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No Worries Wednesday – Top Ten Plays for the Bull Market

We're still waiting for a clear signal.

The S&P is finally over our 1,359 level but, so far, has not stayed over that line for a full session and we need two sessions over the line to confirm it.  However, I did promise not to be bearish if we're over 1,360 and I think I got it all out of my system in the last few posts, as well as last night and this morning's Member Chat, where I outlined my case for for the oil glut and the collapse of the EU, which will lead to the collapse of Asia and the US – but not today.  

Today there is a ton of money sloshing around in the system and we are clearly in a massive technical rally, which may (or may not) end at any moment.  We discussed our February trade ideas from our morning posts on Monday's morning so I won't rehash them here but I do want to take a look at ways to leverage some trades to take full advantage of this non-stop rally as we have VERY CLEAR stop lines (our 10% lines) where we'll have a clear signal to get out or cover if ANY of the major indexes fail.  

As with our early February trade ideas, we can add one more bullish trade each day that we're over the line and cash out the older trades that go well in the money and, of course, accumulate some Disaster Hedges (20-30% of your unrealized profits into protective hedges is a good rule of thumb as well as the cheapest form of protection – STOPS!).  

My favorite disaster hedges are playing for a correction in the Dow or the Nasdaq which, if you are a Dow Theorist, would seem very likely based on the chart on the left but, so far, nothing matters to the bulls – who have their story and they are sticking to it – regardless of those pesky facts.  Sorry, that's a bit bearish (bad habit).  Anyway, my favorite disaster hedges are:  

SQQQ April $13/17 bull call spread for .70.  This trade has a 471% upside potential by itself if SQQQ (currently $13.14) gains 30% by April expiration (58 days).  That's a lot but SQQQ is a 3x ultra-short to the Nasdaq so a 10% drop in the Nas, back to 2,650 would do the trick and that's where we were at the beginning of the year, just 50 days ago.  

Keep in mind a good hedge risks little to make a lot so we can offset the risk of losing .70 (although it's really and insurance policy you expect/HOPE to lose) by finding something we REALLY want to own – even if the Nasdaq falls 10%.  AAPL is, for example, a nice company but a bit expensive at $515.  Would you like to buy it for $300?  If so, how about I PAY YOU $15 to do it?  That would make your net entry on AAPL $285 so do you want my $15 or not?  That's the offer you get for selling the AAPL 2014 $300 puts.  If AAPL falls below $300, you will own 100 shares per contract at $300.  If AAPL stays above $300, the bad news is you don't get to buy the shares at 40% off but the good news is you keep the $1,500 per contract you collected up front.  

$1,500 buys you 20 of the SQQQ spreads and leaves you with another $100 to go to the movies while you wait.  TOS says the margin for selling the AAPL 2014 $300 puts is $3,000 so it's a 50% return on margin if AAPL stays over $300 for 2 years.  Should the Nasdaq fall 10% and stay below 2,650 into our April expiration, 20 SQQQ $13/17 bull call spreads should pay out $8,000, good enough for an additional 26% discount on those AAPL shares – if you are lucky enough to get them for $300 ($30,000 for 100 shares).  

Is that worth putting $3,000 of margin aside for?  If you have a $250,000 portfolio and don't mind making AAPL 10% of it, you are buying $8,000 worth of protection against a short-term 10% drop which, even if you are completely unhedged otherwise, shouldn't cost you more than $25,000 (10%) if you are fully invested but decently diversified.  Consider the end-game, your portfolio drops to $225,000 and you get $8,000 from the hedge ($232,000) and you end up spending $30,000 on AAPL (very simple worst-case example, of course).  

That means you have $202,000 and 100 shares of AAPL, which are currently $51,500 so, if you VALUE AAPL at $500 or more (regardless of the price), you should have no fear of the downside using just this simple hedge.  Also keep in mind, you are only committing to AAPL to save the $1,400 insurance fee for the SQQQ spread.  If you already own 100 shares of AAPL as 20% of your $250,000 portfolio, you could also just sell 1 April $510 call for $27.50 and that gives you $2,750 which pays for your $8,000 insurance hedge ($1,400) and leaves you with $1,350 of protection on your AAPL stock (back to about $500).  So many paths to free insurance….  

Moving along then, in addition to SQQQ, I think the Dow could join the Transports for a 10% drop and DXD is also cheap at $13.42 but it's only a 2x ETF so we don't want to be so ambitious with our target.  The April $13 calls are just .90 and we can sell the $15 calls for .35 for net .55 on the $2 spread.  Again, keep in mind that the bull call spread, by itself, has a 263% upside potential so everything else we do is just to mitigate the cost of the insurance.  

To make $8,000 on this spread we need to have 40 contracts for $2,200 and for this one let's look at other bullish offsets, like FDX April $80 puts at $1.10.  Selling 10 of those nets $1,100 and pays for half of the bearish spread and, of course, it's very unlikely that the Dow goes up while FDX goes down and FDX is currently $91 and looking attractive at that price – especially if the market keeps going higher.  Going longer, T is always nice to own (now $30.34) and you can agree to buy it for $25 in 2014 and get paid $2.15 per contract for doing so – fully offsetting 4 DXD spreads per short T put.  SKX is cheap again at $12.69 and, if you are willing to buy it in October for $12, you can get paid $1.55 per contract for the $12 puts.  

And that's a good transition to our bullish trade ideas.  SKX sells sneakers and people wear sneakers so, if the consumer is truly coming back (and I have promised to be bullish so I will keep my opinion to myself other than to point out we're still short XRT in our virtual $25,000 Portfolio), then sketchers should be able to work past the slump they had in Q4 that knocked them back from $14.70 (which happened to be their 200 dma) to $12.69, which happens to be their 50 dma.  Rather than spend money now, we can still sell those Oct $12 puts for $1.55 and use that to buy us an Oct $10/14 bull call spread for $2.20 for net .65 on the $4 spread that's already $2.69 in the money.  I love these kinds of plays because all SKX has to do is hold $12 for 8 months and that's a 207% gain on cash right there – that's going to be plenty to keep us ahead of inflation and buy us a nice pair of Sketchers!

How about gas?  Do you use gas?  We hear a lot about oil going up and up and up because Iran will do this or that and we think it's all BS and we're aggressively shorting oil in our $25KP and will keep doing so even if it goes higher as it will eventually get real (we shorted the Futures this morning, in fact at $106) – but let's say it doesn't.  XOM pays a very surprising $5 for selling the 2014 $65 puts, which is a 25% discount off the current $86.57 price, not even including the $5 you pocket.  If you don't like oil enough to buy XOM for a 25% discount – don't sell the puts but those can be combined with the purchase of an SU ($34.88) 2014 $25/37 bull call spread at $6 for net $1 on the $12 spread that's $14.88 in the money.  So you begin this trade up 1,388% if the stocks just flat-line, that's a good starting posture.  

If you really, Really, REALLY want to own XOM at net $66 – what's the risk?  These plays are great for skeptics like us, who are sidelined with cash and waiting for a drop that, so far, isn't coming.  So, if the drop never comes – what are the stocks we do want to own?  SU was in the $60s for most of 2008, topping out at $70 and fell all the way to $15 in the crash and quickly got back to the $30s so, unless we really hit the wrong window, timing-wise, this is a good target and, frankly, if SU is back at $15 just because the market collapses, I'll be screaming BUYBUYBUY about this one – just as we did in 2009.  

Another way to give war a chance in the oil patch is to pick up a long play on USO ($40.58).  Yes, we are short but if they do pop $107.50, then reality has left the building and the USO June $40/46 bull call spread at $2 makes $4 (200%) on it's own if oil goes up 10% ($116.60) and holds it into June expirations while you can over-cover with SCO ($33.47) October $26 puts at $3 for a net $1 credit on the $6 spread.  So, if USO goes up 10%, you collect $6 and now you "risk" having SCO assigned to you at net $19, which is 43% off the current price and SCO is a 200% ultra-short so a 21% rise in oil to $127 would cause you to own SCO at net $19.  I don't know about you but I will be THRILLED to own a lot of SCO at net $19 with oil at $127 so this is a trade that can make you happy twice.  

I suspect you are already noticing a theme here.  We are selecting trades that not only have huge upside potential on relatively small moves up in the market but also have downside protection of 15-20% built in (see "How to Buy A Stock for a 15-20% Discount") .  Then we take insurance that pays us in full if the market falls just 10% so there is a HUGE window of opportunity in which we can both collect our insurance and still win our bullish bets.  Clearly we will outperform the broad market in a downturn and, while we somewhat limit our upside, there's no need to be greedy.  

In fact, let's say you have a $250,000 portfolio fully invested and well-diversified and you make the average S&P returns of 8% for 20 years.  You would end up with a very nice $1.2M providing somewhere near the end you didn't hit a year like we had in 2008.  Now, let's say we play our system much more conservatively, with only $125,000 invested and the rest in cash but our hedges outperform by just 5% for a 13% annual gain.  After 20 years, that's $1.4M – more money made by playing it safer over the long run!  

Cash on the side gives us margin to play with and also let's us take advantage of opportunities, like AAPL falling to $300…  As our Members are seeing in our rapidly growing virtual Income Portfolio – we end up owning more of the stocks we are able to buy cheaply – the system essentially forces us to both buy low and sell high – not a bad combination.  

