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Thrilling Thursday – Our “One Trade” Does Good!


One trade to rule them all!

That was our goal and our one precious trade for 2012 was BAC on January 5th, buying the stock at $5.75 and selling the 2013 $5 puts and calls for $2.55 for a net $3.20/4.10 entry (see "How to Buy a Stock for a 15-20% Discount" for more on this strategy).  On Tuesday afternoon, I modified the entry live on TV at about 3:45, with BAC at $6.70 and you can see the immediate reaction the stock had on my pick into the close.  

BAC was $6.49 on Tuesday afternoon at the start of my interview but the 2013 $5 puts and calls were $3.10 so the net was only $3.39/4.20 – not a huge change.  BAC came through on earnings this morning and is up at $7.20 pre-market and we're well on our way to our 56% profit target, now with a 30% cushion. 

It's no wonder that the TV crowd jumps on my picks as my last two appearances gave them a GNW spread on 10/24 for a 127% gain and an AXP spread from 10/5 for a 140% gain.  BAC was, by comparison, a fairly conservative play and that's because, as you know if you've been reading this week – I'm not entirely convinced that this rally is sustainable – but I'm feeling much better about it now that we have BAC earnings out of the way!  

This is a great time to thank my friendbuddypal Jim Cramer for chasing all his sheeple out of BAC this year with his SELLSELLSELL rating – without you and your half-assed opinions Jim, we'd have to work for a living!  Why just yesterday, my trade idea for Members in the morning Alert was the FAS Feb $67/70 bull call spread at $2, selling the Feb $55 puts for $1.30 for net .70 on the $3 spread but last night – Jim didn't like my bullish Financials pick:

Financials were, in fact, one of my "Secret Santa's Inflation Hedges for 2011" that were published on Christmas Day, 2010 (and you can read that post for the logic behind each trade).  All 4 of those trades are done tomorrow so let's see how they performed for the year:

  • 30 XHB Jan $15/18 bull call spreads at $1.40 ($4,200), selling 20 XHB Jan $14 puts for $1.70 ($3,400) for net $800.   

XHB Finished the day yesterday at $19.12 so we collect $3 on the bull call spread ($9,000) and the short puts expire worthless for a $4,800 gain (600%).  

  • 2 XLE Jan $55/60 bull call spreads at $2.60 ($520), selling 1 Jan $50 put for $4 ($400) for net $120.  

This was a trade just to pay for gas and the 2012 spread finished at $1,000 and the puts are expiring worthless with XLE at $71.08 yesterday so a profit of $880 is up 733% for the year – paying for a few tanks of gas, as intended.  

  • 6 DBA Jan $26/29 bull call spreads at $1.90 ($1,140), selling 4 DBA Jan $25 puts for $1.90 ($760) for net $380

The Jan 2012 spread finished way in the money for $1,800 and DBA closed yesterday at $28.63 so the short puts should expire worthless and that's a net profit of $1,420 or 373%.  The goal was to knock $100 a month off the cost of groceries.  

  • 40 XLF Jan $12/13 bull call spread at .80 ($3,200), selling 40 Jan $11 puts for .40 ($1,600) for net $1,600.  

XLF finished the day at $13.92 so we collect $4,000 on the bull call spread and owe nothing on the short puts for a $2,400 gain (150%)

Wasn't that fun!  Just like BAC, I love to have just a few simple trades for lazy people (or people who have real lives) that don't want to sit around trading all day trying to "beat the market."  The trick is to be realistic.  If you have $100,000 to invest and you hope to make 10% for the year – then you only need to put $1,500 into a trade that has the potential to make 733%, right?

In this case, $2,900 of cash put into these inflation hedges returns $9,500 – a very respectable blended 227% gain and, of course, as inflation hedges against things you are forced to buy every day – if they "lose" then you spend less at the pump and at the grocery store so it's a true hedge, meant to guarantee your buying power at the cost (potentially) of some of the savings you would have gotten if we were wrong and hit a deflationary cycle.  As it was, 227% has kept us well ahead of actual inflation – so far!  

We've been holding off on getting bullish in 2012 until we A) See some earnings and B) See the NYSE over our 7,866 target.  Earnings have not been that hot and the NYSE has exactly 100 points to go after yesterday's close as it sits at a very unusual 10% below the Dow's on our 5% Rule Big Chart.  

The Dow has it's own big level to hit at 12,749 and it's not likely to happen today but let's now prepare to get bullish next week.  I'll be laying out a new round of Inflation Hedges for 2012 and we'll certainly have more upside picks like yesterday's FAS trade idea but first we need our indexes to SHOW US THE LEVELS!  

Corporate earnings are simply not that impressive so far, we still have a concern about Europe that doesn't seem too irrational and who knows what's going on in China but it doesn't sound all that good.  We're not seeing data that reassures us the US itself isn't in the throes of a recession (but we are definitely in denial of one) and it's gotta be a concern that the ECB handed out €489Bn to EU banks and they simply turned around and deposited €502B in the ECB's overnight facility (a record).  You're not creating economic liquidity when all the banks do is park the money and collect interest! 

Putting on my happy hat though, we are seeing a flow of capital out of bonds and into equities.  Perhaps the ridiculously low rates paid for bond risk – even as Greece prepares to give their bondholders 70% haircuts with other countries in just as bad shape – is forcing people to move to dividend-paying stocks as well as riskier equities in search of the kind of returns that can keep them up with inflation.  

We've been partial to cash and cash has been very good to us as the Dollar has marched from 74 in October to 82 last week – giving us 10% more buying power from our sidelined money but if the Euro is "fixed" and getting stronger – we need to get off the sidelines and into things that generate good returns – like our One BAC trade or yesterday's more aggressive FAS spread.  

Last Wednesday, I reviewed or trades from the first 5 sessions of 2012 and we were surprisingly bullish but that was because there were lots of good bullish opportunities and, above all, we try to stay balanced – no matter how bullish or bearish we feel.  

Recently, we've seen better ISM numbers in the US (53.9) and Consumer Confidence jumped to 74 while Chinese GDP is rolling along at an 8.9% growth rate.  China's Industrial Production rose 12.8% in 2011 and, although they seemed to slow down in Q4 (waiting for better data), we are not yet making a good case for a "hard landing" over there.  Just this morning, in fact, the PBOC put their foot back on the gas and will allow the Nation's 5 largest banks to increase Q1 lending by 5% over last year (when their lending seemed out of control). 

This is the kind of NEW INFORMATION that forces us to rethink our bearish premise.  We already know the ECB is pouring $1.5Tn into the Banks through the EFSF and the Fed has put in Trillions of Dollars through the back door into US banks and the BOJ and the SNB are both printing like crazy trying to devalue their own currencies at least fast enough to keep up with the money printing in the US and EU so, at a certain point – we can't afford to be bearish or we may drown at the bottom of Trillions of freshly printed Yen, Euros, Francs and Dollars – money, Money, MONEY!  


Over in the Eurozone, those bond auctions are certainly going swell so far, just weeks after $700Bn was dumped into the market and 3% on French paper certainly beats 0.25% in the overnight vaults of the ECB and it's "so far – so good" except we're only taking the first of 1,000 steps towards a true recovery.  Oh sorry, I'm supposed to be thinking only happy thoughts…  

We got our EU downgrades and they were taken in stride and Germany's ZEW Investor Survey dramatically improved and they are the guys with all the money in the EU so we have to pay heed to their opinion on the subject.  So our risk factors are certainly "improving" and certainly better looking than they seemed before the ECB pledged another Trillion Euros and, from the EU's perspective, before Obama had another $1.2Tn of his own spending money "approved" (ie. not blocked) yesterday.  

So it's MONEYMONEYMONEY keeping the markets from going down in 2012 – so far and, if they can keep it up next week – we'll have to start taking it seriously.  For the rest of this week, however, we'll continue to just sit back and enjoy the show!  

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  1. FYI / IB /CL Futures
    IB will not allow Feb Oil futures trading any longer since it violates their complex physical delivery settlement policy.  We have to use Mar futures that are around 0.15 above Feb contracts.  Grrr. ……  Missed the latest move at 102 since my order was rejected.
    Does TOS have such non-sense or are you still trading the Feb12 contract?

  2. lflan, got your post this morning. I fixed the position. I'll post the current position after market open this morning. Thanks for catching the problem.

  3. Oil Lines

    R3 – 104.77
    R2 – 103.50
    R1 – 102.53
    PP – 101.26
    S1 – 100.29
    S2 – 99.02
    S3 – 98.05

    Yesterday's high and low – 102.24 / 100

    Breakout lines – 105.86 / 94.13

  4. All,
    I am not getting any email alerts/ updates from PSW. Greg said to fix the whitelist issue??? Anyone know how to tweak firefox so I can receive these email alerts from Phil. Thank you in advance for the help and guidance.

  5. JASU,
    Check your account on PSW.  (upper right corner) I had the same issue once and somehow the email preferences became unchecked.

  6. FAS Strangle – Well, history repeats itself… Just like last week it looks like we'll be breaching our call side this morning. But like last week, we need to be patient and wait out the surge. We might get lucky again, if not, there is next week or next month to roll to!

  7. Burrben / CL – TOS has both Feb and Mar available now identified as /CL and /CLH2 respectively and with Mar tracking about $0.15-0.20 higher. There was some weirdness for a few  minutes last night at the start of Thursday trading with /CL showing the Mar contract but that got straightened out quickly. These are physically settled contracts so for financial traders with no ability to take settlement I can understand brokers taking a cautious approach. Don't know if/when TOS boots you out of the front month, though. Someone (like Phil) probably knows more about this.

  8. i am gong to take a short off of of my 1310 target ..10 day exponential moving average for the SP is still only about 20 points below the index… we are not extremely overbought…. shorting here a gives me some pause…and play it for about 25 spu points..

  9. Exec,
    All alerts' boxes checked in my account. Still did not work….but thank you for pointing me in the right direction. 

  10. Phil, 
    Any more inflation or "lifestyle" hedges for 2012?

  11. jasu1 – Who is your ISP? They maintain their whitelist.

  12. I don't remember who said it over at Slope or maybe Cobra's site, but by 7:30 am (10:30 EST), the low of the day has been put in and it is a 'go long' from there to the EOD.

    PP for today:

  13. not quite following your call angelcur…..are you placing a short at around 1310 or taking it off as in closing it out?
    waiting in cash ………if the dollar starts getting dumped here there is the fuel for a real rally higher……the risk i see, and Draghi has already told the market this morning that the next LTRO will not be as large as the first but still very substantial.
    one major stim already signaled into the pipeline….makes me leary of being short for other than shallow dips

  14. Phil/SOPA
    It does depend a bit on how the law is enforced. It does seem reasonable that it should be illegal to use the Internet to sell bootleg movies, music, e-books, narcotics, illegal prostitution, disseminate viruses, spam, etc., and that those who profit from promoting those services should be stopped from doing so. The devil is in the details of how this is to be done. For example, if someone plants a virus on my computer and then demands that I send a VISA payment to have it lifted, why should not VISA (V) which is a publicly traded company be liable to provide me with a new computer, or else at least provide law enforcement with details of who is getting the money for this or face closure of VISA and confiscation of its assets. Possibly the law as proposed needs a bit of tweaking to make sure it gets the real evildoers and not just the bystanders, but a few amendments cannot be impossible.

  15. diamond, is the ISP.

  16. jasu1 – You are going to need to get up very high in their tech support, because most low level assistance will have NO idea what you are referring to. You may need their "corporate troubleshooter" to assist you in the process. I hope this helps!

  17. Felix on the Greece plan:

    This is a pretty clear message: if the bondholders don’t agree to Greece’s terms, then Greece can simply force them to join the exchange. Greece’s bonds are issued under Greek law, and Greece can change its own domestic law any time it wants.[...]

