have that potential, and I have held up on reducing certain equity positions and will definitely reduce my Euro short hedge given a window to do so.  Staying loose, in other words.


  161. Hi Phil,
    The buyout price for VRUS is 137.
    The 130 Calls were 5.80
    The 3X 140 Calls were .15 total (.05 each)
    Net spread 5.65 CR
    So by Jan ’12 if VRUS  has hit the buyout price then one will lose upto $1.35
    I find the risk ($1.35)/reward ($5.65) ratio worthwhile.
    Given the uncertainty hanging around the results of one of the compounds in the QUANTUM trial, there is surely going to be increased scrutiny, possibly delaying the completion of the merger. Add to that the upcoming holidays. Given that the deal was announced on Nov 19, its unlikely for a major pharma acquisition to be completed in 60 days.
    There is a minimum possibility that there could be a bidding war. The bids would have to be over $144 ($7/share) to make sense for VRUS to reconsider the the current offer of $137 since there is a 400MM ($7/share) termination fee. Hence the 3X covers. So its likely that the stock would end up either around 137 or in the case of a bidding war above 144, both likely profitable scenarios.
    I was just wondering if you had any ideas on further improving the odds of success on this trade. Selling offsetting Puts seems to be a very risky proposition given it could drop 60-90 pts if the deal falls through. I was thinking of selling Jan 38/36 Put Spread for $.62 on GILD instead to cover part of  the $1.35 exposure of the VRUS call spread.


  162. Good morning!

    We’re off to the races today as the VP of the ECB, Vitor Constancio, finally smacks down the bears by simply saying what I’ve been saying for ages regarding the possible break-up of the Euro or the EU:  

    “It’s still absurd and unthinkable in many senses of the word for people who really understand what it means to have a monetary union, it’s really unmanageable and unthinkable.

    “Some people that seem to think about it or have the idea of preparing for it, they don’t know what they’re talking about.  In my view, it’s still not going to happen.”

    Constâncio said the ECB was determined to stick with its current policy of introducing new three-year funds to try to counter the freeze in interbank lending, and support greater fiscal integration in the euro zone.  “What we decided is very recent and it’s enough, but we never pre-commit, so we will see,” he said.  “So far, we think the decisions we made are very significant and should be enough for the objectives that we are responsible to attain.”

    About time someone pointed out the obvious.  As I said yesterday, the only reason the Dollar is so high is on fear of the Euro and all it takes is a rational word or two and the Dollar drops like a rock, back to 80.40 now, after testing 81 last night, with midnight giving us out tippy top on the Dollar and low in the futures. 

    Oil shot back over $95, Gasoline (/RB) came back off that $2.50 mark and now $2.526, Nat gas is $3.13, gold $1,606, silver $29.32 and copper $3.34.  Major congrats to those who took the (/CL) longs off that $93 line – money money money!  

    Unfortunately, so far, the markets are only up 1% at 5:30 , not a very impressive performance with an almost 1% drop in the Dollar.  Asia had closed pretty flat and DAX and CAC are up 1% but FTSE flat (still not participating in bailouts) but the Nikkei futures have pooped about 1.2%, over the day’s trading high.   

    The Euro is at $1.307, the Pound $1.5632 with 77.88 Yen to the Dollar and 1.2177 Francs to the Euro.  

    I think the Dollar is consolidating for a further move down, if they break below $80.40 we could have a good reversal day  but there will be plenty of Dollar bargain hunters on the way down.  That sudden move up in the Dollar yesterday that we, fortunately, did not believe – may have been a blow-off spike to flush the shorts before moving down.  

    It’s certainly going to be an interesting day, in any case.  


  163. Ad for Edison United Manufacturing. RIMM/Kinki – I agree they are undervalued, of course but I don’t believe they should stop trying.  He’s right about Corporations, that’s why RIMM isn’t going to die a quick death as NO ONE offers the security of a BBerry.  While many company users are demanding smart phones, not every company is going to say yes.  Maybe RIMM should hire some hackers and start planting phone viruses and stealing data from the competition but that doesn’t mean they can’t do their R&D because what happens when they perfect the secure smart-phone with all their patent background?  If Damodaran were around 100 years ago, I’m sure he would have said:

    "As a potential stockholder in the Edison United Company, I think they should abandon this foolish quest for so-called "incandescent" lighting and stick to the boring old electric lamp, which has plenty of sales and plenty of customers who don’t want or need lights in more than one room in the home or office."

    Edison didn’t invent the light bulb (they were around for 50 years before his) – he perfected it – after many, many, many attempts, saying:  "I have not failed 1,000 times. I have successfully discovered 1,000 ways to NOT make a light bulb."

    Sprint/Pharm – No way, same monopoly BS with S.  S and TMobile can get together but T has apparently been told:  "No mergers for you!"  


  164. Grrrr/Scott – Good call!  

    Big Chart – Don’t mean a thing as we swing between our lines (doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah, doo-ah). 

    AAPL patents/Iflan – I am just stunned that AAPL couldn’t get a sweeping patent on the entire concept of a smart phone – they were miles ahead of everyone else and CLEARLY everyone else just copied them.  I was at the Wired Store in NYC this weekend, looking at all the tablets and they essentially rank in popularity by how much they are exactly like an IPad.  It was also very telling that EVERY display that used a tablet for interaction was using an IPad – despite there being about 100 different companies represented.  The only really cool thing I saw that was different was HP’s new touch computer, which is a 27-inch screen/computer with a touch interface that runs windows normally with a keyboard that comes on screen when you need it.  Now somewhere in between that and an IPad is my FlatTop!  

    BCE/ZZ – Yep, that’s more than I thought ($1.4Tn) and, as I keep saying PLENTY of money to kick the can 2 years down the road.  This crisis is over for now.  

    Cash per share/Burr – You can add it to the standard Google stock screener.  The problem is, I don’t know if it’s accurate or perhaps it’s just not net as it shows GS with $78.40 a share but I guess it’s a good jumping off point to find a few gems like KYO, who have a very surprising amount of cash and almost no debt.  

    Game changer/ZZ – That was my initial impression too but nothing happened.  Very strange.  

    VRUS/Oncmed – Ah .15 total.  How do you see the risk at $1.35 if they get bought for $140 in the end?  Bumping up a price to please shareholders ahead of a vote is routine.  As I said, I wouldn’t trade them (we did sell some very low puts early on when they were still fetching a good price) because the spreads are ridiculously wide and you can’t get realistic entries or exits.  

    Dollar holding 80.40 so far.  Europe still up about 1% – they just can’t seem to get people excited about the markets into the end of the year. 


  165. In Capitol, Investors Pay for Trading Tips

    Seeking advance word of government decisions is part of a growing, lucrative—and legal—practice in Washington that employs brokers, lobbyists and political insiders who arrange meetings between hedge funds and officials. 


  166. RIMM/Phil:  Edison was a genius and a cunning businessman — as was Jobs & Co. and the Google managers. I don’t know if RIMM management can be grouped in that same category at the moment….  I guess Damodaran is assuming RIMM staff is incompetent and is looking for that last "puff" on that still half-smoked cigar butt. 
     
    But, at this point, any step forward is probably a huge upside surprise for them, seeing as how they are so universally hated.  Maybe if they started selling furry boots or yoga pants?


  167. AAPL portfolio alert:    Here is the plan for this morning:    Place standing orders to sell 5 Jan 380 calls for 18.50 and sell 5 of the 15 Jan 390 calls for 13.00.  


  168. lflantheman,
    Do you think they are going to sell down after the open.. What is the stop on the appl 5 Jan 380 calls
    Thanks,
    Sasanka