AA is still inexpensive at $10.40 and you don't need to do anything fancier with them than just sell the 2014 $10 puts for $2 for a net $8 entry (23% off).  This is an easy concept, if you have a possible allocation for $15,000 of AA (1,400 shares), you can sell 8 short puts for $1,600 and all you tie up is $1,300 of ordinary margin against which you collect $1,600 up front (153%).  All AA has to do is hold $10 through Jan 2014 and you keep that $1,600 and your margin is released.  As AA goes higher and you become confident you won't need the $8,000 allocated to buying the first 800 shares, you can find something else you might want to buy and do it again.  If AA drops back to their 2009 lows of $4.84, you will be forced to buy 800 shares for $10 but you have $8,600 on the side (your $7K remaining allocation and the $1,600 you collected) and you can buy 2,000 more shares for $4.84 ($9,680) and now you own 2,800 shares for your $15,000 plus $1,080 and net into AA at $5.74.

As I often say to new Members – if you don't REALLY want to own 2,800 shares of AA at $5.75, why on Earth would you be considering buying 1,500 for $10.40 or even shorting the puts to net 800 at $8.  These are trade ideas for Fundamental traders with long-term convictions – much like a home buyer, we don't care about the current price of our stocks as we value them for the long haul and have no intention of either buying or selling based on short-term price fluctuations.  As I said above, our goal IS to have the occasional AA put to us in a disaster.  Our successful trades go back to cash and we end up with a better-than-expected quantity of stocks that we were able to pick up at a significant discount.  

X ($28.49) is another one that's too cheap for a bull market.  We already know autos are coming back and a glut of nickel is a good thing for keeping X's costs down so we can engineer a cheap entry by buying the stock for $28.49 and selling the Jan $25 calls for $8.50 and the 2014 $20 puts for $2.95 for a net $17.04/18.52 entry.  If you are called away in January at $25 and the longer puts expire worthless, you gain $7.96 (46%) on your net $17.04 cash entry (there is margin too).  The negative case here is that X drops and you are forced to double down at $20, which puts you in a 2x position at net $18.52 but, again – that's 35% off the current price – may all your bad entries yield such bargains!  

PEG ($30.92) is a utility provider in the Northeast.  I like the Northeast (remind me to mention HOV for the same reason) as we weathered the crisis fairly well and, from a utility standpoint, we have great population density and very old facilities that can handle oil, coal, nat gas or nuclear so, whatever fuel is cheapest, PEG can usually take advantage of it.  Not much earnings growth but a juicy $1.37 dividend which makes it attractive to buy the stock for $30.92, sell the Sept $30 calls for $2 and the $30 puts for $1.85 for a net $27.07/28.53 entry, which makes that annual dividend almost 5% in addition to the 10% you make if your stock is called away over $30 in just 7 months.  

HOV (see, I remembered – $2.97) is a long-time PSW favorite.  We had a good ride from the bottom at $1 and got out at $3 but I still like them long-term, much more so than other builders.  If you want to be cool like us and buy HOV for $1.10, you still can by selling the 2014 $2 puts for .90 – what can be simpler than that?  You risk owning them for net $1.10 but all they have to do is not drop 33% and you make 180% on .50 of ordinary margin in 22 months.  That's a good ROI by any measure so, if you like housing (and companies with massive tax write-offs) – HOV is an excellent choice.  

BAC ($8.11) is our "One Trade for 2012" and has already made us a ton of cash but we still love them at $8 if the S&P is marching over 1,360 and the volatile nature of the stock has kept the option premiums warm for us so we can take advantage of other people's fear by selling the 2014 $10 puts for $3.30 and buying the 2014 $3/7 bull call spread for $2.75.  That is a net credit of .55 on a trade that makes $4.55 (827%) if BAC finishes over $10 but it's an aggressive trade that nets you into BAC for $9.45 under $10 with a bonus of $4 if they are over $7 for net $5.45 – so you still make $1.55 (280%) on cash if BAC drops to $7 and break-even is around $6.25, which is a 23% cushion on your entry.  Again, the key with these is that a flatline pays you 280% while anything up from here is a bonus.  

A more conservative play on BAC is selling the Jan $7.50 puts for $1.15 and buying the $7.50/10 bull call spread for $1.05 for a net .10 credit ($7.40 entry) as your worst case and a $2.10 profit if BAC goes up $1.89 into Jan expirations.  It should also be pointed out that just selling the 2014 $7 puts for $1.55 requires just .70 in ordinary margin so a 221% return on capital in 22 months and you break even way down at $6.30, which is 22% off in the self-hedging play.  

On the Regional side, we love HCBK ($6.94) but we've been heavy into them at $5 and many of our Members took 40% and ran at $7 so be warned.  Since they pay a .32 dividend, I still like them, especially since we can sell the Jan $7 puts and calls for $1.80, which drops the net to $5.14/6.07 and that makes the dividend a lovely 6.2% addition to the $1.86 you make (36%) if the stock is called away over $7 in 10 months.  We like plays with built in 12% protection that pay 42% a year when they work, don't we?  

Last but not least is another favorite dividend payer of ours that gets no respect.  FTR just cut their dividend to .40 but, with a stock price of $4.63, that's still pretty good.  They are digesting a huge purchase of VZ assets and customers so it's been a rocky road and won't get better soon so this is in the "accumulate" category but you can buy the stock and sell the Jan 2014 $5 puts and calls for $2.20 for a net entry of $2.43/3.71 so we're talking about a 20% discount if a second round of the stock is put to you at $3.71 or a 105% profit if called away at $5 in January PLUS the .10 quarterly dividend, which works out to 16.4% annually against your $2.43 cash layout.  

Let's keep in mind that I don't like ANY of these if the S&P can't hold 1,360 but, on the other hand, I don't think we'll be crying to own them as long-term investments so, just like our first 20 February picks, let's just consider buying 1 for each day the S&P is over our new, higher target of 1,360 while we're ready to cash out our earlier plays and these if we fail but, for now – I'll take those two disaster hedges and wait and see if they can shake us out of those first!  

How's that for bullish?  

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  1. Phil:
    "….we have gotten to a point where robots write headlines and stories read, reacted to and traded by robots. "

    Is that story for real? That is scary!

  2. "…but AA, BA, CAT, CSCO, CVX, DD, GE, HD, HPQ, IBM, INTC, JNJ, KFT, KO, MCD, MMM, MRK, PFE, UTX, WMT and XOM ship pretty much everything they sell…"
    Does BA ship aircraft? Agree with your general point, though.

  3. Oil Lines

    R3 – 108.73 (Oy)
    R2 – 107.60
    R1 – 106.86
    PP – 105.73
    S1 – 105
    S2 – 103.86
    S3 – 103.12

    Yesterday's high and low – 106.48 / 104.61

  4. Interesting theory and the evidence seems to back it up:


    Now the first thing to note is that contrary to some popular delusions, which posit that the government is only pumping more and more into the economy, in the last quarter, government spending was a net drag on growth, as stimulus fades, and austerity starts to kick in.

    But the spending cut was more than expected, and Phillips posits that it's the result of gridlock in DC. More specifically, he argues that it's the ongoing result of funding mechanisms called "continuing resolutions" which are the temporary stopgap measures that Congress uses to keep the government operating in the absence of a full-year budget deal.


  5. BA/JMM – No they fly the planes out after the parts appear on the teleportation pads and are assembled all in one place.   

  6. To follow up on my VIX ETN post from last night:


    Unfortunately, over a long-term time horizon, long positions in TVIX, VXX and many of the other VIX ETPs will be a losing proposition. For those who doubt this, read the prospectus for TVIX. Start with the Risk Factors discussion on page PS-26 and make sure you read as far as the first paragraph of PS-28, where you will encounter the following statement:

    “The long term expected value of your ETNs is zero. If you hold your ETNs as a long term investment, it is likely that you will lose all or a substantial portion of your investment.”

    This is the situation in a nutshell and helps to explain why TVIX is down more than 80% since its launch at the end of November 2010 – in spite of a meteoric 7x rise from July to October of last year. Will TVIX go to zero? No. As is the case with a number of other VIX ETPs, should TVIX continue to decline in price, a reverse split will likely be used to inflate the share price.

    There is something to be said about the honesty of the TVIX prospectus…

  7. Boeing / Jmm and Phil – They do actually ship the planes (well, big chunk of them at once):

  8. An Airbus has an even funnier one…

  9. Well, this guy is making his point come across loud and clear:


    Bond markets have slowly and steadily embraced the notion of really low rates for a really long time, and they have accumulated strong returns on the way. that’s lovely. But from here, bond market returns are about as attractive as following a plague of locusts across a field of corn.

    You’re not going to get rich buying 2yr Notes at 0.3% yields (indeed, you’re just going to guarantee to get a bit poorer) and I don’t think you’re going to achieve much if you picked up 0.25% yields in this morning’s 2yr Schatz, either. But if the US economic thaw continues, and if we retain ZIRP, and if the UK adds another GBP 25bn to its bond-buying for good luck, and if the BOJ’s change of stance is indicative of a bigger mood shift, we could be on the verge of a longer bull market in equities, irrespective of the need for short-term corrections.

  10. Boeing. Well  of course companies use various modes of transportation (or possibly pipelines) to import raw materials and components,  but there is obviously a time lag between them doing that and delivering finished orders to end users. I agree that if transportation is lagging on the business-to-business side, that would tend to indicate that companies are not ramping up production.

  11. From Felix Salmon on the problems of setting up a Web site to export a Greek  product to the US.
    Antonopoulos and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.
    Once they climbed the crazy mountain of Greek bureaucracy and reached the summit, they faced the quagmire of the bank, where the issue of how to confirm the credit card details of customers ended in the bank demanding that the entire website be in Greek only.
    Surely not a problem for US consumers now that we have Google Translate.