    But the big-picture game plan is clear. Greece is going to default, on March 20, and there’s really nothing the banks can do to stop it. If you’re not willing to accept whatever deal Greece comes up with, you probably shouldn’t be holding Greek bonds at all.

  18. I don't think all of the bonds were issued under Greek law.

  19. SOPA/jmm1951 – to my eyes, it's a problem differentiating the mode of delivery from the crime. If some guy's selling bootleg dvds and knockoff watches out of his trenchcoat in an alley, that's not really  different from doing it over the internet except in the wider reach of the internet. And there was a time when those guys in trenchcoats were pretty pervasive if you knew where to look – just as you have to know where to look on the internet, in the figurative alleys.

  20. I entered the SLM trade based on last prices quoted on TOS at the time of Phil's post. Prices changed quickly after that!

  21. Anyone know of a good site to determine when a stock is going ex dividend? For example, I'm looking for JBL's next ex-dividend but can only seem to find the last ex-dividend date in Nov.

  22. $25K / StJ – I think you also missed the rolling of the short XRT $52 Jan 12 Call to XRT $53 Feb 12 Call

  23. Rainman,
    I use dividend investor – it has the most up-to-date ex div dates that I have found so far.

  24. dpas, i don't believe we executed the roll of XRT yet. That was just Phil's eventual plan. I guess if you did roll, it's probably fine anyway. Looks like we will be rolling for sure anyway.

  25. Gingbaum — Thanks!

  26. XRT / StJ &  mampcsA  - Ah ok sorry then my misunderstanding, i remember reading it in one of Phil's comments, and followed his advice. Sorry for the confusion

  27. Good morning! 

    I have nothing to add to the above post as I put a lot of thoughts into it.  

    That's about as happy as I can get and it's not enough to make me fly (fairy dust anyone?) but it is enough to get my wheels churning for a new round of bullish plays – but only if this nonsense, er I mean strong market move, keeps up the momentum next week.  

    I'm out of here at 1:30 to head of to Florida, I can't believe my Dad's been dead a year already but my Mom is doing pretty good so thank God for that!  I'll be posting from down there tomorrow and Monday and busy with family stuff so, for now, we're just going to roll our bearish $25KP bets forward a month and, if the markets are still defying gravity next week – we'll be using those as a bearish offset to some very aggressive February betting.  

    One trade I already like is EWJ – if the World is so fantastic, why is the Nikkei 25% behind the Dow?  The EWJ Feb $8/9 bull call spread is .70 and you can sell the March $9 puts for .20 for net .50 on the $1 spread.  TOS tells me the margin on selling 10 short puts is net $1,500 so I like 10 of these spreads for the $25KP and we need to stop out (not hard but remind me) if EWJ can't hold $9 (now $9.32).  This may be a slow fill as it's thinly traded but that's OK for a targeted play (EWJ holds $9 through March).  

    France is very happy, up 1.5% as they sold some bonds today for cheap rates, Germany is up 0.5% and the FTSE isn't part of their EFSF scheme and up just 0.4%.  

    Oil has been a day trader's dream today and we caught a few waves and now it's back to $101.64 after bottoming out at $101.50 so we'll keep an eye on that one.  Dollar is 80.54 and below it is MORE bullish and above it is not but 80.60 should start worrying the bulls.  

    It's all about the NYSE for us on the Big Chart and Dow 12,749 shouldn't be so hard with the World all so recovered and all.  AXP, COF, IBM, INTC, MSFT and GOOG need to keep the party going this evening – any of them can tank us on their own and I am really worried about MSFT and INTC with soft PC sales but Nasdaq buyers sure aren't with another 0.5% gain this morning.  

    There are more cracks in A380 wings and that's going to be good for BA once people stop worrying that they screwed up the 787 as well.  This is silly because the 787 is not in the least bit similar to the A380, which BA said was a gigantic mistake from day one.  Should Airbus end up scrapping or even delaying production – even if they survive it financially (and they will because they are "too big to fail" in Europe), China can't possibly fill the gap and BA is in a position to give some very onerous terms to lock in orders, hire Airbus engineers and ramp up production of 787s (and you need 2 787s for each cancelled A380) and blow out their numbers for the next decade.  

    SO – I am loving selling the BA Jan $65 puts for $5 and buying the $65/75 bull call spread at $6.15 for net $1.15 on the $10 spread that's 100% in the money to start.  All BA has to do is hold $75 for the year and it's a 769% gain on cash and TOS says net margin on the short puts is $6.50 so the full $8.85 gain would be 136% back on margin too – a very nice little trade that can make your year BUT – Keep in mind we're not really bullish yet so waiting for a dip and looking at this next week is the real plan as long as BA doesn't look like it's getting away on the Airbus news.  

    Other than that, I'll have to break my bullish character and say I see no reason to change my mind on being short-term bearish other than the technicals, which, of course, I think are a BS paint job.  That's REALITY – the markets are more like fantasy – up 20% from last Q on these earnings.  

    So please – be careful out there!  

  28. EWJ / Phil – In Optionxpress i get the whole trade for $0.90 and $2K margin requirements,  so not worth it just for the $0.10.  Do any other guys get better quotes in their platform?

  29. Phil, what were the specifics on rolling out the bearish 25K plays for another month?

  30. Phil – any trades on getting long Volatility?
    I don't really trade VXX but thought  I would ask.

  31. EWJ/Dpas, it's about .7 in IB.

  32. EWJ, I am getting $0.94 from TOS for EWJ Feb. $8/9 BCS.

  33. EWJ/Mam – Thanks boss, still cant get a decent quote. Will wait for the zombie rally to heat up ;-)

  34. Good morning,


    IWM    75.54,  75.80,  76.02,  76.36,  76.66,  76.82,  77.04,  77.20,  77.48  and  77.96


    Good hunting !!

  35. This chart brought back memories as I can relate to most of the devices listed:

  36. STJ,
    You left out "Pong"

  37. JR,
    Is there a reason you numbers only go up to 77.96?
    Interestingly, your trend line from yesterday is parked at the PP.

  38. "Pong" was created by Atari in 1972 and would be located on the chart next to "other"

  39. JRW 77.96, no higher values?

  40. The trend is getting better…

  41. Phil, Last week I went long the Feb FAZ 30/33 BCS and sold a Feb 35 JPM Put for a net $0.  I'm in the green on this trade now but with FAZ nearing $30 do you think it would be wise to adjust?

  42. jrw,
    i'd like to think that you don't have any lines above 77.96 because you believe this is a top !

  43. Initial Jobless Claims – How does that compare withthe Labor Force Participation rate over the same time period? 

  44. Dollar doing the bouncy thing so be careful and watch that 80.60 line. 

    Oil/Burr – TOS lets you trade the damned front-month contract while it's expiring, that's a problem sometimes if you think you're trading the next one.  (/CLH2) is the March delivery contract and is the default now.  You can still force (/CLG2), which is trading at $101.23 while the March contract is $101.40 (and congrats to the futures players on that last run down from $102 – wheeeeee!).   Oil inventories are 11 and if they don't save the Feb contracts, we may get a pretty sharp sell-off on those.  

    White list/Jasu – That's something in your own Email, once your provider or local Email client starts considering our Emails junk, it's up to you to let the program or the provider know it's not – that's what white list means.  If you re-check the preferences and your system rejects the mail again – our system will uncheck them again as that's the spam laws (not that anyone else seems to obey them but we do).  

    Inflation hedges/Dano – Yes, there will be.  With our BAC trade, for example, we picked up BAC at $5.75 and it was about $6.50 by the time I was on BNN and, because of the spread, they missed 4% out of a possible 56% so BE PATIENT – let's just make sure we really have something to be bullish about before locking up cash for a year.  

    SOPA/JMM – As it's proposed, it masks some very nasty stuff like if you put up a link in chat to a site that has something illegal on it – I'm liable.  That's just ridiculous – we (bloggers) would have to ban all links as we can't afford to take the chance.  Also, technically, if I copy a paragraph of text from the WSJ – I am then violating copyright.  Also ridiculous.  Essentially the goal is to put all the power in the hands of Big Corporations, who are, of course, very pissed off that guys like me can run a service and get subscribers without having to buy 500,000 feet of NY office space to house all my editors and attorneys.  It's the old guard making a run at ousting the newcomers and making the World what it was in the good old 50s again – except with much less local competition.   While the Right is spinning this bill as anti-piracy, it's nothing of the sort – this is an all-out attack on individual publishers – an attack on freedom of the press 2.0 in America and the same people who march for the tea party march for Rupert when he wants to shut down the competition because they are actually uninformed idiots who only think what they are told to think – even when it's completely contradictory to their original position.  

    Oh sorry – happy thoughts, happy thoughts!  

    Force/StJ – Yes but force = default and, for many bondholders, that is much better economically than "volunteering" to accept a major haircut.  I've been saying for years that anyone holding Greek paper deserves whatever they get as it was pure speculation – Greece should tell them all to shove their 20% coupons up their asses.  

    AA Money/StJ – No change

    FAS Money/StJ – The $73s are now $5.50 and we can roll those to 2x the next week $78s at $3.25 as I think that's about all the good news we can expect from the Financials.  Tomorrow we can buy back the Jan $78s, now a ridiculous $1.78 with $1.18 of it in 1-day premium and then we have the 4 long calls offset with 2 short puts and that's fine.  

    IWM Money/StJ – $46s are $6.30 and we can roll the 2 of them to 3 next week $49s ($4.10) and that's good for now as we're double-covered on the longs – we can always sell more puts.  


    MON, DMND, BKS, GLL, SLM – Waiting

    SQQQ – There were 8 as of yesterday with 4 more Feb $17 puts sold at $1.45 for a $1.30 average on 8.  Fine by me if you sell them now for $1.75 but that was the play yesterday.  

    MA – NOW I want to spend .85 to roll up to the $305 puts.  

    XRT – Jan $52s now $2.55 and a straight roll to Feb $52s ($3) picks up .45 more and that's fine for now as I'm still not seeing bullish retail numbers.  

    DIA – Aren't you glad we didn't risk them overnight?  The $125 puts are now .30 but 100 points out of the money so no fun anymore.  The Feb $121 puts are $1.05 with a .25 delta so a 100-point drop makes us 20%+ without worrying about the decay so let's make that one a day trade on 10 and see if we can catch a sell-off into the weekend (so yes, an overnight hold at least).  

  45. XRT/$25KP, Dpast – Thanks, I like that roll better – just not available anymore today so I'm glad we did it yesterday – I forgot.  

  46. JRW – does this rally still conform to your big plan chart?

  47. Looks like BTFD is back in full effect for 2012!  It really is amazing how the programs use the same formula every day, dip at 9:45-10am and then Bot Grind up all the way to close.

  48. FAS Strangle – Selling the 76 puts on the upward momentum. The 79 calls are still OK for now.

  49. No one expects today to be a down day….why it could happen.

  50. OIL drawdown……….sell into $103?

  51. SQQQ – for today, if one hasn't added the 4 more, would it be better to sell 4 $16s for 1.10?
    thank you

  52. oil -3.4m what was expected?

  53. estimate was for an inventory build of +2.9 million bl

  54. Thx roro reaction mute at this point

  55. FAS Money – Buying back the 2 FAS Jan 73 calls (now 6.10) and selling 4 FAS Jan4 78 calls (now 3.30) for a $1.20 credit.

  56. $25KP / Phil – My bad on the SQQQ, I missed that comment. I'll adjust the position. On this portfolio I only update the position after hours so we can't catch what I miss until after hours…

    On the XRT, mampcsA mentioned that we had not rolled yet, so I'll make today's roll the new "official" position.

  57. GMCR – anybody taking a position in it?  Last time i played the earnings and bought puts and it returned 600% overnight.  I'm thinking of buying puts in it again for the Feb 1 earnings.  Thoughts?

  58. IWM Money – Rolling the 2 TNA Jan 46 calls (now 6.80) to 3 TNA Jan4 49 calls (now 4.50)

  59. 25K Port
    Haven't seen any mention of the long SQQQ Jan 17 calls. We eat the loss and let it go?

  60. Phil, I missed out entirely on the Jan/Feb SQQQ play, what would be a good Nas hedge for February at this point?

  61. stjeanluc/Chart, Thank you for the chart, I am with you for most the devices. :-)

  62. What happened to TLT, I LOVE IT. :-)

  63. The Jan TZA puts in this hedge are still getting crushed…uggh.  Down 107%.  Rolled the 26's to the 22's.  
    Short JAN TZA 23 PUT, Long APR TZA 26/38 BCS

  64. VIX under 20

  65. Phil, wait to roll the MON 75 calls to the Feb 77.5 calls till tomorrow? It's coming down nicely now.

  66. XRT – Oh, well then whatever Mampcs says is official as he's been following these very closely.  

    EWJ/Dpast – Just because you get a quote, does not mean you have to accept it.  I'd offer .65 for the bull spread and ask .25 for the short puts and, whichever end fills first, then you know what price to offer for the other to net .50 or better and, if it doesn't fill – there will be other trades.  As I noted above, it's likely to be a slow fill with the thin trading and people have bid up the bid/ask to silly numbers at the moment but the last sale on the $8 calls was $1.05 (10:48) and the last sale on the $9 calls was .41 so net .64 there.  Generally, you get your fills when the trade is going against you so it's a matter of A) Patience and B) not changing your mind when the stock flips.  

    Specifics/Jercon – Hopefully answered above. 

    VXX/Samz – At VIX 20, very tempting.  VXX is $29.67 and you can sell the Feb $28 puts for $1.47 so another 3% drop in the VIX to about 19.50 is what you're betting against.  That $1.50 can be put to good use with the $29/35 bull call spread at $1.60 so net .10 on the spread with a $6 upside.   Just don't forget, there's no VXX to own, it's a cash-settled position.  You can roll it but, ultimately, you have nothing of value under the short puts.  

    Better/StJ – Relatively speaking, I guess.  The move up from 275,00 to 400,000 in 2000-01 led to a market collapse and the Nas still hasn't gotten back to it's old levels by almost half!  

    FAZ/Bbates – That was a good combo!   I love it when a hedge doesn't lose on a move up.   I'd roll the $30s ($2.25) to the April $34s ($3.30) for $1.05 and let nature take it's course on the caller.  If JPM expires worthless then you paid $1.05 for the longer-term protection and you're good through April.  

    Dollar pushing on 80.60 but can't stay over.  Oil not doing so hot at $101.27 and gold only $1,655 – we may be getting too bullish and money coming out of commodities but hard to say on oil expiration day.  Net neutral on the oil report is no help for the bulls, of course. 

     EIA Petroleum Inventories: Crude -3.4M . Gasoline+3.7M. Distillates +0.4M. Futures +0.86% to $101.58. 

    Down day/Kustomz – What is that? 

    SQQQ/Morx – Not if you have faith.  

  67. Down day, hoping for walk down memory lane to refresh old memories 8-)

  68. The market is like a balloon, floating on the wings of a storm…

  69. Vix is a teenager again!
    Phil, what would make you DD on shorts here?  Evidence of distribution selling?  Nothing? (cuz of your new positive attitude)

  70. I covered my shorts overnight and I'm looking for a chance to reload.

  71. Now that's interesting.  They're pulling the plug on the dollar and it's not moving the markets. 
    What's up with that?

  72. looks like the (real) DOW is stuck on cruise control at 12, 600

  73. Phil,   I have the Jan EDZ 16/23 BCS with sold 16 puts for net 0.55 entry.  It was a bearish play, not a hedge in my portfolio.  I have waited and waiited for a pullback to get out, and now it is sucking wind bigtime.    I don't really want to be assigned the short puts.  EDZ is at 14.89 now,   Any suggestions on a roll.   Thanks

  74. From my post last night, I think the dollar and Euro have decoupled from the market.  There is something to the free money being thrown around, and it must be coming from the fed window (or more is out there than we know about).  I want to know what the leverages are of the US banks are now.  Unfortunately, we will never know how much they have shifted off the books during earnings.

  75. Pharm / balloon — In particular this balloon.

  76. peedle you are a masochist

  77. JR,

    Are you trading today?

  78. 71 RSI on the Nasdaq and also very overbought on McClellan. Due for a short term sell off on it.  Might be a good time to buy some TZA or write puts on it.

  79. I tried Phil but my happy thoughts hit a wall pretty fast:
    EDZ (tomorrow) 15 calls. What's 25 cents amongst friends?

  80. Anyone fill on the MA roll yet?

  81. GMCR/Lol – I'd wait as they should have great top-line revs and likely go higher but the revs come from SBUX and DNKN  machines that they won't see any long-term cup sale profits on – their whole model is messed up and now they are just machine sellers and that will peak out at some point (patent expires this year). 

    SQQQ/$25KP, Zip – Yes, barring some increasingly unlikely miraculous recovery, they are just dead money.  

    SQQQ/Jercon – It's a good hedge today on tech earnings!  The short puts from the $25KP are a good bet and you can augment with a bull call spread if you want to be aggressive.  

    TLT/Bob – Not sexy enough with markets on fire.  

    TZA/Burr – You realize you can roll the $23 puts to the Feb $21 puts for .20, right?  Do that 10 times and you'll be short the $3s at the end of the year.  

    Deciles/StJ – That's the bots back-filling from pressing the leaders to bringing up the rear – actually a bullish sign as it indicates they are probably serious about holding 1,250.  

    MON/$25KP Mampcs – Woops, shouldn't be waiting on those.  The $75s are $4.80 and they can roll to next month $75s at $5.60 for .80 more and I'd rather do that and roll up later if we have to as the Apr $80s are $4.60 so we can likely stay out of trouble.  

    DD/Peedle – Nothing right now.  A ridiculous pre-market spike up next week might do it but, as I said at the top, my goal is to see the NYSE hit it's number (50 to go) and then we can put all this bearishness behind us. 

    Dollar 80.40 – Good point Exec.  They are pulling every trick in the book to keep this thing going and that's not what I'd expect if someone KNEW the Fed was going to do something.  

    EDZ/2Can – A bit late on that one.  Amazingly, you can still pull .25 from the $16s so I'd do that.  The $16 puts are only $1.20 and the Feb $15 puts are $1.30 so you get paid a dime to drop $1 there.  If you want to re-up, the Feb $16/20 bull call spread is .60 so another net .35 and you roll the whole thing to Feb at the cost of $3 of potential upside.  

    80.39 – Dollar diving! 

  82. USD/ A 'rumor" of yen intervention sending EUR/YEN back to 100
    USD followed the move down.
    How crafty to move the less traded cross after the Euro closing…

  83. Phil, I'm reluctant to move any more money from my conservative account with Schwab to my TOS account that I've been using to follow along with the 25KP. I'd like to free up some margin in the TOS account and right now the MON trade is taking up most of it. Do you have any recommendations to roll this trade to something with less margin? Thanks

  84. Phil,
    I bought C JAN 12 $2.5 @1.89 as part of the bull call spread and also sold $4p @0.85. These options were all traded before the reverse split. I'm wondering what's the best strategy.
    1)Should I take the $4 assignment?
    2)should I excercise the $2.5C instead?
    3)use the money to buy XLF instead?

    If this analysis is correct, we can have quite long and strong rally

  86. AAPL 50k portfolio:   I have closed a couple of positions today.  Bought to close the Jan 420 puts for .18 and sold to close the Jan 415 puts for .07.     Also, sold to close the 10 Jan 410 calls for 19.03 and bought to close the Jan 420 calls for 9.23.    So we made a good deal of money on both of these positions, as AAPL continues to ramp up.  I could have let these contracts expire but I feel better just closing them out and moving on into earnings.  Incidentally, I did check back with my broker on the issue of commissions for spreads that expire with both arms in-the-money.  There is a flat fee for the closing out of the trade, even if not done actively by the portfolio owner.  And I thank one or two on the site for pointing this out.  There is, of course, no fee for any option that expires worthless.   That option just disappears into the sunset.   Speaking of earnings, you will notice that I'm moving the account gradually into cash.   We still hold the April and July bull call spreads, but these are months out.  We now have no short-term AAPL positions.  Earnings is a dangerous time to hold positions.  If you do so, they must be carefully thought out and properly sized.  I will be back on tomorrow  or Monday to give you my AAPL earnings play.   Good trading and be careful out there!

  87. Phil

    What have you been hearing on QE3?
    This weak dollar is odd.  Did the Bernanke tip off his buddies?

  88. VIX increased at about this time in 2010 and 2011. The Bollinger Band width for VIX is at about the same levels as those two same periods. GOOG, MSFT, and IBM all announce after market close today. Maybe…

  89. Todays 25KP trades to recap.
    Bought 10 DIA Feb 121 puts at 1.05 (I got them at 1). Now 0.95
    Rolled 5 MA Feb 290 puts to the Feb 305 puts for 0.85
    Rolled 5 XRT Jan 52 short calls to Feb 52 for credit of 0.45
    Rolled 4 MON Jan 75 short calls to the Feb 75 calls for credit of 0.80 (I got .90 just now).
    Not yet executed:
    EWJ Feb $8/9 bull call spread is .70 and you can sell the March $9 puts for .20 for net .50 on the $1 spread.

  90. Phil, slightly confused (not an unusual situation).  As of a couple days ago you wanted to go long on the Nas over 2750 (see below). We're approaching 2800, but you want to remain short the Nas now?
    SQQQ – Well buying premium has been a disaster so we should take the opportunity to sell 4 more Feb $17 puts for $1.45 and we'll be looking for a bullish Nas play if the pop 2,750 to offset this potential loss. 

  91. Phil
    Are we trading CSCO this year? , I was look at sell the 2013 20 puts
    Any suggestions

  92. Markets Up – dollar, gold, oil all weak or dropping slightly. Sidelined money coming back in play?

  93. Yentervention/Lionel – that makes no sense as Japan intervenes to make the Dollar stronger, not weaker.  I guess they can rumor they are trying to make the Euro stronger and not the Dollar but that would be silly as it would be a net gain for the Yen no matter how much they spend.  

    MON/Jrod – It's a $500 loss (2% of portfolio) – you just take it and hope to have a better trade another day if you can't afford it.  The most important thing is to learn that's not the kind of trade you should be initiating in the first place if you have that limit.  

    C/Jop – I'd play them not to go BK and roll the $4 puts ($1.05) to the Jan $23 puts ($3.10) in whatever makes you even.  You're getting .45 from the calls and then you just have the short puts to ride out and yes, it's smarter to just go with XLF and spread your risk but is C really going to fail and, if they do, is XLF going to be safe anyway?  

    Stratfor/Lol – As long as CBs turn on the machines, we can rally through anything – it's what happens when the music stops that's scary.  

    QE3/Exec – As I said above, this is not the kind of market behavior you'd expect if IBanks knew something – this is a "come on in the water's fine rally" while banks tend to chase retailers OUT of the market when they know it's going up so I'd say they KNOW there is NO QE3 at the upcoming meeting is my working theory. 

    Thanks Mampcs!  

    Nas/Jercon – I want to see the NYSE confirm and get past tonight's earnings and the weekend.  I have been looking for bullish Nas plays and haven't found any that don't look overpriced.  

    CSCO/QC – I love them long-term.  $20 is a tough pill to swallow though as we were buying them at $15 when nobody liked them just last summer.  I'd rather see them prove they can hold over $20 first before making bets that they can.  If the VIX were higher, it would be easier to ignore the price and hedge it down but it's not so it's a bad combination for chasing high flyers.  

    Side money/Scott – Low TLT is evidence of that.  

  94. Dollar- actually, over a longer term (years) there is an approximately 35 to 40% positive correlation. The tick for tick inverse market action is, in a sense , an aberration.