  12. PP

  13. A good summary of the plan for Greece:


    1) Make everyone poorer (well, not EVERYONE, of course)

    2) …


    I suspect there might be a flaw in this plan.

  14. Good morning, still nothing new,


    IWM     81.12,  81.41,  81.73,  82.00,  82.43,  82.87,  83.07,  83.38  and  83.75


    Good hunting !!

  15. Earning Play – If you sold the CAKE Mar 29/35 strangle yesterday for $0.95, it can be bought back for $0.45 this morning.

  16. A decent day yesterday…   ;-)

  17. Phil,
    I like HOV and have owned them for some time based on your calls.  I have 10000 shares at a basis of $2.91, Sold 50 Jan 13 $1.00 Puts for $0.55 now $0.175, Sold 50 Jan 13 $2.5 Calls for $0.45 now $0.85.  I cannot sell uncovered calls in this account. I am thinking of selling 5000 shares since they do not pay a dividend and selling the Jan 13 $7 Puts for $0.80.  What do you think?

  18. Aapl port… apr 490 37.90. 5 contracts

  19. button
    The $7 puts??

  20. Phil, HOV
    Sorry That's Jan 13 $2.5 Puts for $0.80.

  21. lflan -Good Morning!  Thoughts for AAPL today?

  22. Aapl….watching….waiting…..scale in if dip

  23. stjeanluc…………if bond traders are so smart with so much money at ZIRP just laying around rotting then what are they waiting for? (and aren't they supposed to be among the smartest – i wonder looking at Europe but another story)

  24. Good morning! 

    Dollar at 79.39 is most interesting signal of the morning.  Oil $105.85 again, gold $1,755 but Europe is down half a point and we look weak overall so not the time to be jumping on the bull wagon just yet!  

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    7:45 ICSC Retail Store Sales

    8:55 Redbook Chain Store Sales

    10:00 Existing Home Sales

    1:00 PM Results of $35B, 5-Year Note Auction

    At the open: Dow -0.09% to 12954. S&P -0.09% to 1361. Nasdaq -0.18% to 2586.

    Treasurys: 30-year +0.34%. 10-yr +0.11%. 5-yr +0.07%.

    Commodities: Crude -0.35% to $105.88. Gold -0.18% to $1755.25.

    Currencies: Euro -0.01% vs. dollar. Yen +0.63%. Pound +0.75%.

    Market preview: Stock futures are subdued (S&P -0.1%) following weak economic data from Europe and China that show contracting manufacturing. Fitch cut Greece’s credit rating to C from CCC, signaling it expects imminent default. European markets are broadly lower, while Asian bourses gain ground. Dell -6% after its sales forecast missed estimatesStill ahead: existing home sales.

    It's best not to get too cute with contrarian analysis, but Bruce Krasting - viewing a clip of last night's ABC News – wonders if a tipping point hasn't been signaled. When this group of "stars" is all on the same page, perhaps "sentiment has gotten away from reality."

    "It's difficult to fathom what the market cares less about now,"tweets economist Jeremy Cook, "Greece or ratings agencies." European shares and the euro hardly blink as Fitch downgrades Greece, the Stoxx 50 -0.8%, the euro flat and buying $1.3228. 

    The divergence between Dow transports and industrials is creating some angst among Dow Theory followers. The transportation index has fallen in eight of the last 11 trading days, declining 3.8%, while Dow industrials have risen in eight of the 11, rising 0.8%. “When you look under the hood there are some divergences that suggest the risk-on trade may be losing some momentum,” one strategist says.

    The Fitch downgrade of Greece is a technical matter, the country's paper being placed in "restricted default" (RD) due to the debt exchange. Once the exchange is completed the country will be put in a category "consistent with the agency's assessment of its post-default structure and credit profile," i.e. likely to default

    The February Flash Composite PMI for the eurozone drops to 49.7 (50.4 previous) against expectations for a rise to 50.8. Manufacturing PMI 49.0 (48.8 previous). Services PMI 49.4 (50.4 previous). "Sharp divergences in performance also continued … with modest growth in Germany contrasting with a steep decline in the periphery."

    ICSC Retail Store Sales: +3% W/W, vs. -2% last week.+3.2% Y/Y, vs. +2.8% last week. Strong sales for Valentine's Day drove a 3% surge in weekly sales.

    Redbook Chain Store Sales: +2.9% Y/Y vs. +2.7% last week. The rise in sales reflects Valentine's Day demand and early Presidents' Day promotions.  - Strengthens the Dollar (demand for Dollars)

    MBA Mortgage Applications: -4.5% vs. -1% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) increased slightly to 4.09% from 4.08%.

    The dollar rises to a 7-month high vs. the yen as the BOJreiterates its commitment to getting a green print on the nation's CPI, Governor Shirakawa telling lawmakers a price target was set to show the central bank's resolve. Dollar +0.6% and buying ¥80.25. 

    The euro rises to a 2-month high against sterling afterminutes from the BoE show 2 members wanted an even bigger QE program. At £77.71/barrel, the price of Brent crude is at a record high in sterling terms, notes the FT's Chris Adams – an interesting thought to anyone who remembers the way $147 crude hit the U.S. economy in 2008.

    Buying the rumor that Greece is saved has been replaced by selling the fact that Greece is still "completely broke," writes ZH, noting the sharp rise (ahead of the bailout announcement) and then collapse (since) of the country's bank stock index. NBG -10.4% premarket.

    The ECB's LTRO has been successful at re-openingwholesale funding markets in Europe, Morgan Stanley noting (h/t Gareth Gore) banks have raised €93B in the last 6 weeks – that's more than the entirety of 2011's second half.

    The government of Julia Gillard teeters in Australia after foreign minister Kevin Rudd unexpectedly resigns (while visiting D.C.). Ms.Gillard replaced Rudd in 2010, who was forced out after a series of missteps, including an attempt to implement a new mining tax. A formal leadership challenge could come next week.

    "Bond market returns are about as attractive as following a plague of locusts cross a field of corn," writes SocGen's Kit Juckes, who should remember folks have been complaining about low JGB yields for 20 years, but a trader running a leveraged portfolio of that low-yielding paper since 1995 is likely kicking it from his/her seaside mansion right now.

    Moody's is looking at thousands of U.S. municipal sector obligations linked to 26 banks currently under review for downgrades. The results of Moody's evaluations could cause turmoil in the $3.7T muni bond market that has so far managed to chug along without too many problems.

    The CFPB's Richard Cordray says that the agency is launching an inquiry into the policies of banks on checking account overdrafts. At issue: Do banks withdraw larger checks before smaller checks in order to run up fees? At risk: An estimated $38B in annual overdraft fees. 

    With no end in sight to Fannie and Freddie's drain on taxpayers, the two mortgage giants need to rein in their rising legal costs, according to a watchdog report (.pdf) released today. At present, Fannie and Freddie are spending tens of millions of dollars defending former execs facing private lawsuits and government investigations.

    Citigroup (C) is facing a potential multibillion-dollar writedown as it begins unwinding its minority investment in the Morgan Stanley Smith Barney brokerage. Accounting complications and a reduced valuation could leave Citi facing an after-tax hit of up to $1.8B, more than it earned in Q4.

    After airline stocks fell sharply as a group yesterday, Dahlman Rose's Helane Becker takes all the suspense out of the sector move. "The stocks are just going to move with oil, it's as simple as that."

    More on airline stocks (previous): Though airliners all feel the same pressure from the rising cost of aviation fuel, US Airways (LCC)stands by itself among bigger carriers with its decision not to hedge its fuel purchases. Yesterday, LCC lost 11.4% compared to the NYSA Arca Airline ETF that was down 6.2%.

    Boeing (BA) says 55 of its Dreamliner jets could have arecently discovered flaw in the fuselage, while reiterating that the world's first carbon-plastic passenger plane is safe to fly. Boeing is reporting signs of "delamination" on a support structure in the rear fuselage, the latest in a series of glitches in developing the revolutionary jet.

  25. MGM Resorts International's (
    MGMQ4 loss narrowed to $0.23/share from $0.29 in the year-ago period, as the casino operator booked fewer impairment charges and posted stronger-than-expected revenue. But the loss was still wider than analysts were expecting; shares -3.6% premarket.

    China's mobile subscriber base closed in on the 1B mark in January, growing another 1.2% M/M to 987.6M. Top carrier China Mobile (CHL) saw its base grow to 655.4M subscribers= (53.9M 3G users). China Unicom's (CHU) base reached 202.9M subs (43.1M 3G). And China Telecom (CHA), which just struck a deal with Apple, saw its base reach 129.3B subs (38.7M 3G).

    Looking to target a growing middle class that's spending anenormous amount of time online, Chinese online retailers are rampingtheir ad spending. Perhaps 60%-70% of their ad dollars will go to search engines, claims consulting firm iResearch, and most of that sum is likely to go to Baidu (BIDU), which has an estimated 77% share of the Chinese search market. (BIDU Q4)

    Apple (AAPL) shareholders have a lot to celebrate heading into Thursday's shareholder meeting, but all the same, some hot-button subjects are likely to get airtime. Tim Cook's plans for Apple's giant cash balance should be at the top of the list. Corporate governance may be close behind – last year, shareholders voted for a non-binding resolution requiring directors to be elected with a majority vote.