  95. Phi. okay, thanks for the explanation why not yet going long the Nas – I suspect not worth going long unless AAPL sells off after earnings next Tuesday.  What you mentioned above "It's a good hedge on tech earnings" refer to selling the Feb SQQQ $17puts?

  96. Phil/waters fine

    You know you're right.  My perma-bear buddy was in an hour ago and he cringed when I told him I just loaded up on TZA.  Christ, I figured he be cheering for me, instead, he warned me to be careful…."this market is strong".
    The talking heads with the assistance of the BOT's are definitely effective at shaping public opinion.

  97. Phil, any thoughts on a BCS on the VIX.  We are getting crazy low for all things happening in the world, IMO.  Would you do April 18/20 for 1.45?  What would be a good offset, a TZA put?  TIA.

  98. Would you own one?

  99. BKS – over 50%, 30 days left. Going all the way? This is kind of an educational question. How do you make the decision?

  100. exec
    Remember the flex to lines, IWM is having a problem with R1. My other observation is the slowest trading of IWM I have ever witnessed. I am still not trading, trying to get used to 24 hour narcotic pain control. Getting another adjustment Feb3 and I should be able to trade. Today is a great day to wait, something is afoot. We will never be able to figure out all of JRW's methods because he works dynamicaly.

    says they need to raise some money. Anyone know someone who could give them some advice?

  102. Dollar/Pstas – Because, long-term, a strong dollar is good for consumers and consumers are 70% of the economy.  Short-term, things are priced in dollars so it's normal to have a short-term correlation – you have to watch both paths independently.  

    SQQQ/Jercon – If they are ever going to pay off, it's next few days.  

    Strong/Exec – It's funny how they can alter people's mindsets.  Dow up 15 today and you'd think being a bear is an insane position.  As I said on Tuesday – how many times can they fool us with the same trick.  All the time for some of the people it seems…

    VIX/Robert – See VXX above.  VIX is lousy to play as it's too thin,  

    CAT/Exec – Not for me. 

    BKS/Morx – When you have no reasonable expectation that a short put will fail, it's not really greedy to let it ride.  At 25%, I'd stop it out.  

    OK guys, don't let oil hit $95 without me – I've gotta head to the airport, might check in from there if there's time.  

    Actually, don't forget they are dumping the Feb delivery contracts and once they are done, they can goose March again so be careful and take a turn back up in oil seriously.  

  103. exec/tata car, for my personally, I won't drive it even I got one for free.  just me…

  104. 25KP / mampcsA – Thanks for the recap. I am up to date now except for the EWJ trade. Let me know by EOD if you were able to get the trade. 

  105. Phil/ Check the Cross currency streams. EUR/JPY moved up first on this 1Y sudden move. USD/JPY moved up 25c during that time.
    My broker confirmed it was EUR/JPY purchases.
    I don't understand your comment. Japan has intervened against single currencies to weaken the Yen and not always against a basket of currencies.
    Now it is just a rumor…. but Euro is still up 3 Yens in 4 days.

  106. SOPA
    Barclays Bank (BCS) sponsor of English Premier League Soccer  is up 8%  today, which is good as I am long the stock, short the puts, and have a bcs that is building some value too.
    It's claimed that if there is on violation by one contributor then YouTube could be shut down, but it seems a bit unlikely that major concerns like Google or YouTube or Wikipedia could actually be shut down just like that. Certainly at present time every single day there are illegal posts appearing on YouTube with videos of copyright soccer games from the Barclays English Premier League, and  as fast as they appear they are blocked and taken down. This is a pretty huge phenomenon involving thousands of people.
    I can't see Barclays wanting to make themselves even more unpopular by shutting down YouTube. It is not like banks have some kind of popularity credit bank to draw on.

  107. VXX / Phil:
    VXX is an ETF (or ETN, whatever).  I've owned VXX shares before.  When you said "VXX is cash settled", you must have mixed it with VIX.
    Be careful.  VXX has pretty hefty decay.  If the market keeps going up like this for a while, VXX may go down faster than VIX.

  108. Shadow,

    IWM is trading very oddly today.  I swear the BOT/s and Dollar manipulators are coordinated and targeting the day traders.
    Today's behavior is bazaar in that IWM typically follows the dollar tick by tick.  It's almost as if they know that there are traders that use the dollar as an indicator and are purposely throwing some deep down spikes in the dollar to lure them in.

  109.  euro cds down big today….bloomberg euro bank index +6%!…looks like investors have been fooled again…more big gainers on volume than in long time….oil trades horribly…china still trades poorly given how much it has plunged…everyone thinks its ok…but i have feeling that will be market's next focus later in year.

  110. Hey, look, TBT is pushing 19…rising like the Great Pumpkin!

  111. TBT / Esco – We should ban that name from being mentioned again on the board!

  112. Biotech volumes are also way down the past 2-3 days. 

  113. Hello All – Any thoughts on this "Treasury Department sold $15 billion in 10-year Treasury Inflation Protected Securities on Thursday at a yield of negative 0.046%. " – MarketWatch

  114. Phil or anybody else that can help,
    I'd like to reactivate my account at TOS.  What's Scott's last name again and what's the typical commission for a PSW member?  I was trying to dig this up through the search function, but no dice.

  115. TBT / StJean — one of these days, Alice…to the moon!  No, but really, despite the pain, as Phil said earlier this week, at what point in time is it prudent to give the government your money at 3% for 30 years?

  116. Phil,
    I have sold Mar $53 XRT calls. Should those be rolled to something like the Jun $55, or should I wait, as you mentioned not seeing bullish retail numbers earlier?

  117. TBT / Esco – One day, but we'll reset first!

  118. Tweet of the day…

    Screen shot 2012-01-19 at 9.10.27 AM

  119. Rates / Esco – We have not reached historical bottoms yet… but we are not far!

  120. Wappler
    I believe his name is Scott Sheridan. He is the one we mention for the PSW, TOS commission discount.

  121. Fareed Zakaria has a couple of interesting articles about the lack of job growth in the United States.  He picks up on some main themes discussed here:

    We've netted no new jobs in over 20 years. That's under Obama, under the Bush years with tax cuts, under Clinton with balanced budget and deregulation.
    Most Americans sense that we are in a new world.

    In the second article he makes a strong case for government investment the infrastructure for job growth in the US, noting that we simply are not going to create enough jobs by making things to export.

    When asked how they will create jobs, Republicans simply talk about cutting taxes and regulations and getting government out of the way. Yes, it is important to have competitive tax and regulatory policies. But the lessons from East Asia to Northern Europe suggest that government policy and investment can play a vital role in providing incentives for the private sector. If Republicans want to get practical, they might learn from this.

  122. exec / Trading

    Ready but waiting !!


    yshenhar / Big picture

    Not if we break through SPX 1325 !!

  123. Phil/OXY  - Back in late December you recommended selling a Jan. 2013 $67.60 put and buying the Feb. $80/90 vertical spread.  It looks like that Feb. spread is over 90% profitable now.  Does it make sense to cash in the 80/90 and do another spread for May?   

  124. Just read everything and realized Phil is at the airport.  Anyone else in the OXY spread?

  125. revtodd64
    OXY I am holding the following trade Somewhat recommended by Phil I think
    Buy OXY Jan14 80c for 26.89 sell May 12 90c for 11.15 now 14.00
    and for good measure sold Jan 55p for 5.95 and Jan 65p for 8.50 All looks good and it is the intention to roll the May 12 90c when time is up Hope this helps  

  126. Is oil going up and SCO also rising?  That's not possible, right?

  127. Thanks Yodi.

  128. exec
    I expected JRW was waiting and he was. Also to add to your post XLF and SPY are out of sync with the buck and oil is out of wack period. Wouldn't suprise me if we have a sell off and congrats to JRW for not giving another higher level. I think he said he was going to buy puts yesterday!

  129. Now they're back in synch.

  130. Pharmboy : Biotech is in fire. Which is the best bet long term

  131. I have been seeing this all over, this one from Cobra's site (the Wave Trader…If the gap to 24.92 gets filled…then we have something to the down side….FWIW. 

  132. Biotechs….YMI, PLX (my fav), CRIS (though a bit high – scale), SGEN, ARIA, IMGN…..

  133. pharmboy
    Could you try that chart again please?

  134. 2/3 SHORT now !!

  135. FAS Strangle – Needless to say, we close the 76 puts at EOD unless something drastic happens in between now and then. The plan is to let the 79 ride overnight hoping for some weakness during the day that will allow us to close them. Still over $1 of premium in them!

  136. pharm--your pic didn't come out? unless it is my computer?
    FU EDZ!!!

  137. Support trend line now at IWM 78.02; I will be fully short on a failure of 77.96 !!

  138. Very expensive to go long here, seems the easy cheap trade now is to short…but still dangerous with GOOG reporting tonight

  139. jabobeast
    No it is not your computer

  140. Kustomz:  Yeah, that bullish conviction started to drain away as the Euro approach 1.30.  No one want to be the last person in the universe to buy a Euro for a buck-thirty.  You'd have to go out and look for an appropriate frame for it, to "remember when.", 

  141. Dear Phil,
    Thank you for the EDZ and TZA bull call spreads adjustment advice!

  142. Here is the chart for those that cannot see it.

  143. Thanks Pharm!

  144. Why we've seen a rally in financials…they needed to sell paper
    NEW YORK –  Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), and UBS AG (UBS, UBSN.VX) are each issuing benchmark-size bond deals in the U.S. credit markets Thursday.
    Citigroup is offering 30-year debt, Goldman Sachs is selling 10-year paper, and UBS is marketing three-year covered bonds.
    "Benchmark" typically indicates a minimum of $500 million.

    Read more:


  145. Bots spooling up; I'm down to 1/3 TZA !!

  146. Back to 100% SHORT !! 

  147. Went long GOOG stock. Will take whatever proceeds and roll it into AAPL.
    Otherwise I'm short now (EDZ calls).

  148. Only just getting on plane.

    Should be interesting with earnings tonight

    Later all.

  149. Pharm – "CRIS cross will make you jump jump"
    Let's get pumped for GOOG earnings people!!

  150. Safe travels Phil

  151. BMY down in an up market?  What's going on?

  152. This was my (incorrect) theory last year: QE had gone too far; money supply trumps bond purchase effect (attempt to push rates down), inflation rises, rates follow, something about horses and a barn door, and then the trade-of-the-century tees up for those paying attention.
    Couldn't have been more wrong, but was I just right too early? Is that shaping up now? Time will tell (it always does), but I want to have some cash to deploy
    Long term effects: Dow 22000 by EOY 2015 (prediction  hasn't budged from 2 years ago). Housing has bottomed. Interest rates will bob around down here but cannot go much lower. By EOY 2012 or sometime in 2013 bonds crash. Fed scrambles, runaway cash making machine for those at PSW who are prepared for this turns on full steam.
    OK. My plan is in, ready, set, execute.

  153. stj, the PSW spreadsheet shows FAS Jan4 12 Call $78 sold 1/13, did you mean 1/19?

  154. Come on Stick! Is this all you got? Cmon! We still have some margin left!

  155. Bid/Ask spreads have widened for over an hour.

  156. More 2012 resolutions – No. #7: not going to buy any risky plays like CSCO or GLW that can crater for no good reason and whack my annual return…

  157. Apple had an education event today, but not too much to get excited about. The iAuthor app for books looks pretty interesting for self publishing books (free of charge). It looks like the most you can charge is $14.99 for any given book. I'm sure this will piss the mega-publishers off.
    Burr/book chapters – hedges it is. I didn't download a program to pull the comments. I actually wrote a small script to pull the content from the site with the permalinks. I then filter that based on word count and some other semantics. I have all the content in a devonthink database and I'm using that (5000+ posts by Phil alone over the past year) to generate the chapters. I'm happy to share the Devonthink database and make it available somewhere but Phil has to sanction it, of course.