    Trading in Vivus (VVUS) is halted pending a news announcement as a FDA panel over the firm's Qnexa weight-loss drug is ongoing. Shares of VVUS have trailed off 18% over the last 3 trading sessions on speculation that the drug won't muster up enough votes to gain FDA approval.

  26. Not much downward pressure. Aapl volume good. May pop.

  27. Phil, any ideas on WMT

  28. lflan – yesterday's NFLX trade looking good this morning 

  29. Add contracts under 510

  30. Bond trader / Roro – They might have been the ones fueling this equity rally… 

    What struck me in the story is what we have been saying in this pages – the CBs are basically supporting the equity markets and it might get worse (or better)!

  31. Nflx short. :)

  32. Robots/DC – True fact.  Many blogs are now written by robots that simply assemble pages from places they fish.  Flipboard is one of my favorite IPad apps and it just goes around crawling my Twitter and Facebook accounts for entries and turns them into magazines that are much nicer to read than either service.  

    TLT rammed back to $116 already ahead of the auction.  Oil having trouble clearing $106 again and indexes not getting red.  

    Home sales are up 4.3% but December was dropped to 0.5% from previously reported up 4.5% we rallied on then so, on the whole, this report is a wash – IF you trust the current number.  Distressed sales were 30% of all sales as foreclosures come back and 33% cancellations is awful.  I cannot stress enough how dreadful all these numbers are when we're talking about + or – 5% of ZERO!!!!

  33. Lflan – add contracts under 510?

  34. Lolo. Aapl. If it drops below 510 i,m buying more calls

  35. Got it, thanks.

  36. Dollar seems to have trouble going through R1 at 79.40. Support is at 79.15 which is PP, then about 79 at S1.

  37. is it safe to short cl april at cross of 106 if usd is at or over 70.30

  38. And once again the S&P blows 1,360.  

    MSFT making new highs.  Just an attempt to keep the Nas going, I think.  

    79.44 on the Dollar.  VIX 18.84  

    VIX ETN/'s/StJ – Sounds like a good short to me!  

    Those cargo planes are bad-ass – I want one! 

    Woops, Dollar dumped back .10 very quickly to 79.35 and the indexes fly up.  Must be time to buy the dips again.  

    FAS Money – Looking good so far.  

    IWM Money – Close enough

    $5KP – Yawn.  TSL at $9.89 and not looking very exciting at $1.50.  Time to sell the $10s for .95 and roll down to the April $8s, now $2.40 so we net .05 (enough to pay for cost of moves) and end up in the $8/10 bull call spread at about the same net $3 with a month advantage over our caller.  

    $25KP – Sane as yesterday, nothing to add at the moment.  Someone said Iran would nuke the US within 2-3 years with their exciting new capabilities and I laughed so hard I missed the rest of the interview.  I guess Iran could commit national suicide by firing a bomb at the US and, if it hits (or if it doesn't), there will be no more Iran and we'll have a new state that's full of oil – still not a reason to be bullish to me.  The premise of this whole thing is that it's Iran's goal to give Israel, the US or Europe a really good reason to invade them and take down their government because, I suppose, watching it happen to Iraq and Afghanistan made them jealous.  

  39. bought 10 more apr 490s at 37.15. Aapl

  40. stjeanluc ,
    This does not include Fed balance sheet, I assume?

    Interesting theory and the evidence seems to back it up:

    Now the first thing to note is that contrary to some popular delusions, which posit that the government is only pumping more and more into the economy, in the last quarter, government spending was a net drag on growth, as stimulus fades, and austerity starts to kick in.
    But the spending cut was more than expected, and Phillips posits that it's the result of gridlock in DC. More specifically, he argues that it's the ongoing result of funding mechanisms called "continuing resolutions" which are the temporary stopgap measures that Congress uses to keep the government operating in the absence of a full-year budget deal.

  41. Phil:  What is your current view on real estate?  The only noteworthy item that I've come up with in the morning scan is the term "dacion de pago", with which I was unfamiliar, which is the cancellation of a debt upon returning the collateral..  
     The principal Catalan newspaper is reporting today that the following proposal has been agreed between the current [Rajoy / PP] government and the banks & savings banks, and will be put to the legislature as soon as the proposal is finalized.  In effect, Spanish families with 1/ low income, and 2/ all wage earners unemployed, can return the title of a mortgaged house to the bank in exchange for cancellation of the mortgage indebtedness ["dacion de pago"] without being forced to leave the house, provided it is the family's principal residence.  There will also be a mitigation of any "penalty" interest accrued for non-payment.  
    The bank will be forced to recognize the debt on its balance sheet and make provisions for it's non-payment.  Details of income levels and unemployment status have not yet been finalized. Up to now, the indebted homeowners were ejected from the house for non-payment of the mortgage, while remaining liable to the bank for the debt.  I thought this might be of interest to those of us scratching our heads about U.S. housing and banking.

  42. stjeanluc……….i agree it appears to be a risk to being short but as was pointed out in the JGB story there 2 sides. also another thought that crossed my mind after you posted the SocGen story ( more cheerleading possibly?), but i wonder what all of the BONDS are really worth if liquidated? (legitimate question given the debacle with bonds in Greece/Europe which are obviously not worth the paper printed upon…………in other words is all this just another part of the masquerade and the Emperor has no clothes?………are you willing to buy all of that UST or ECB paper at face?

  43. Are we really buying these micro dips?
    Not me.  I'll wait until at least the bottom of the channel.  Even if it comes in 2014.

  44. Cargo planes / Phil – The Airbus one could make one heck of a party plane!

  45. So much for new highs. MSFT is in the  toilet now.

  46. Balance Sheet / Peedle – Well, of course no! But these are very different instruments with very different effects on the economy!

  47. HOV/Button – I like that adjustment as you are dropping your net basis by .80 to $2.11 less the $1.45 you already sold is .66/1.39 so your worst case is getting back to 10,000 shares but at $1.39 while the call-away at $2.50 is a very nice $9,200 gain – nothing to complain about.  I'd put a stop on the $1 puts at .25 though, gives you more flexibility if they do start to fall.  You can always flip to 2014 $2 puts (now .90) so selling 1/4 of those would pay for the .25 taking out the $1 puts if you decide the fall has a bottom.  

    WMT/Bbates – Didn't we do that yesterday?  I think I liked the 2014 $55 puts at $5, still $5.  No need to do anything more until they prove they can hold $60.  

    GMCR still an exciting-looking short at $69.26.  Our March $60 puts are down to .60 but things could change.  

    Oil (/CL) still a good short at $106 as CNBC pumps and pumps and pumps this morning  just to try to keep it there.   

    Listen to these idiots treat Iran attacking America with nukes like it's breaking news.  They are showing pictures of rockets being launched (satellites) and saying it's the same as a nuke.  No it's not – it's the same as a nuke from 1955 you idiots!!!  

  48. NFLX  / Iflan – Great call yesterday, cheers for this.  Decided to follow you in AAPL today. If it sucks today then its me to blame :-)

  49. Bonds / Roro – See, it's your mistake – you are trying to make sense of the situation. Just drink the Kool-Aid and be happy. Many of these bonds are not worth the paper they are printed on – this is nothing new. Go back in history and see how many times big countries have defaulted on their debt.  Maybe 20 years from now the entire world will have a Default Day when we will declare all the government debt void and clear and start anew!

  50. Check out the day chart on aapl and tell me what you see

  51. AAPL / Iflan – Looks like a cardiogram… Its ALIIIIVEEE.. 

  52. Dpastramas….that,s why they didn,t let you become a cardiologist. :) .

  53. Lflan- the chart appears to coiling like a spring

  54. Lflan,
    I see that AAPL holds 511 nicely so far.

  55. stjeanluc…………yes, Greece has defaulted x times in just the past 100 yrs. so what. it is all bullshit, but the question is at what price and on which side.
    and, what is the SocGen dude or FT for that matter both selling?……kind of weird timing to place an article like that don't you think?
    is that a signal to start selling the dollar again?….i am watching

  56. 15 more at 38.40

  57. We appear to have turned

  58. More on Greece from Felix:


    If the Greeks and the Europeans can structure a deal where the credit default swaps aren’t triggered and the bondholders voluntarily swap their old bonds for new bonds, then it’s actually possible that this misunderstanding could continue well past the bond exchange, to the point that the broad public thinks that we’ve just seen another bailout, and misses the footnote that the bailout was accompanied by the single largest bond default in the history of the world.

    If all goes according to plan, this is going to be an orderly bond default, to be sure — in contrast to the very disorderly defaults we’ve seen in recent years in countries like Argentina and Ecuador. But make no mistake: Ecuador owes €14 billion to its bondholders on March 20. It is not going to make that payment, and instead bondholders who are currently owed 100 cents on March 20 will find themselves instead with a mixture of securities worth maybe 26 cents on the open market. When the CDS get triggered, that fact is going to get hammered home. Because although it has long been priced in to the market, it still isn’t broadly understood.

  59. Oh no, now Iran is Hitler!  Quick, cut to Art Cashin – who nods his head (with ashes in the center of his forehead for good measure) as the girl reiterates the "Iran Threat" – AMAZING!  

    Only thing that matters to me is the S&P chart they flash behind Art says 1,359.  

    Oh wait, now she mentions LTRO2 – that's good for .25 on oil.  Art doing his best to sound rational but I'll bet he's waiting for her to warn him of a Mars attack next…  

    Oil/Tommy – Sure, it's a great cross at the moment as $106 is a very slow cross in either direction and that means you have time to get out with a penny loss when it's not going your way.  Even if you only make .05 when you're right, you only have to be right one out of 4 times to stay ahead of the game.  