  158. Spreadsheet / Scot – Cut and paste error… Thanks!

  159. BAC almost back to where it opened…….almost.  Why, oh why?

  160. BAC / Pharm – Really ?? BAC gave up all the +5% gains? OMG Who the f*&k is buying into this rally?!!?

  161. Heavy hitters on deck for earnings tonight:


    This could shape the morning action!

  162. scottmi – those are two OK-paying div stocks that seem to find nice bottoms for enter-and-accumulate type of activity, no?

  163. stj/earnings… they either sink the market or take us up to 1350

  164. Evidently retailers are falling in line buying at bid with some big boys having plenty to sell them.

  165. Their trying hard to knock the dollar down to pump the averages!

  166. Wow, I may break even !!  (exiting now)


    It seems that the only people of substance in this market are employees of people on Ben's short list !!

  167. I can't recall who plays the SPX weekly options – I was looking at starting a new play, but looking at the spreads, you could drive a truck in between the bid and ask! For example, on the Jan 1310 Put, the bid/ask is 1.50/2.20. I am used to 0.05 in the FAS options. And yet, these SPX options look much more liquid than FAS!

  168. BDC - my experience has been more like "draw you in and tie up your cash in dead money sukkah!" stocks. but your mileage may vary.

  169. Hi, Kwan,
    How does your script pull contents from permalinks?  Do you mean those links next to the date & time of each comment?
    I am a programmer as well.  So, you can speak program-ese.  Thanks.

  170. FAS Strangle – Closing my 76 puts. Not a great day, but we'll take it. Tomorrow should be interesting!

  171. SPY is better StJ.  That was the premise of my over the weekend SPY plays.  I have been relucant to play for now b'c of weekend disasters that 'could' happen.

  172. JRW
     Just about when you got out the spreads went back to normal. Maybe Ben and the boys are after you? Hope not.

  173. scottmi / crater — Any stock can crater for "no reason".

  174. Volume surge at the close, yet again.  Unbelievable.

  175. shadowfax / Hope not !

    Me too !!    8-)

  176. WOW! Last min. UP with the VIX following!

  177. GOOG missed. 592

  178. JRW
    Too bad, your not in that .0001%!

  179. Indeed BDC…. 581 now! Big hit. That's not going to help the NAS tomorrow.

  180. What a scam! 78 to 78.20 on the IWM during the last 30 seconds of the trading day! This truly means everything is "Fixed"!

  181. Good start from Googlel!! -8.5% as we speak!! Hold on, make it -9%!! Next one!!

  182. Maybe the SQQQ will pay off tomorrow!

  183. well my 6 shares of GOOG is getting bush whacked, but better than 100% loss on the calls.
    Now, let's hope there's significant weakness follow through with Mr. Market (and see some EDZ action take control!)

  184. At 4:10, AMEX, IBM and MSFT!

    At 4:15 INTC

  185. LMAO on the futures!!! Moment of silence for the FREE markets!

  186. Men, this has officially become a casino. Would you like to check that opinion you brought with you at the door? Whenever I have something turn out right, it's either dumb luck or the result of systematic, non-directional plays.

    JeanLuc: That SPX spread is bogus, because trading ends at 4:15 tonight, and it won't settle until tomorrow's open. I do weeklies all the time and the spreads are usually .20 or so. Getting fills has not usually been a pain. The proper 3rd week play on SPX is the SPXPM, which expires like everything else tomorrow.

  187. Nothing as spectacular from IBM and MSFT, both up around +1.5%. INTC same.  Mmm, lets see if one Google can outweight IBM MSF and INTC

  188. AXP seems to be on EPS but misses on revenues. Somewhat lower now!

    MSFT beats on EPS and meets revenues. Indicated higher now.

  189. So far, there seems to be misses on revenues except for Intel who beat on EPS and revenues.

  190. ….although there were several downgrades on INTC this week.

  191. StJ,
    If you are talking about SPX strangles, Peter D is the guru.  I actually learned from Peter.  I now trade the weeklies.  Barfinger also trades weeklies.
    Yes, the bid/ask spreads are wide.  Sometimes, you have to be patient.  Sometimes, you simply have to accept a lower bid.  If you have PM, SPX saves you commissions.  In comparison, you have to trade 10x SPY to get the same profits, but then, the commissions eat most of the profits.
    You have to be careful, though.  You have to reserve lots of margins.  When SPX moves against you, it's a BIG train coming!  I usually reserve enough margins so that I can do 6x to 8x when necessary.
    BTW, I have no SPX strangles right now, and I didn't trade any SPX strangles today.  It was tempting all day today.  But I decided to sit on my hands, as I was so afraid, on either direction!

  192. Phil, and others……..Earnings reports  tonight on the NAS players, and investor response to those reports,  may yield  some insight into how AAPL might move when they announce next Tuesday.  I  look forward to other's opinions on this before we construct an AAPL earnings play.   

  193. L4real,
    Thanks for the info on TOS!

  194. my initial margin on an SPX pair is about $12,000 a contract. I am making about $400 a week per contract on average. Annualized, that's 170% or so. I suppose you could do as well with FAS, but I would consider a different strategy on those. What about shorting FAS and FAZ calls? you would get assignment if one finishes in the money, but then, you would have a short position in a decaying underlying. I'm seriously considering adding this to my weekly plays.

  195. SPX / Cwan – Thanks. I did trade some condors on SPX so I was familiar with the spreads on the long dated options, but I thought that the weeklies would have better spreads. I switched from RUT to SPX for the commissions on the condors as well as it is true that it is more efficient. 

    I recall you made a comment about that and FAS as well… I'll check into SPX for a weekly play in the near future.

  196. I had a bull put spread on GOOG that just went belly up, but I'm considering doing the same thing on AAPL tomorrow. I risked $1 to make $.40 in a day, and I lost. Big deal. I will get this back with the same play next week (I hope).

  197. Qs down $.25 AH, now stable. Not much of a market mover, I guess. Out for the night.

  198. FAS / Barfinger – Right now, we average a little over $1000 a week with the FAS Strangle, but playing with 10 contracts that tie up about $22K of PM margin. I calculated around 5% a week on margin, so a little bit better, but more commission. 

    With FAS and FAZ, the best play would be to short long dated OTM calls. You know for a fact that they will eventually come down to be reset. Now, you might need to weather some rough times in between, but decay is a given… I had made the same remark about TBT!  I am still happy with my FAS strangle and we have been lucky so far. But I am looking at improving the timing still. Any suggestions is of course appreciated.

  199. AAPL / lflan – I was just checking the estimates for earnings on Tuesday and right now they have an estimate of $9.98 but the whisper number is now at $12.18. How does that look to you? Seems that the ramp up we have seen might be baking in that number.

  200. Strangles- SPX- also, be aware these expire on THURSDAY of expiration week. Just realized I had a brain cramp today and left open a couple of slightly in the money short calls on SPX. I would not normally hold these so close to the vest without rolling but this was an unusual situation. Not a major deal though as the options will cash settle tomorrow and I will then just resell calls as if I had rolled. If we gap up at the open it may actually work out to my advantage.
    I am posting this mostly for my own benefit hoping it STICKS IN MY PEA BRAIN this time.

  201. VIX Trading
    Someone on this board must have a crazy-mad bank account… :)
    70K March22/Apr28 Strangle for $4.85.  My calculator must be off.  That's 33.9 Million????

  202. Dollar been taken to the woodshed over last 4 days.

  203. Hey cwan, maybe we are twins after all. The script finds a comment block based on some html tags and then identifies comments from a particular poster (in this case Phil, but previously someone like PeterD). Phil usually posts multiple topics per comment, so I break his topics by looking for his TICKER/User blocks. Each topic is then linked to the permalink posted beside the date under the commenter's name, which lets you easily locate the original comment in the original post. I didn't bother pulling the images but I considered it. Each topic in each permalink'd comment is dumped to a separate file, and all of those files are imported into a devonthink database.
    The majority of the time this will break topics up correctly, although occasionally the script will grab a paragraph too much and there will be a small bit of overlap. This usually happens when he starts talking about something else completely unrelated to what he was previously addressing. Better too much than not not enough though, as the delete key is a good fix for this once you're going through everything.
    I took this a step further and walked the entire 'Phil' section of the website so the same script will automatically pick up all posts between in a given range of pages. Querypath does the heavy lifting of making an object out of the formatted web page source and the rest is just regular expressions and glue to get everything working together nicely. Nothing too complex :)  

  204. KWAN
    Follow up question on answer from yesterday. A new guy just trying to learn
    Thanks for responding
    Question was: Bought 300 MT for 19.45 (now  $20.21)  Sold 3 Feb 20 calls for $1.19. (Now 1.30)
    Thinking of rolling up Feb calls to $21.00 for net cost of $.38. (That was after the market yesterday)
    My stated reasons was:  Strategy guide says to roll up $1.00 if you can do it for $.50 or less.
    Should have also said my goal was to capture more of the profit on MT( between $20 and $21)  and hold MT long term and sell more calls against it later.
    Your answer was " Why would you want to do that when you can get 9% by waiting to get called."
    If I understand correctly  your saying keep the bird in the hand.
    Is there any logic in my thinking to try to keep MT long term or am I way off base and being stupid not to be happy with the 9%?
    Have a lot to learn but loving it.

  205. VIX Why would they buy both for $4.85?  I understand the Vega, but seems to me that buying the April and selling the March would be more plausible to reduce the cost of the long dated. 

  206. Kwan – Cwan, I;ve been reading your posts lately and wanted to chime in. I asked Phil awhile back if he had interest in a threaded message board and he basically said this works fine for now. But it would be interesting to click on a user and see just their comments, or to have threads like Yahoo message boards so a particular comment can have it's own sub thread (for example, you have just ONE political rant thread for the day so users can go there to fight it out and not populate stock trading threads with this). Comments could also have ticker-subject line where you can put in (maybe up to 5) tickers so if someone searched comments by ticker, they would populate in a latest-comment-first cascading fashion. And obviously, it would be searchable.
    PHP-BB is one way to go, it is easy to set up and host. If others had enough interest, and Phil gave specific permission, I could set up a '' type of environment easy enough.

  207. Anybody thinking of holding a short overnight?  I'm tempted just on sentiment alone, but it doesn't seem like there are good levels to manage risk with.

  208. wow!
    this rally is starting to make me look up disco like Ain't No Stopping Us Now by McFadden/Whitehead.
    dec 19 Dow 11, 750………….900 long
    having been arounfd the futures/currency and more recently CFDsmkts for 7 yrs i know what it feels like to get steamrolled by a steamroller which is why as a rule i tend to get off the street before dark
    i have been taking modest shorts all the way up looking for a sig reversal but NO, none to be found, so far.
    wonder how all of this march onward and up will play on the OIL price.

  209. And now it's floated.  With no real explanation for what another QE round will accomplish other than push up stock prices.  This 'market' is unbelievable.  The insider's can't lose-

  210. peedlew99………i am way more skeptical over a correction than just several days ago……..# 1 reason being the stimulus and i bet this iceberg is a LOT bigger than QE1 and QE2 and most it is underwater.
    i also bet that the central banks learned a LOT of lessons form the first rounds of stimulus so this round is a LOT more sophisticaed than previous rounds.
    fundamentals and technicals and morals mean f--k all (excuse my lang) in a stimulus event as money printing trumps all fundamentals and technicals and if M Draghi was on this morning TELLING the markets that the next LTRO (Feb 29) is not only coming but it will be almost as BIG as LTRO 1 and PHIL said that one was BIG so then that is about all i need to know to STAY AWAY form shorting.
    the dips on the Dow today were like 10 points.??? wtf!
    i am in cash except for mostly OIL shorts lately and tomorrow is LTD for the Feb contract so i may stay away from that until next week
    if the Dollar breaks down then look up for that floodgate to open the rally in equities a lot higher.
    and, the FED hasn't even come to the party with its gazillion trillion yet…….just saying.

  211. stjeanluc……I'm sure AAPL will blow the numbers away,  given all I've read about them during the past quarter.  At least in my mind, that's a known.  The unknowns:    1.   How will investors respond?  We have seen more than one occasion where numbers were beaten but a company's stock languished.  2.  What will the overall market be doing at the moment?  If we meet some unknown event in Europe or elsewhere on the 24th, then the response to AAPL's good numbers may be muted.  3.  What if there's something we don't know?  This is always the potential fly in the ointment.   So the way I see an earnings play on AAPL is somewhat like this:   Historically, they beat.   Historically, they go up  afterwards…..about 70% of the time.  News about recent sales has been favorable.  No bad news has surfaced.  So, if the market stays generally green through Monday, then AAPL will likely go UP post-earnings.  Does that mean I will make a big bet on it?  Of course not.  Earnings bets are dangerous.  Right now there are thousands of bullish GOOG players kicking themselves in the arse for the plays they made today on GOOG.  One of the reasons I established theAAPL 50k is to illlustrate a theory which becomes more deeply imbedded in my brain with each passing year that I trade.  That is, it matters less what you trade than how you trade.  To me, trading methodology is paramount.   So if we do make an earnings play on AAPL, it will not be to earn a chunk of money overnight..  That's greed, and greed is one of our biggest enemies.  An AAPL play, if we do one, will be a high probability play with low risk and a limited wager.  It would be mostly just for fun.   If such a play cannot be identified, then we sit back and watch.  

  212. matt1966………just read your TRILLION DOLLAR reason NOT to be short, and that is on top of the other 500 billion LTRO reason Not to be short which MDraghi announced this AM in Europe.

  213. i will be VERY interested to see what Phil thinks of the FED Trillion in the context of OIL but if it logic follows then $100 may become support very soon
    or BTDs

  214. AAPL / lflan – Thanks for the insights. My thoughts exactly! Small bet on earnings for sure. I would add, something neutral if possible. I mentioned previously that during the last earning season I tried out some condors on liquid stocks and it worked out well (except for NFLX but I had bad feelings about that one). Not saying that it would work with AAPL, but playing both sides seems to be the way to go if you can. 

  215. If it is on cNBC….it must be true!  Here are 5 reasons why it won't happen (yet).  Hell, Operation Twist is not even over yet…

  216. QE / Roro – Not counting what our Chinese friends are pumping in their economy right now! 

  217. stjeanluc……..i agree. China pumping and who knows what the BOJ will come to the party with……maybe more than the March 2011 tsunami
    think i will be buying USD/JPY dips back to the 76.75.
    kind of reminds me of 50 Cent……..gonna party like its yor birthday

  218. Of course they're going to ease.  We've all know that and talk about it every day.  But that money is mostly just sitting around.  And how much of the impact is baked in?  I think we could be WAY more set up for a disappointment…
    1320 is major resistance.  A breakout there I'll become a believer.  Until then I want my volatility back!

  219. AUD/JPY and CAD/JPY too!
    this coordinated PR exercise starting with Draghi in Europe this morning TELLING the market another BIG round of LTRO is coming FEB 29 is obviously designed to get momentum buying to push prices over that RUT 773 chart JRW so astutely pointed out as FLOODGATE RISK to the upside.
    i think the european indexes are already informed and on their way back to last summer highs.
    everyone knows AUSTERITY totally sucks. so, what is the choice, and this is an election year in France and the US

  220. Matt:   A growing consensus of economists think that the Fed will throw a Trillion on the table?  I'll fade that bet all day.  In fact, my amazing expanding short position already has.  Bernanke is not going to risk tying his hands over the next few years by risking a giant inflationary liftoff in the U.S. without a really good reason.  A collapsing Europe and massive Euro bailouts is not that reason — quite the contrary, as it will tend to push money towards the strengthening currency — the dollar.  Bernanke doesn't have that many Credibility Bullets before hyperinflation becomes the buzz word du jour; he'll need a much better reason than a European bond market collapse to start up the U.S. printing presses.
    Forget QE3 for now.  QE-mortgage bailout may be down the road, but Miami condos are flying out the door as it is.  The Fed will sit back enjoying a nice slice of schadenfreude for now, and let the ECB take the heat until the Euro blows through 1.20.  A guess, obviously..  

  221. USD/CAD has already broken to the downside of its wedge pattern and the BOC has implied rates are not going lower so for commodity currencies as reflective of a risk is a buy.

  222. zeroxzero …………….you just shot down my premise that it is an all for one, and one for all.
    risk risk risk and how to get paid for assuming it is always the bottom line.
    nice point about the money flow……the dollar index is at a sig support level and if it breaks lower then then then.
    but but but…… it all enough to keep the train on the tracks?
    V shall see as the gERMANS ARE FOND OF SAYING

  223. ZeroXZero……….really good point and i rolled it around today in the context of the upcoming FOMC where the market will be looking for stimulus  follow through,……..last time it disappointed and that was the catalyst for a very nice reflex short trade.
    i am looking for that and then get short in some size…….relative of course.

  224. What Zero said and..

    Anything that happens from here on out will be back door (no, not the movie). CBs providing liquidity to banks.
    I can see it now, heads exploding all over DC if Bernanke tried QE with elections only months away.

  225. ricar/MT
    I make no claims to be an expert, but if you had done the typical Phil play, you would have bought half the stock you wanted for your final position and then sold both 2013 puts and calls and waited to either harvest about 20% or double your position at a lower  basis.
    If the stock is called away, you can easily get it back. Just sell the $20 LEAP puts until it is put to you. If it is never put to you, you will still make plenty of money too. If you sold the January '13 $20 puts now for $3.60, that would give you an 18% profit over 12 months if the stock stays over $20, or else you will buy the stock again for net $16.40 next year. If you sell the $20/$10 bull put spread then it would return 24% or you get the stock put to you for net $17.60. And if the stock does fall below $20 and is put to you, then aren't you glad you let it go for $20 at a profit? It's win-win.


  226. ZZ,
    I think you're right. The Fed would be nuts to step in before they have to, especially with Europe so clearly to blame. I still think the signal for QE3 eventually will be a massive sucking sound in the bond markets. (Sorry it didn't happen last year.) Sooner but probably later the bond market will wake up to the insidious inflation. Ben better have dry powder then, and until that time I guess there are enough of us confused enough to keep the damn stock market in play.

  227. Yodi / Oxy 
    I have the same trade on as Rev, and I think that's what Phil was going for.  Short a long dated put, buy a short term BCS, and do that 4 times a year.  But I'm trying to figure out how you structured your trade.
    Buy Jan14 80c , Sell May 12 90c
    - So is this a calendar spread that you were going for?  If so, may I ask why?
    Sell Jan 55p for 5.95
    Sell Jan 65p for 8.50 
    - Was this double put sale to take in more premium?

  228. and what peedle said "I want my volatility back"!

  229. STJ/LFLAN
    I have owned AAPL for a while in a non retirement account.
    I hate to sell it and incur the tax man.
    How do you recommend protecting against an earnings drop.
    To buy puts seems prohibitively expensive.
    Any other thoughts?

  230. JMM
    Thanks, great scenario and learning experience for me. Every thing you said makes perfect sense.
    Did enter with 1/3 of my total dollars for the play so I have cash to play with so am learniong.

  231. AAPL / Maya – If you own it for the long term, I would not worry about an earning drop. If anything else, as lflan will probably tell you, it might provide you with another entry point. In any case, a lot of factors like your cost basis for example. 

  232. Breaking down the Microsoft numbers:

    Breaking things down further, the company's Business Division saw a 3 percent increase in revenue to $6.28 billion, its Server & Tools business jumped 11 percent to $4.77 billion, its Windows and Windows Live Division dropped 6 percent to $4.74 billion, its Online Services business was up 10 percent to $784 million and, last but not least, its Entertainment & Devices Division jumped a full 15 percent to $4.24 billion. On that last bit, the company also reminded folks that it's now sold 66 million Xbox 360 consoles and 18 million Kinect sensors, and that its Xbox Live user base now stands at 40 million worldwide.

    Quite incredible that they now make over $4 billion with the Xbox stuff! Almost as much as with the Windows division. Quite a hit there…

  233. Maya….I agree completely with stj…..Owning AAPL for the long term, as in an IRA, I wouldn't sell it and I wouldn't buy any protection on it.    Yes, if it pulled back to, say, 385 on an earnings 'miss'  I would see that as an opportunity to buy more.  In fact, that's one possible 'earnings play'…….doing nothing until after earnings, then going long if it drops, shorting (over the short term) if it pops.   stj……you mentioned condors, which I'm actually studying as a possible play on AAPL for next week……I've not done the calcs I need to in order to make a rec, but more later.    You know what…..I just need to say what I'm thinking.  First, I think we're in the first phase of a bull market, notwithstanding the general tenor of our site.  Secondly, I'm really not sure AAPL will ever see 400 again.   But, that won't change the way I trade AAPL through options…….In a small way, thoughtfully and cautiously.    

  234. …should read……the way I trade AAPL through earnings 

  235. AAPL Condors / lflan – In the condor book that some of us got on this site, the recommendation was to use the deltas to positions your strike, with a delta of 10 being the recommended strike. I would wait until Tuesday to actually make the play as volatility will certainly increase as we get closer to the news release. Right now, a straddle of the weeklies seems to price in a 5% move on either side. Using the deltas as a guide, you could construct a 385/390/465/470 condor expiring next Friday. It pays $0.75 against $4.25 of margin (or 17%) and gives you about 9% on each side. Of course, as we have seen with Google, 9% can melt away quickly. I think that historically Apple moves around 5% on earnings (these options guys are not stupid) so that should be OK. I would not be worried on the upside as the other trades in the portfolio would more than cover the losses. It's just the downside… But that could be adjusted as needed. You close the call side and work on the put side (might have to DD). That's what I did for Netflix and came out even despite Netflix blowing up. But not the most flexible strategy… shorting a strangle would be better. But selling premium with AAPL is really expensive unless you have PM!

  236. STJ/LFLAN
    appreciate your sentiments very much.
    So, let’s say I am not in a position to see AAPL drop to even 400, let alone. 395.
    Having said that, and perhaps to see if you guys can come up with something, what combination of put and call buy/sells would you utilize? Let’s say, to hypothetically protect 1000 shares from ANY drop?
    I have a couple of ideas, but am not sure and would like to hear both your thoughts.

  237. STJ/LFLAN
    how about selling the April 430 calls for about $24?
    That protects you on the downside for about 6%.
    And if AAPL trades higher, you have 3 months to roll the calls and keep rolling as needed?
    The other possibility is buying the April 430 puts for $26.
    However, if AAPL moves significantly UP on Tues, I do not know how much of that premium would be salvagable. Do you have a method to calculate that? Depending of % premium loss on the bought puts, you could perhaps sell calls AFTER earnings on a move up?
    Any touts are appreciated

  238. I agree the QE talk seems well timed to coincide with OEx.  But, there has been an invisible hand in the market since Thanksgiving.  The last time I saw a hand like this there was a bailout of some sort behind it.  First TARP and then QEII..

  239. Maya, the protection might end up costing you more than the taxes you would have to pay by selling the shares and going to cash if you are that worried! There is no free protection from a drop and protecting 1000 shares will be expensive no matter what! 

  240. Businessweek: The biggest bond dealers in the U.S. say the Federal Reserve is poised to start a new round of stimulus, injecting more money into the economy by purchasing mortgage securities instead of Treasuries

    As a result, the 30 year fixed mortgage could hit 3.5% or even lower.  The last FOMC meeting however provided no hint of such program. The Fed is not in a hurry to launch something like this for two reasons.  First, at this stage it is the only viable tool that will have a material impact on asset prices and they want to reserve it for a potential escalation of the European crisis.  Second, the Fed is not totally immune from political pressure, and such a move will generate a great deal of criticism.  Given the relatively decent economic data coming out of the US, "operation twist" is all we are going to get for now.