    Gridlock/Peedle – Remember when the story was that Gridlock was good for the markets?  What happened to that "truism"?

    Dacion de Pago/ZZ – That's an option in Spain if the property is not upside down only and thus, does not apply to most mortgages.  It's a very old law from Feudal times but they don't get to keep the property, just walk away from the debt.  What you are saying makes no sense as you are essentially giving free housing to people who can't pay and that screws the banks over so badly that I can't believe the sponsor of the bill (if there is such a bill) will make it through the weekend alive.  The basic law is not very different than what we do here with short sales but forcing the bank to then turn the home into free public housing (do they pay taxes and utilities too) makes no Capitalistic sense.  

    Drink the Kool-Aid/StJ – Great advice.  

    10:00 AM On the hour: Dow -0.14%. 10-yr +0.15%. Euro -0.08% vs. dollar. Crude -0.43% to $105.8. Gold -0.29% to $1753.45.

    Jan. Existing Home Sales: +4.3% to 4.57M vs. 4.69M expected, 4.38M (revised) prior. Total housing inventory fell 0.4% to 2.31M existing homes for sale, representing a 6.1-month supply. - Oh sorry, I put up new home sales before.  These are "much" better:  

    Whuck???  The Obama administration will propose today lowering the top income-tax rate for corporations to 28% from 35% and reduce the tax rate on manufacturing to 25%, while raising overall tax revenue by eliminating dozens of deductions. But don’t rip up your tax-planning documents just yet, as any plan isn't likely to make it through a deeply divided Congress in an election year. - Well, I guess if they REALLY get rid of deductions but geez – don't we need the money?

    Treasury scrambled to convince S&P away from downgrading the U.S. in the days and hours leading up to the Aug. 5 move, according to newly obtained emails. As it became evident S&P was going to move ahead, Treasury desperately floated a story that the ratings agency had muffed in a simple calculation, but it was to no avail.

    Morgan Stanley sees the chance of multiple earnings upgrades for EU banks as the wave of liqudity from ECB's LTRO is stoking action. January was likely the best month for credit trading in 2 years, MS says, and FICC (fixed income, commodity, and currency) revenue could double in Q1 from Q4.

    Tighter lending practices and excessive regulation of financial institutions are squeezing out middle-class consumers who soon will find themselves locked out of the banking system, Meredith Whitney tells CNBC. Whitney hasn't backed off her maligned call for a meltdown of municipal defaults, and a new book deal means you'll be seeing her even more than usual on the talk-show circuit.

    A set of interesting charts shows the current account balances of EU states not being affected by changes in the euro's value … with the exception of Germany, whose current account seems to dance to the tune sung by the common currency.

    Ireland identifies up to €3B in state-owned assets to put up for sale, meeting one of the terms of its bailout conditions. On the block will be the power-generation capacity of the Electric Supply Board, parts of gas company Bord Gais, and possibly some of state forestry firm Coillte.

    Sterne Agee, Needham, and Citi are downgrading Dell (DELL -5.8%) following yesterday's FQ4 miss and weak guidance. Sterne sees Dell's PC business suffering at the hands of Apple (AAPL), Acer, and H-P (HPQ), while Citi doesn't expect Dell's soft gross margin to improve in FQ1. Staying bullish is Deutsche, which thinks Dell's current woes are due to near-term hard drive and government spending issues. (transcript

    The headaches continue for Alpha Natural Resources (ANR -0.9%) over its purchase of scandal-ridden Massey Energy (previous) after a U.S attorney charges a former exec at the acquired firm of conspiracy to obstruct federal regulators. The single count charge is viewed as a signal that a broader indictment is upcoming that will move higher up the corporate ladder. The bigger question: Is all the blowback from the Massey purchase accounted for with civil and criminal liabilities – along with wrongful death lawsuits – already settled?

    Nike (NKE) unveils several new high-end products, with the goal of showcasing them at the 2012 Summer Olympics. Perhaps the most important of the bunch is Nike's Flyknit running shoe. The result of 4 years of R&D work and proprietary manufacturing processes, Nike boasts the Flyknit offers the fit and comfort of a sock, while maintaining the structure and durability of a shoe. 

    Gannett (GCI +7.6%expects to expand revenue by 2%-4% in each of the next four years as part of a new plan to revitalize its ailing publishing operations and expand growth businesses like its local marketing service, CEO Gracia Martore says. GCI also plans to return $1.3B to shareholders by 2015 through dividends and share buybacks; its board approves an annual dividend of $0.80/share.

    Apple (AAPL) contract manufacturer Foxconn hid underage workers in advance of an inspection last week by the Fair Labor Association into the health and safety conditions at its plant, a watchdog organization claims. Apple recently said FLA was beginning inspections of the Foxconn facilities in China, which reportedly turned up "tons of issues."

  60. Dollar / Roro – Sell dollars against what – the euro, the yen, the sterling? What would be the argument that these economies are better off?

    I don't know about the FT, but I am quite sure the bond guy is selling something!

  61. Europe is closed. Time to paartyyy!!

  62. Phil,
      Do you think buying the March $60 put on GMCR is still a viable play to short them?

  63. Llet the meek take aapl profits now.. The rest. … Party on!

  64. …methinks somebody is manipulating these markets:)

  65. Sage….ok. It,s me!

  66. It frustrates me so much that there are so many people who think bloggers are accurately reporting a story.  Someone was telling me that they expect oil to go to 200 a barrel because they read a blog stating that Iran is not selling oil at all anymore and demand is up overall because of China and we are going to run out of oil soon.  I hate to say it out loud, but people are stupid.  No one checks any facts anymore and they believe whatever is on the internet.  I'm waiting to see how long it takes for them to blame high oil on the Duke LaCrosse team.

  67. Phil – greetings from Bagram (again) – Ive been here almost a week. Since we have 2k angry afghans at the gates the septic trucks arent able to enter the base and theyve shut off much of the water. Toilets are backed up and I took a 'shower' with ice cold water from the bottled water left outside…I didnt sign up for this, Im in the AF! lol. ANyways, not in the best of moods but wanted to comment on this BS increase of the drumbeat to war with Iran…
    We shouldve invaded them initially. They ARE dangerous. A large part of their Gov't believes it is their duty to attack the US and/or Israel. THey believe this will start the final Holy War and they are the ones honored to be the spark which ignites it. You wouldn't think a nation would do this but they are lead by zealots… I dont support the inevitable war with Iran, but they ARE a dangerous nation….

  68. $25KP:

    May as well take out the GLL $17 calls for .10 ($200) as they will only stop us from taking advantage of a bounce to stop out or roll.

    SCO – Let's sell 10 March $34 calls for $1.60 and spend $3 to roll our 10 $32 calls down to the $28 calls so we're spending $1,400 net to put the calls $5.39 in the money ($5,390) on a $6 spread that pays off below $105 oil.  

  69. AAPL $495 puts at .90 are a fun play for a sell-off.  $515 has been a tough nut to crack so a stop at .70 makes 10 in the $25KP worth the risk and we're thrilled to make .35 ($1.25) on this one.  

  70. Phil--I know you think Iran is no big deal but they continue to repeat the same mantra…which happens to sound very similar to Hitler, no?
    Ayatollah: Kill all Jews, annihilate Israel
    Iran lays out legal case for genocidal attack against 'cancerous tumor'

  71. stjeanluc……..not certain what your point is here but buying and/or selling whatever is crossed against the US dollar (prcatically everything last time i looked) be it OIL, equities the Euro or the Yen or GBP in the context of a trade and being on the right side of price.(that uincludes cash too as the value of cash also fluctuates also)
    i guess if you buy into the SocGen and FT pitch from your article this morning then  a low risk opp would be to buy up a whole lot of cheap out of the money calls on equity indexes and sit back and just not bother with much else except cutting the grass or walking the dog……… that cheap Kool Aid?
    the kool aid was much less expensive back in december as was Oil only 2 or 3 weeks ago…..relative to the USD

  72. Iflan
    I knew it!

  73. Aapl port: I,ve placed sell orders on the 30 calls bought today. STC….10 @ 40′ 10 @ 41. And 10 @ 42. If they don,t sell i will hold them. And now i,m travelling for 3 hrs. See you late afternoon!

  74. Good Greece chart JRW – it's the lie we all choose to believe to be bullish.  Check out this video: 

  75. Kool-Aid / Roro – OTM indices calls would be cheap Kool-Aid indeed… Not for me though.

    And the SocGen guy makes sense only when he talks about CBs supporting the markets. For the rest, I'll leave up to anyone to interpret.

  76. I saw that video a few days ago…..can we say balls of steel?  Unless they get crushed by Dr. Ben.

  77. Phil, I have the other SCO play you posted last week. Mar 35/39 bcs for $2 sell the 34 P for $1. What is adjustment for this one?

  78. Phil/SCO,
    "SCO – Let's sell 10 March $34 calls for $1.60 and spend $3 to roll our 10 $32 calls down to the $28 calls so we're spending $1,400 net to put the calls $5.39 in the money ($5,390) on a $6 spread that pays off below $105 oil. "
    I have SCO Mar $35/$39 BCS, sold $34 Put for $0.90 Debit.  How do I adjust this?  TIA.