  241. all of the marching up lines as JRW pointed out (and floodgate runs higher for the RUT from 773) also point to a HUGE risk of a reversal if the the stimulus is not delivered on implied/assumed schedule.
    Phil has been consistently making the pint that the price run ups are not supported by fundamentals.
    catalyst day draws closer

  242. remember  - taxes are only an issue if you have no losses in your past to offset – so if you're like me – your pre-PSW days should offset that concern for a time. I like the one week JanWk4 calls as an offset – ATM for max premium, and plenty of time to roll on a pop. Depending on your perspective, you could do a half cover if you're concerned – but I like full cover here. We've had a great run, and a 5% drop is due.

  243. Has anyone read The Price of Civilization: Reawakening American Virtue and Prosperity by Sachs or Confidence Men: Wall Street, Washington, and the Education of a President by Suskind?
    I'm looking for input – not a long term political discussion, thanks

  244. IFLAN/STJ – AAPL condor.  I was thinking of doing the same, with short strikes at 445 (calls) and 410 (puts).  This increases the risks and returns.  However, I wonder if playing both sides "safe" is somewhat defeating the purpose.  That is, can one manage the losing spread If there is a violent move in one direction?

  245. Good listen from Lee Adler at WSE.  Overall, there will be no QE for now.  They also discuss the melt up in the market.

  246. NY Fed Sold $7B face value of Maiden Lane Investments to Credit Swiss….

    The New York Federal Reserve Bank announced on Thursday that it sold $7 billion in face amount of assets from its Maiden Lane II portfolio. In a statement, the New York Fed said the transaction was prompted by an unsolicited offer from Goldman, Sachs & Co. Four broker-dealers were included in the competitive bidding process for the assets: Goldman, Barclays Capital Inc., Credit Suisse Securities, and Merrill Lynch, Pierce, Fenner & Smith Inc.  "I am pleased with the strength of the bids and the level of market interest in these assets," said William Dudley, president of the New York Fed, in a statement. Net proceeds from the sale will be reported in April. Maiden Lane II was a special investment vehicle created by the Fed to purchase troubled residential mortgage-backed securities from several insurance subsidiaries of American International Group Inc.

  247. Sean Lee from
    At various times we’ve looked at the market set-up, the interbank market, hedge funds and real money, and the impact of order books. Seeing as it’s sooo dead, why not have a look at a growing phenomenon; Algos.
    Algos have become very big over the last 18/24 months and they are a huge part of intraday liquidity. Many of them are only trying to make a very small number of pips, from 0.5 to 10, but they trade in very large size. They run programs which look at price history, current price action, volumes etc and these programs are designed to predict where the next small move is likely to go. When the percentages are high in their favour, they will trade large amounts and try and move the market in their preferred direction. They are often very active in illiquid markets like early on a Monday or around the NY close.
    Good interbank dealers are now figuring out how the Algos operate and are able to manipulate the micro market movements to suit their own needs; spoofing the machine so to say. (Sometimes market participants are able to generate a small advantage for themselves, but it seldom lasts for very long).

  248. Peedle:  I'm totally on board that, if and when the Fed decides another QE is appropriate — my prior comments suggesting it ain't right now — it should be directed at real estate.  Too many houses are underwater on their mortgages — a refinancing implies a re-pricing, and neither owners nor banks want to see on paper that the value of their "collateral" is less, or far less, than the outstanding loan — g-d forbid the banks should have to mark their inventory to market [any accountants want to weigh in?]  At the same time, I landed in Miami quite by chance this week, and asked a real estate agent today about mortgage rates.  Her answer was: mortgage rates are very cheap, but almost no one can get one!!!  Lending conditions are super tight.  
    I conclude that, as long as an unknown [to me] percentage of U.S.-mortgaged property is worth less than their outstanding loans, no bank wants to call in an independent appraiser and ask what a house is actually worth today.  The whole house of cards would collapse.  The consequence, however, is a frozen housing market — if you try to buy something for less than 100% cash, someone might actually value the goddamned thing, and the cascade effect on bank portfolio valuations would be ugly indeed.  But one can hardly expect a "housing recovery" if banks offer low mortgage rates, but no one can actually get a loan.
    I will leave to banking specialists to imagine exactly how the Fed can conspire to break this logjam.  Banks want to lend — it's a little tough for banks to make money if they can't borrow low and lend higher — and buyers would clearly come out of the woodwork to buy cheap houses at low mortgages rates [I was quoted low 4%-something] if credit requirements didn't require 30% down payments and levels of income that would shock Croesus — but it ain't happening right now, and it's the hard to imagine how it would solve itself without banks coming clear and admitting that  the fair market value of their inventory wouldn't buy it's equivalent weight in sawdust.
    But irrespective of how this is solved, it is clearly soluble — there are willing sellers and willing buyers at fair market value, anemic as that might be.  A QE-whatzit that conspired to push the monkey-in-the-middle banks out of the way would break the logjam, and Adam Smith would take it from there. Two-cents from a non-banker.

  249. Phil /Hedging question
    Why not use ratio spreads to hedge. For example if you sell the TZA April $18 calls and buy the (at the money) $22 calls in the ratio of 2:3, the hedge pays for itself, then if the market tanks you make out very well, but if the market soars, then the hedge pays for itself. Worst case is the market stays right where it is and I suppose that is the biggest danger.

  250. stjeanlucscrivener's error:
    FAS Short Options
    Jan12 Call 73 … 2 [sold] 1/3/2012  [closed]  1/19/2012  (NOT  1/18/2012)

  251. zero-
    very thoughtful.  I totally agree.  I bought a house in New Orleans last year.  Coming out of 2008-2009 my tax returns showed low income… but I have a high net worth and very good credit.  I had planned to use cash but the rates kept dropping so I tried to borrow some money.  NO bank would take me.  The only loans banks are making are ones that can instantly be sold to Fanny Mae.  That's the business right now.  No risk.
    And why shouldn't it be?  These banks have come to rely ONLY on a risk free government backstopped business model.  They are allowed to say almost anything they want on their financial statements.  They're tipped off by the central banks before other market participants.  In a never ending ponzi between banks and corrupt Technocrats they get to run carry trades between currencies and debt instruments that that in a free and fair market would be worthless…  Lloyd was wrong, they're not doing Gods work, they ARE Gods!
    Sorry… didn't mean to rant.  Maybe I'm just jealous.  Maybe Phil's stock world should file papers to actually BE a bank!  Then we could get in on all that risk free money!

  252. Great dialog zero and peedlew99!

  253. Print-Or-Panic, TrimTabs On The Market's Meltup

  254. Hi, Kwan,
    Thanks for the explanation of your data mining strategy!  Very nice strategy!

  255. Its a real problem when you have a jumbo mortagage that is an ARM on a house that is underwater. No one will touch a jumbo unless you have significant equity  to bring to the table. And then even if you do,  are you throwing good money after bad? Of course one has to enjoy the low rates while they last but when they go up watch out!! And no Federal program will help because non conforming loans are not backed by Fannie or Freddie…..Just some things I ponder late at night….agree with I4….good discussion on housing

  256. Barfinger,
    Are you saying that you sell $2 on each side, SPX puts & calls?!  Whoa, that's pretty aggressive, especially on the call side.  You gotta play pretty close to the fire!!  I got burned once selling calls too close to the market right before it bottomed out and started a relentless melt up.  It took me months of rolling (both the options and my sleepless body at nights) before I recovered!
    How about we try a "SPX Strangle Experiment"?  We can compare that with FAS Strangle Experiment and see which one wins!
    BTW, how much margin do you reserve for FAS strangles?  Are you prepared to roll to 4x or 6x or something?

  257. Since I'm not in the market for a house, I was trying to remember what got me started about the housing market.  Oh yeah — QE3.  It could, and perhaps should, take the form of a "housing initiative."
     But neither the President nor the Congress are bashing the Fed these days, while the Presidential Candidates are affording us wonderful distraction as they detail each others respective shortcomings and dragging skeletons from each others closets. Plus the stock market is up, there have been some "green shoots"-type numbers on the U.S. economy, and the U.S. economy doesn't appear to be getting any worse.
    At the same time, the unseemly scramble of Euro leaders to prevent their Currency Union from imitating a Carnival Cruise ship whacking a Mediterranean rock and and disintegrating into "sauve que peut!" is beginning to make Americans feel almost good about their economy, reinforced by a dollar which has risen from 1.45 to 1.29 per Euro.  Even the stock market has been looking spry in recent months — all in all, not the sort of scenario which would induce the Fed to fire up the helicopters.
     I'm beginning to wonder if we'll ever get another big "money dump" out of the Fed.  A rose by another name, perhaps – a "technical" maneuver, QE-Bank Regs, which will amount to giving U.S. banks a mandate to re-finance mortgage loans and start lending with full Fed backing using infinite capital creation — invent your own mechanism.  This will not cause much of a disturbance in the force because we all know that's what they've been doing all along in any event.  
    Maybe "QE-Squib" would be the better term:   Definition: all of which, I think, may apply:  "A small firecracker.

    b. A broken firecracker that burns but does not explode.

    a. A brief satirical or witty writing or speech, such as a lampoon.
    b. A short, sometimes humorous piece in a newspaper or magazine, usually used as a filler.

  258. sundevils
    You describe my position exactly. Jumbo loan on house I have owned since 1994. On top of that a divorce perfectly timed at the top of the housing bubble. Now I have an underwater jumbo with an ARM. Been lucky with the rates so far, but know somewhere down the line i will have to pay much higher rates. I am hoping just to get out even if possible. In the mean time I will just enjoy the cheap rent.

  259. But we've been pricing in endless QE since the end of QE 2.  We all look for clues in the way the Fed constructs sentences… but is there anyone left who thinks they aren't planing on endless intervention?  I think not.
    Zero, I think you alluded to the best possible way to light a fire under housing.  Sell houses for what they're worth.  But banks don't want to do this.  This is really the problem with all this intervention… The people who have their hands on the controls think they can save their friends, but all they're really doing is creating chaos and postponing a real recovery.  If they really wanted to help housing, they could use all this big money they're giving the banks for free… and spend it on massive infrastructure upgrades across the country that would create jobs, improve the standard of living, and have a lasting benefit to EVERYONE for generations.  How about switching over our transportation system to natural gas?  Cheap, abundant, and American….
    No, forget that.  Let's just keep funneling money to Goldman Sachs.

  260. This is certain to be interesting:
    Oil Grab in Falkland Islands Seen Tripling U.K. Reserves: Energy
    Oil explorers are targeting 8.3 billion barrels in the waters around the islands this year, three times the U.K.’s reserves. Borders & Southern Petroleum Plc (BOR) will drill the Stebbing prospect next month, one of three Falkland wells that Morgan Stanley ranks among the world’s top 15 offshore prospects this year. Meanwhile, Rockhopper Exploration Plc (RKH) is seeking $2 billion from a larger oil company to develop the Sea Lion field, the islands’ first economically viable oil find.
    And why are we at $100/barrel:
    Oil Near One-Week Low as Fuel Demand Declines to Lowest Level in 10 Years

  261. Good morning!

    Damn, missed a really nice dip in oil this morning, down to $99.86 after hanging near $101 until about 2:30.

    I'm loving my Toshiba USB Mobile LCD Monitor – gives me an extra display for the laptop and it's not much bigger than an IPad to add to my bag!  It's great because I can keep TOS running on my side screen and work on the main now.

    Futures off a bit but not too much so far, Asia had a strong finish (not sure why yet) and ended up about 1% led by Nikkei, up 1.4% but I take it the EWJ play never filled unfortunately.

    Europe is down about a quarter point – also not bad but it seems the ECB has bought 50Bn Euros of debt this month, pretty much all the debt that was offered and ONLY THAT explains the low rates everyone is celebrating. 

    China's PMI not bad apparently, but I think (still), we're overbought and I'll be super-surprised if we have an up day.  


    Dollar 80.55 at the moment, now oil $99.63 – that's why I like SCO, you can't catch every move in the futures so at least that's working for us while we sleep. 

    Gold $1,647 but still a long way from sanity. 


  262. MJNA/Morx – I think once pot goes mainstream the bet will be for big tobacco to take over.  Right now they are letting the little guys fight the battles and take the heat but once they set enough legal precedents and get enough states on board – they will be bumped out tout suite as it turns into a business.

    Currencies/Lionel – Like I said the other day, they are untradeabel with all this manipulation.  As to Japan, what I'm saying is that boosting the Euro, which is less than 25% of BOJs holdings, weakens the Dollar, which is 2/3 of their holdings so it's a no-win situation for them to pull that string as it's attached to the other one and it's not about their holdings anyway, it's about the relative value of the Yen but it's the same math as the Dollar is the dominant currency.  Of course they need to buy Euros once in a while but, as we can see this morning, only before they go back to the Dollar well.

    VXX/Cwan – You are right, I was thinking of the VIX so VXX is an ETF that holds rolling positions in something that has absolutely no value – that's much better.  8-)

    TBT/Esco – That's a "none shall pass" line for TBT these days.  Roughly lines up with $118 on TLT, which is the line the Fed seems eager to defend.

    TIPS/Aldo - It's part of the fear trade, people are just looking ot park their cash in somehting that gives them their money back or, in this case, most of their money back.  Insane if you ask me.

    Dollar testing 80.50 and futures pull a U-turn and back near even.  Oil a good up play for a change off the $99.75 line (/CL) with tight stops but once they get over $100, it's a quick ride to $100.50. 

  263. That was quick, just under $100 with the Dollar at 80.485, now it's up to the Dollar to bounce of head lower but of course oil will reject on fist swipe at $100 so a quick quarter is taken off the table on oil and now we watch the Dollar and the $100 line for a re-entry but I think the Dollar should bounce and maybe back to $99.75 first.

  264. XRT/Kevin – I'd wait for more evidence.

    Oops, I was wrong, dollar fell and we're over $100 so game on with a stop at $100 on (/CL). 

    Someone remind me tomorrow to find a clip on a Fox show called Red Eye where they had a round table discussion on what idiots the OWS crowd are and how great it is to be in the top 1% – great for a weekend discussion.  It was on this morning but I don't see it on the web site yet.  This show, while "humorous" is repulsive.

  265. That's "humorous" to Fox Conservatives, of course – you have to be pretty out of touch with reality to find this funny.  It's humor of the stripe that it's "OK" to tell racist jokes because "there's none of them in the room."

    Long-term interest/StJ – Note the last time we had rates this low was the last time the Government was borrowing a ton of money in excess of 100% of GDP. 

    And now the Dollar pops back over 80.50.  Oil right at $100 (from $100.10) but no bullish betting with the Dollar over 80.50

  266. Jobs/Rev – The countries where the jobs are growing are the ones that invest in infrastructure.  What passes for policy discussion in this country is a joke as China spends 10% of their GDP on infrastructure building and Germany has many laws to protect jobs and invests heavily in Education, Solar Energy and, of course, free health care – why is it that no one remembers already that the reason autos aren't competitive in the US is that automakers here spend $4,000 per car on health care while it's free (well, free to employers) in Japan and Europe.  Germany pays their auto workers $67.14 per hour vs $33.77 per hour in the US and VW was the number one car in the World last year.  There ws a good article comparing the two systems here

    OXY/Rev – Yeah, it looks like you should get $9.80 if you cash now, however, if you roll your calls ($20.60) to the 2013 $82.50s ($23.10) and, you're paying $2.50 net but then you can roll the Feb $90 caller ($10.80) to the May $92.50s ($11.60) for hopefully closer to $2 as expirations approach.  That's a nice "dividend" on the $10 you are forgoing collecting and – if you get two more rolls like that – you can widen the gap so you collect maybe $15-20 at the end.  Of course, it's a risk, $10 in the hand is worth $20 in the bush and OXY is no longer the bargain it was in December. 

    Keep in mind these trades work because we identify a good stock that's underpriced.  When you have a successful trade and the stock has moved up, the original premise no longer exists.  I know it's very tempting to "stick with a winner" but stock are not, for the most part, sports stars – they don't perform day after day, year after year – they go up and they go down and you should buy them when they are down and sell them when they are up – no matter how much you like or hate them (see GOOG if you have any doubts and now we'll see how AAPL does, who are not cheap anymore either). 

    $99.75 again with the Dollar at 80.555.

  267. Chart/Pharm – If the chart is a .png, they seem to have trouble posting.

    You're welcome Ron!

    GE with a small beat but a slight guide-down on the year.  Kind of confusuing as they divested NBC/Universal – nothing to run away from but will disappoint some holders.

  268. Bond selling/Kustomz – Very good point!  They are trying to sell a lot of paper.

    Good plan BDC.  I agree with Dow 22,000 down the road (not 2015) and that's why the last thing I worry about is missing a bull rally.  Once inflation gets it's teeth in, we'll be yawning at 100% gains on option plays as flat becomes the new down and up 20% the new flat, etc. 

    Resolution/Scott – Or GOOG?

    And oil is back to $100 – this time they have a better shot of going over so we can hold a bit longer.  Dollar keeping us nervous at 80.525 so any uptick is a sign to take bull profits unless we get over $100, then that's the stop.   

    80.515 – going well. 

    Indexes flat now.

  269. AAPL/lflan – Expectations are just too high for me to like them into earnings. Wouldn't bet against them, of course, but Oct earnings were spectacular and they fell from $426 to $390 and eventually $363 and that wasn't about Jobs as he died on Oct 5th and the stock zoomed up from $354 to $426 before earnings.

    VIX/Burr – That's an odd play. Of course, you never know what someone is hedging – that's why I don't pay much attention to those option activity things – just like we buy spreads to hedge that we intend to lose – funds do that all the time so why "follow the money" on those trades?

    Threads/BDC – While it sounds interesting, realistically, there is not a chance in the world I'm going to go hunting around threads looking for a new comment and making sure I only answer about a subject under the proper thread. Not only that, but buy narrowing the focus you diminsh the very successfull serendipidous stream of information and contributions we have here. To me, what is wrong with the web is precisely that – people only read what they are "interested" in and, clearly, they have no idea what they are missing. This is a bright, intelligent group of people from all walks of life and diverse business backgrounds and you never know what comment someone makes can get your brain working and, ultimately, make you a profit. THAT's why I don't like the idea. It's one thing to sort and categorize comments after the fact for achives but to do it live – well there's not a single forum set up that way that I've spent more than an hour on and none ar in my favorite sites so I'll be damned if I turn this site into it.

    Modest shorts/Roro – I agree with that strategy. It's like oil, we keep playing it short and waiting and playing it short and waiting – it can go up all it wants but we have FAITH in the down.

    Fed/Matt – Wow, they had that one loaded up and ready to fire at the first sign of trouble.

    The Federal Reserve is likely to step in with $1 trillion worth of easing that could be announced as soon as this month, according to a growing consensus of economists who see the recent uptick in economic growth as unsustainable.

    I love the way that investors gloss right over the "recent uptick in economic growth as unsustainable" part on focus solely on the MORE FREE MONEY!!!!

  270. Chart/Pharm/Phil – if you're running a mac you can convert a png to a jpeg with your Preview program.

  271. 500Bn/Roro – That's Euros you know – $650Bn!

    5 Reasons/Pharm – While I agree, fortunately I went to college and I know that the "sober" guy at the party may be right – but he'll never get laid.  It's a party, Europe and the US are throwing it and everyone is driking the Kool-Aid and of course it's mis-timed, mis-guided and it's all going to end in tears but, like sending two wasted guys to pick up another keg in the middle of a party – we may as well drink what's left and hope they don't screw it up. 

    Also, don't forget what happens to a party when the guys come back and tell everyone the liquor store was closed – we may get some of that action after the Fed meeting next week if they don't come through because the ECB already used their keg up and everyone's now counting on Uncle Ben to keep the party going.

    Reminds me of this video, in case people haven't seen it:

  272. BDS, Great idea about having a threaded message board with sub threads and be able to click on a user to see their comments. It would save time in looking thru the site for sure – something I hope Phil would consider and would be a definite upgrade.

  273. I mean BDC not BDS

  274. Phil/being funny,
    I just don't think there are any or very few conservative comedians that are funny, it is just no in their genes I guess. I remember Dennis Miller on SNL – he was funny but on FOX now not.

  275. Big Chart – Just 47 points to go on the NYSE!   125 on the Dow would also be impressiive – a Trillion Dollars should do it.

    Also, very bad to raise expectations ahead of the game, reduces net effect of actual easing significantly and also means that a $700Bn QE3 can be a disappointment next week.  More likely, it's a BS rumor attempting to pump the technicals ahead of the massive drop next week that the manipulating banksters can blame on the Fed and not the fact that they jacked the markets up 20% for no reason.  As I noted yesterday – puts are very cheap now so, if I were an evil hedge fund, I would have bought my calls last month, rammed the markets up this month, forcing suckers to call away my stocks while I get back to cash and load up on cheap puts, which I can tell the regulators I was buying to protect my stocks but then – WOOOPS – they got called away and I was left all short – what a happy coincidence that it all worked out. 

    Notice how both Lloyd and Jamies yesterday said they thought the markets were heading higher – that's a warning bell right there!

    Or maybe I'm just paraniod and everything is fixed and the Fed will be showering us with $3Bn a day for the next year and Greece will have an orderly default and Japan can borrow another Trillion this year even though they are now about 230% of their GDP in debt and, of course, China's just fine…

  276. Dennis Miller/Jomp – He reminds me of Pet Cemetary, where the kid comes back from the dead but "he just ain't right".  WTF happened to that guy?

    MSFT/StJ – Very encouraging that Windows is becomming a smaller and smaller part of their revenue stream but that 6% drop is probably the tip of the iceberg.

    Ratios/JMM – What happens if TZA finishes at $22?

    Jumbos – Keep checking, they are easing requirements again bit by bit.

    Gotta go to work now!

  277. Phil……..Jon Hilsenrath put out a 'the FED is in a wait and see' article 7 hrs ago on how the ec performs before deciding to launch another bond buying program.
    that is kind of lowering the expectations for next week's FOMC, …….as you pointed out already it very bad to raise expectations ahead of time.
    since Hilsenrath is or is supposed to be the mouthpiece for the FED do you think this article throws a bit of a curve into what is expected for next week as far as an announcement is concerned………..maybe it puts a cap on price until then and maybe sets up some nice shorts?

  278. Phil/Ratio
    What happens if TZA finishes at $22?

    In that case your  hedge has been expensive, but I was thinking that you could always roll it one month before expiry if it stayed close to the original purchase price without losing too much, and also that once you put the hedge in place, you might sell higher calls against the 50% of the long calls that were not in a spread if the market moved down, and start buying back the short calls if it moved up.
    Of course whether this would provide effective hedging in real time conditions is a moot point and would probably depend on the competency of the execution.

  279. Phil, basic beginner's question for you…I have Jan $400 and Jan $410 naked calls on AAPL that are of course nicely in the money now.  I bought the 400's at 10.35, now at approx $28.  I bought the 410's at $11.28, now at $17.60.   I am tempted to sell the $415 calls against them, creating last minute 400/415 and 410/415 spreads. On the one side, I am capping the profits on the naked calls, but on the other hand the premiums are very nice on the $415's right now, around $12.50.  Plus, I can leave the spreads into the weekend and just collect the profits next week.  Theoretically, there should not be a profit difference whether I just sell the naked calls, or create in the money spreads by covering the naked calls.  The advantage is that I can leave the spreads into the weekend and they'll hopefully take care of themselves…am I looking at this correctly or would it be better to immediately sell the naked calls? (assuming AAPL does not dip below $415 today, which is a pretty fair assumption)