  79. Great video Phil, love the entusiastic thank you at the end of that splash of reality!

  80. Watching the Nigel Farage video, as the camera pans to the EU leaders, it's pretty clear most are in denial or don't know what to do. I read somewhere that if they spent just a portion of the energy used on 'how' to save Greece/EU in a realistic analysis of the impact of default (instead of selling the fear factor of default), the best choice would be clear. The discussion is as if there is never a default  - Greece has defaulted numerous times in the past,  that there is never a bad loan made. Occasionally the loan is defaulted, the creditor collects the collateral and the loss is written off. Except the loss here is at sovereign/bank levels, which were foolish enough to lend when they could never afford the risk (capitalization rules) of taking the loss.

  81. This jackass on the AEI blog is complaining that even at 28% (proposed by Obama), corporate taxes in the US are too high:

    Great chart:

    Except that it is so misleading. The real picture is:

    Nothing like a little lie to make your argument. It seems to work every time! The USA is a low tax country no matter how you look at it. You can argue on the size of government if you want, but fact are there on taxes.

  82. JRW did you bother with TZA or are you waiting for the bounce in TNA?

  83. Phil,
    I can only buy the GLL 17 calls back for $0.15. Is that still the best thing to do to maintain the flexibility?

  84. Get that re-election campaign going Obama…..unreal. 

  85. See what the big guys are buying:

    Many bets placed on gold and the auto industry (with Delphi) it seems!

  86. Phil:  The "Vanguardia" article was unclear on the details.  But, yes, underwater mortgages  -- house worth less than debt — does seem to be what they're talking about.  And, yes, the bank becomes a "donative lessor" under the proposed law, though presumably not picking up utilities, and maintenance is a good question.
    Your point about the government forcing banks to do something that makes "no Capitalistic sense" is just a formality. Government money is, and has been, holding up the banks, which also makes "no capitalistic sense,", so if the government requires banks to take back title, book the loss and not throw the indigent into the street while doing so, it just amounts to an in situ public housing project — the essential point being that, financially speaking, the underwater housing stock IS, de facto public housing!!
     I think it's rather clever, actually.  Certainly a vote-getter.  So it wouldn't fly in America?  Why, because the major banks haven't been bailed out in the U.S., unlike Europe?  I dunno – my antennae are very tuned to any hint of a "U.S. housing solution", because that seems to be where the politics of an election year may lead.

  87. I really want the VIX to get going….so for PLX's FDA in May.  I own the stock, sold the Mar $5 Ps and will now sell some May $5 Pt for 95c or better.  The EU decision is due at any time, and I expect approval from them (with PFE).  I am also going to buy some May $5 calls for 1.35 or better.  I will make this a spread as time progresses towards the FDA.  I see it moving back to 6.50 or higher, but expect it to pop with the EU ok.

  88. Phil or anyone--how do I respond to the anti-tax the rich guy who just sent this to me??
    softball for you, I am sure ;-)

  89. Well so far, the earnings strangles seem to be ok. CAKE sold back for a profit and RRD was underwater early with the gap up but has now come back and is profitable. Taking a look at a few today but nothing really exciting…..

  90. IRA Portfolio update:

    Our short ACI calls expired worthless and our shares are out there uncovered.  So, sell 1 APR 14 call for every 100 shares you own.  I got $0.89 per contract.

  91. stjeanluc…………i think your bond posts from the past several days raise interesting questions. if all that 'cash' is just sitting around collecting ZIRP then why?…………
    my best guess comes from a personal context and that has a lot to do with trust.(and experience and education)
    i do not trust the markets or the banks or the central banks or the politicians. if most of what i have is in cash or in and out of cash as i choose then i guess i at least feel more secure making my own decisions and mistakes than handing it over for some bank or broker to manage, or abuse and mismanage which is more often the case than not and then be told one day it was all lost by the Harvard educated former chm/former gov of GS/NJ .
    why do you think all that 'cash' is stuffed into the bond mattresses? you must have some thoughts about it otherwise you wouldn't be posting the articles. i know Pharm gave his views on the subject the other day.

  92. MELI is tomorrow 4 ur strangling fun!

  93. Earning Strangles / Sundevils – I was just looking at GDP and ESRX. For GDP, you could sell a Mar 15/20 strangle for about $0.60 against $1.70 of margin with 12% protection on the downside and over 15% on the upside. What worries me a little bit is the large short interest in GDP so the stock could really move. But 15% on the upside is pretty big. And these 20 calls can be rolled to the 22.5 in Apr and 25 in June. 

    ESRX is another one, with an implied move over 10% with a historical move of less than 5%. A Mar 47.5/57.5 strangle keeps you outside the 10% prediction and can be sold for $1.5 against $6.00 if margin. There are some unknowns there with Medco acquisition.

    As usual, high risk trades….

  94. Come 'on folks, is anybody in UST at this moment (I mean do you own them outright)?  No.  TLT is a 20yr, which is used to hedge the 10 and 30 yr.  The 3 mo to 5 yr are used as instruments to hedge out the longer durations on the curve.  IF any of these tank, I expect the market to get crushed, as the primary dealers, if they are good, and most know what they are doing, then this market will move down so fast, most will not know what happened.  Movements on a daily or weekly basis of a few PiPs is insignificant.  1.5% baby, and beyond.  Would you buy Portugal's debt knowing that they can install a CAC even after the bond is issued?  Hell no.  Treasuries are safe and secure.

  95. the vix does not seem to beworried about this dip

  96. that tape is about a month old isn't it..imagine how apoplectic he owuld be today..i thought he was killed in a plane crash thos eURzoners can'r do anyhting right..
    we have some of worst cre overcapacity in country and local paper said a number of major new projects are about to start up after being postponed indefinitely…so dumb

  97. Phil / CMG – march 325 puts.  did you adjust this yet or just hold on? 

  98. kustomz

    Looking to short here (IWM 81.66) if no buy program !!

    Good hunting !!

  99. Pharm,
    Related to your post about bonds, here is a link to a posting on ZH describing how the ECB has opened Pandora's box. I suspect that it will drive further capital flight out of Europe, perhaps to US.

  100. Phil
    Had to hitch hike to work the other day immediately after  doing  the CQB spread you showed me because I could not afford the gas.
    Now I am up enough to pay for gas for the next 30 days. 

  101. JRW
    I see shorting also, but money is flowing into IWM.

  102. FOR the Iran discussion. I differ to Joe Klein of Time. I think a good perspective of guy sitting in the US. I have some other insights from other more SANE observers that I will share later…
    Is Iran Dangerous--or Desperate? Both


    How dangerous is Iran, really? Rick Santorum, who truly is a severe conservative, says, "The theocracy that runs Iran is the equivalent of having al-Qaeda in charge of a country." Israeli Prime Minister Benjamin Netanyahu believes Iran is run by a theocratic death cult that will attack Israel as soon as it gets a nuclear weapon. And given Iran's twitchy, trigger-happy behavior this winter--the alleged "sticky bomb" attacks on Israeli diplomats in India and Georgia, the bomb factory that exploded in Thailand, the alleged plot to kill a Saudi diplomat in Washington, the threats to close the Strait of Hormuz, Mahmoud Ahmadinejad's nuclear braggadocio--Santorum's and Netanyahu's extravagant fears would appear to have some basis in fact. Israel is certainly acting as if Iran were an imminent threat, dropping hints--very unusual for the traditionally mum Israelis--that a military strike against Iran's nuclear facilities may be coming sooner rather than later.
    Or maybe not. The reality is that Iran right now is more desperate than dangerous. Its economy is collapsing under the weight of brutal sanctions. Its prime ally, Syria, seems to be collapsing as well. Its internal politics are fractured. Ahmadinejad has been humiliated and marginalized by Supreme Leader Ayatullah Ali Khamenei; most of Ahmadinejad's allies were struck from the ballot for the coming parliamentary elections. And Iran's alleged attempts to cause mayhem in the world--the bombings, the assassination plot in Washington (which, I'm told by intelligence sources, was as real as it was weird)--have been marked by ineptitude and utter failure, especially when compared with the alleged, but likely, Israeli campaign to assassinate Iran's nuclear scientists. Indeed, the pathetic nature of Iran's responses show that it is intimidated by Israel's retaliatory capabilities: Where are the truck bombs of yesteryear? How intimidating can attacks in New Delhi and Tbilisi be compared with murders carried out in the streets of Tehran? Even Iran's nuclear project has been severely compromised by an ongoing, joint U.S.-Israeli sabotage effort; experts say a successful nuclear weapon is at least two years away.
    The Iranian collapse has not happened by accident. It has been stage-managed by the Obama Administration. Even the "failure" of President Obama's initial efforts to negotiate with the regime served a larger purpose: it made clear to the Europeans, Russians and Chinese that Iran's leadership was intransigent, which made Russian and Chinese cooperation on the U.N. sanctions possible. Now Iran is nearly isolated in the world, the regime is extremely unpopular domestically, and its revolutionary fervor has ebbed. Far from being the theocratic martyrdom cult that Santorum and others allege, Iran is a fairly traditional military dictatorship with a patina of religiosity. "Khamenei has marginalized the clergy," says Mehdi Khalaji of the Washington Institute for Near East Policy. Khalaji should know: his father is an ayatullah who was imprisoned for a time by the regime. The real power in Tehran is the Islamic Revolutionary Guards Corps (IRGC)--and there are signs that the IRGC is growing impatient with the Supreme Leader as well. Obama's diplomacy, augmented by Israel's hints of violence to come, has backed Khamenei into a corner. His only reasonable option is to negotiate. But Khamenei is not a reasonable man.

  103. Iran is the only thing keeping gold elevated at levels it need not be at.  IF they do anything to any country in the middle east, action would be swift, and Akmandia would poop his pants when the Seals showed up in his room.


    Selling a few more SGEN July $17.5 Ps.  $2.05 or better.

  104. 'They' continue to suck premium out of this market in both directions.

  105. Bonds / Roro -Your personal feelings are well reflected in this board and I believe among most investors (save the guys listening to Cramer) – the problem is a lack of trust in this market. Look, the market is up over 10% in the last 60 days and the mood in these pages is still clearly bearish – except for Pharm who is a perma-bull  :-)   Even the market doesn't seem to trust itself – volume is lackluster, there doesn't seem to be great enthusiasm save for AAPL!

    Is it because we read the news, because we analyze the situation and realize that it cannot end well? Maybe because the 10% move is on top of a 20% move which was on top of a 40% move since 2010? Who knows… But there is great scepticism on where we will be on a macro level 12/24/36 months from now (and I am no macro specialist). So we stay in cash… But for the great majority out there, you park your money in treasuries because your trust level is higher (rightly or wrongly) in these instruments. Like we said, it's possible that all these bonds will burned in a great bonfire 20 years from now, but that's not the overall perception now.

    On the other hand, we might also be completely wrong about the market. After all, stocks are not grossly overpriced now if you discard the possibility of a new recession (you need to adjust your perception). And even then, companies have shown that they can make money even in a tough environment – shed more employees, productivity is rising, inflation adjusted wages are going down, benefits are being cut. Even at 10% unemployment, you still have 90% of the people working. And we all need to eat, drive and buy stuff! And in addition to that, borrowing costs are at the lowest they have ever been and so are taxes! See, all sunshine!

    Back to the Kool-Aid pitcher!

  106. Good post Rehat … Thanks!

  107. Here is a very real perspective of Iran of a true traveller. You may have heard of Rick Steves and his Europe guides. In the last few years he has started going beyond the old continent to discover older continents….
    Eventhough he is not a professional political commentator, his insights on the Iranian people and politics is very interesting. a little bit of a read, so you can do it after hours.. but I would recommend it.

  108. Speaking of macro indicators, here is a scary chart:

    The German economy may look strong relative to its eurozone counterparts, but it’s not going to be able to do much to yank Greece et. al. out of the doldrums because much of its growth is driven by exports. And it’s going to take a while for the economic reforms – such as they are – to pay off in the form of higher growth on the part of countries like Spain and Italy. While the question of whether Europe can stop its downward slide is likely to be met with a regretful grimace, the biggest question of all is the extent to which those eurozone woes will begin to weigh on the still-tenuous economic growth in the United States as well. Can the U.S. keep growing, if the European economic picture keeps deteriorating? That’s a topic we’ll undoubtedly be examining in future charts as part of this feature, as we continue to capture the economic trends making headlines and driving investment decisions in the form of charts using Datastream data and analytical tools.

  109. GMCR/Japar – I had dinner with Sam Antar the other night and he's very convinced they are using bad (he used worse words) accounting practices and that there will, eventually be huge issues.  Also, they ran some channel checks that indicated big inventory builds and stale inventory of their K-cups as most people are now filling their machines with SBUX or DNKN coffee and I predicted that would be a disaster for them long ago.  I'm a "where there's smoke, there's fire" kind of guy and we have 3 weeks for them to find a place between $70 and $42 (where they were in Jan) to settle down.  If they go up again on another Cramer pump, you have to take the 50% loss and wait and do it again at a higher strike in April and plan on doing it again into earnings if push comes to shove but it's one of those plays that can give you a triple or better if you hit it right.

    Bloggers/Rustle – Yes, a shameful lot!   Unfortunately, you find more truth in blogs than the MSM but, of course, learning who you can trust is a matter of trial and error.   What sucks about Seeking Alpha these days is they have no filter on who writes there and they treat something I write or Cullen Roche or Bespoke writes no differently than whatever nonsense some anonymous joker slaps up there.  That's why so many of their good writers left (including me, I don't let them run me daily anymore) – it's friggin' insulting to be lumped in with some of their other writers.  ZHedge gets that way too with their 20 Tyler Durdens.  Check out the guy Seeking Alpha ranks #1 in Market Outlook, ahead of me – because he comments on his articles more than I do…

    And wheeee!  The lows are getting lower…

    Iran/Jrom – If they do it they will be put down like dogs and if that gets them to heaven with 72 virgins, then good for them but are they really a nation of zealots patiently waiting for their ICBM program to finish in 2015 so they can fire a missile that has a  99.9% chance of being exploded within 2 seconds of launch by our interceptors?  Or are they going to wait until 2020 so they can develop modern ICBMs with countermeasures and such?  I don't doubt there are fanatics but generally, they are all talk and no action over there so someone must be somewhat rational.  

    They only went to war with Iraq when Saddam invaded and they never struck back in 30 years, they love to make threats and they did hold our hostages once – but they even let them go.  They have a million man army that costs them about $25Bn a year and they have NO MONEY for anything over there and we're currently cutting that off.  I guess they might consider starting a war to kill off half their population but the reality is they want nuclear plants because they can make more money selling oil if they don't keep using it at home and that's what this is about.  They already have one nuclear plant and if you want to destroy America or Israel or whoever, you don't need a bomb – as you are noticing yourself, just a little bit of Plutonium dropped in the water supply and everyone's life is very miserable for the next hundred years or so.  

    Maybe I'm an optimist but there are so many ways to kill thousands of people and yet, hardly anyone ever does it – that kind of makes me think that the World is not as crazy a place as people like to believe….

    Iran/Jabob – As above, they talk a good game and it pleases their voters but I doubt they would be so brave if Israel were their neighbor and didn't have to march through two countries to bitch-slap them.  They learned that lesson pissing off Iraq. 

    SCO/Doro, Bob – I'd buy back the $39s (.50), roll the $35s ($1.35) down to the $31s ($3.40) for $2.05 and sell the $35s for $1.35 so you increase your net $1 spread to net $2.20 but now in the $31/35 bull call spread, which is $2.60 in the money but still making a serious bet on oil not staying over $105.  The next roll would be over to the April $30s ($5.20) for about $1.80 more so you have to be willing to follow-through if you are going to go down that path.  

    Default/Kallen – We're all in default.  The US Government taxes us $2.2Tn a year and we complain about that but they have to cut their spending by 1/3 just to stop building the deficit on those collections and that would be a default on their existing liabilities and then they would have to raise taxes by 50% to raise $400Bn a year and – EVEN IF RATES STAY THIS LOW – it would take us 40 years to pay off our debt.  That's 40 years without a war or infrastructure spending or floods or earthquakes or, of course, without recessions or depressions to put us off track.  So, in short – we're in default, Japan is worse off than we are and Europe about as bad as we are except we don't default our states one by one while we pretend the Union is fine just because it can print money and the states can't.  The current "plan" is for the CBs to literally print the combined $40-50Tn that we, Europe and Japan will eventually be defaulting on so they can keep the banks liquid as everyone resets.  

    Taxes/StJ – Still misleading because most of those countries have a 20% VAT as well so even Germany pays miles more taxes than we do.  

    GLL/Kallen – I hate spending the extra .05 but, if you don't get a bite an gold can't hold $1,755, then I guess so.  

    Cool fund list StJ.  How often can we get those?  

    Spain/ZZ – I just don't see it.  It's a very drastic move into almost Communism and it's not even fair as middle-class people pay their mortgages while slightly less well-off people suddenly live rent-free?  I understand the logic that the Government wants payback for the Billions they doled out (hell, the Fed technically owns a few million homes themselves) but it's the almost random inequity of it that makes me think it won't work – that and the fact that the Banksters would probably put a bullet in someone before they let this happen.  

    Anti-Tax/Jabob – How do you respond to a monthly fluctuation in taxes?  Is it seasonal, have they backed out the numbers to see what would have been collected at the old rate.  Did people front-load income to December to avoid the extra hit and, if so, then it will normalize in a few months and prove nothing. Even the person writing the article mentions (in the bulk of it when you go past the headline) that it's too early to tell due to many of those factors.  So, now that I read the whole article, if you had a friend send you this article thinking it proves something – then he has very poor comprehension skills and does, in fact, need to report to a Government re-education facility ASAP.   Also, make sure you send him that John Galt article from yesterday… 

    55M shares on the Dow at 12:50 is lame  - Obviously, mostly down volume so far today.  They sold those bonds right now so maybe willing to take markets back up with Dollar and TLT down (TLT topped out at $116.50 for the auction).  It's a lovely scam!  

    CRE/Angel – I was down by the Trade Center this weekend and was very disappointed at how small it is compared to the old one – I'd say that's a good indication of the reality of office demand when you can blow off rebuilding about 5M feet of office space in one city.  In fact, the reason the original towers had to be 110 stories was to fulfill the Port Authority's requirement that the complex have 10M sq feet, which we needed at the time (early 70s).  

    CMG/Terra – What the March $325 puts?  Those were a gamble from last week at $1 and down to .50 now so a dead trade.  They weren't meant to be a long-term play, we were just playing against the pop on Friday morning.  Now the $345 puts are $1.15 so, rather than DD, I'd do that roll if you want to stick with them as they can pop .50 on a $10 drop in CMG but it's not likely the $325s would so they are kind of a waste to own now.  On the whole, I like the GMCR puts better at the moment.  

    Gas/Rip – That's good I guess but I'm not big on gambling money you need on these things.  

    Iran/Rehat – Thanks, that's a well-balanced view.  

    Cramer/StJ – That reminds me (from Feb 13th):

    Dell is now “one of the hottest turnaround stories in tech,” Cramer said Monday, adding he thinks the stock is a buy, buy, buy.

  110. Pharm,
    thanks for putting all that complex bond thing into a context that makes sense.
    the problem i have with articles like the one from FT with the SocGen interview is it is all too contrived, distorted and one sided and is spin and really does not present an informed context, although typically tends to reply upon a brand name such as FT or SocGen to give it  cover as being informed……….promotion disguised as journalism (judith miller and the NYT is another example of that kind of manipulation which appears to have become so prevalent for a lot of what gets put in front of the public through most media today)
    bottom line impression with articles like that one from the FT; no context, no meaning…………like so much of the convoluted news that gets pawned off as news when in reality it is just someone with an agenda to sell.

  111. wow, look at the vix crashing..

  112. Gold spiking up?

  113. how is the vix going lower???

  114. Look at gold taking off….

  115. Can VIX be manipulated lower to get option related instruments lower?

  116. TLT / Phil – a lovely scam indeed. Good for min 25% each and every auction day. 

  117. Guy on CNBC lying about Corporate tax rates right now! 

    11:47 AM European shares close in the red for the 2nd straight day following the agreement on the Greek bailout. Stoxx 50 -1%, Germany-0.9%, France -0.5%, Italy -1%, Spain -1.2%, U.K. -0.2%. Someone tell the euro risk is selling off – it remains near its YTD high, buying $1.3240.

    12:00 PM On the hour: Dow -0.34%. 10-yr +0.28%. Euro +0.1% vs. dollar. Crude -0.27% to $105.97. Gold -0.01% to $1758.25.

    1:00 PM On the hour: Dow -0.26%. 10-yr +0.24%. Euro +0.16% vs. dollar. Crude -0.42% to $105.81. Gold +0.01% to $1758.75.

    1:04 PM The Treasury sells $35B in five-year notes at 0.9% (.pdf). Bid-to-cover ratio of 2.89, vs. a recent average of 3.02; indirect bidders take 41.8%, vs. a recent 47.2%. Direct bidders take 12.9%, vs. a recent 11.1%.

    It's an election year (not just in the U.S., but across Europe as well), says Jim Rogers (video), so beware fading current rallies in risk assets. Wait until 2013 – when elections in the U.S., France, and Germany are over – for underlying problems to resurface.

    The monetary transmission mechanism in Europe – where easier central bank policy leads to a pickup in deposits and credit - is broken, asserts Nomura. The ECB's LTRO funding is better than not having anything, but it isn't improving an interest rate channel which has been impaired since 2008 despite years of policy intervention.

    Jefferies is still looking for loan growth in the mid single-digits for 2012, even as data has shown weak lending early in the year. The firm says surprisingly strong Q4 growth in commercial and industrial lending may have been cyclical, but it doesn’t expect Q1 growth to drop as steeply as it did last year, providing confidence in the underlying strength.

    Mortgage rates are at record lows, but by a key historical measure, they should be even lower. The current coupon yield on mortgage-backed securities has fallen faster than 30-year mortgage rates; the spread is now 0.96 percentage points, almost double its average. Some say increased concentration among large banks that dominate the mortgage market helps explain the wide spreads.

    Jonathan Miller doubts the conventional wisdom that the decline in housing inventory (III) means prices will stabilize or even grow. He finds three reasons to explain the drop that hardly paint a picture of housing strength: foreclosure volume was artificially delayed, seller confidence has waned, and low rates extended by the Fed for the next two years have removed any sense of urgency. 

    Single family RE in Daytona Beach has reached Depression levels, writes Robert Sinn, with cap rates of 20%, i.e.operating income of $20K on a $100K purchase. With the cost of capital less than 5%, well, you do the math. Bank of America (BAC) owns at least 1/3 of single-family RE there, and may not have taken the marks yet – something to think about the next time someone says BofA is cheap on a price/book basis. 

    Lumber Liquidators (LL -9%) takes a hit after its Q4 beaton revenue but missed on a per share basis due to larger than expected SG&A expenses. The company also projected revenue and earnings for 2012 below what analysts had been anticipating, now seeing an EPS of $1.05 – $1.20 on revenues of $710M – $740M, versus the Street view for an EPS of $1.21 on revenue of $752M.

    China's energy consumption rose 7% in 2011 according to the National Bureau of Statistics, the fastest growth in 4 years. The country continues to become more efficient, consumption per unit of GDP falling 2% from 2010. Demand for coal, gas, and electricity rose near or more than double-digits, while demand for crude increased just 2.7%.

    Ugly chart of the day: Crude oil broke out of its trading range as the price surged past $105 yesterday, with the next stop its 2011 high of $113.93. If it takes out that level, traders will have their eyes set on the all-time closing high of $145.29 made in mid-2008.

    The WH's Council of Economic Adivsers issues a report(.pdf) highlighting the expected dramatic rise in mobile data traffic by 2015 to a level 20X that seen in 2010. The Obama Administration is using the finding as support for its proposal for an additional 500 MHz of public airwaves (spectrum) to be made available for wireless broadband access.

    Microsoft (MSFT) finds itself in a PR dust-up over yesterday's report from The Daily claiming Redmond will soon unveil an iPad version of Office. A spokeswoman claims the report is "based on inaccurate rumors and speculation," and says an image used isn't of a Microsoft product. But an editor for the paper argues otherwise, and says a working version of iPad Office was "demoed to us by someone at Microsoft."

    Buoyed by strong Kindle Fire sales, developer revenues for Amazon's (AMZNAppstore for Android are taking off, claimsDistimo. Moreover, a growing number of top paid apps are generating more revenue in the Appstore than in Google's (GOOG) larger Android Market, which suggests the former could address themonetization issues that many Android developers have complained about. (previously)

    Respondents to a poll at Android and Me are mostly positive on Google's (GOOGreported plans to sell information-streaming glasses. But Larry Dignan declares the "composite sketch" of a buyer to be that of a "total dork." MediaPost, meanwhile, thinks Google could collect a lot of valuable data from the glasses. Microvision (MVIS -6.3%), which has long sought to commercialize such glasses, could be selling off on the news.

    Google (GOOG) has expanded its flight search service, the result of its controversial acquisition of ITA Software, to iOS and Android devices. Though the service still doesn't feature international flights, and also doesn't cover some domestic carriers, travel bookings providers such as Priceline (PCLN), Expedia (EXPE), and Orbitz (OWW) are upset over the way in which it cuts them out. 

    Three lunchtime reads:

    1) Stand by for the third Greek bailout

    2) Five qualities of all great traders

    3) When boring is beautiful: a low-volatility strategy in a single ETF

  118. Man, they really know how to program these bots now – R1 for gold today is at 1772.47 (that looked impossible to me earlier) and where did that violent gold move just stop? Unreal!

  119. Shadowfax,
    What indicatior are you using for IWM money flow?

  120. Hi Phil,
    Just wondering what your thoughts are on Wi-lan?

  121. Phil:  72 Virgins?   I dunno, dude, lotta suicide martyrs these days.  Uwe Boll has examined this claim, which, on reflection, does seem rather hollow.

  122. Pharm- I thank you for the PLX update. On DEPO- I closed the Mar 7 short puts I had for a nice profit as it fell. Looking to reload. What is a good month/strike to reload these?

  123. "Maybe I'm an optimist but there are so many ways to kill thousands of people and yet, hardly anyone ever does it – that kind of makes me think that the World is not as crazy a place as people like to believe…."    I do actually agree with that.  I was trained to hide under my desk in kindergarten, Washington, D.C., in the event of nuclear attack.  Meanwhile, we've managed to poison both the air and the sea without nukes, and the biggest nuclear threat worldwide is probably the ancient and ill-maintained Russian nuke fleet, as they demonstrate every few years by setting one on fire.

  124. wealthwarrrior
    A money flow index that shows relative buy sell at bid or ask on a 50 over in under out. 

  125. pstas – June $5s, wait for 40-50c.

  126. Phil – what are your thoughts on the XOM from this morning? Still think it is sensible to cover the USO puts? The Feb 87.50 havent moved much today.
    Thank you

  127. oh I forgot it is no worries wedensday, of course the vix should go down as the markets do:)

  128. Shadowfax – hey, I don't speak weathwarrior jargon…what doe that mean…???

  129. Zero / martyrsnew research shows that it's raisins, not virgins, waiting for them…

  130. Bots/StJ – Yep, there's really no more need for people at all in the markets. 

    Train crash/Angel – All part of the utopian dream when we finally get all those Government safety inspectors off our backs….

    WILN/Ging – Too little for me to pay attention to but I do like their space and they seem to know what they are doing but I couldn't say if they are worth $600M or $6M as they haven't put up proper financials yet.  They seem to have money and they are paying down debt (according to press releases) so maybe not bad for a small, speculative accumulation.  

    That was very strange ZZ.  Clearly the correct number is 72, that's documented (although possibly mistranslated and actually you get 72 grapes).  Where they come from – I have no idea.  Girls apparently get 72 guys though what they want with 72 guys with no experience is beyond me…  

    Nukes/ZZ – Yep, I remember those drills yet in the whole 70 years of the nuclear age, the only MoFos crazy enough to actually use them to bomb people is – US!  Maybe that's why we're so willing to believe other people would do the same – it would kind of make us bad people if we were the only ones…  

    XOM/Morx – Sure, the idea is that, if USO does fall, then XOM will go down but, even if it does, that's a good buy spot ($65) for a long-term hold on the World's most profitable company.  If oil goes up, then you lose the puts but the chance of losing on XOM in a rising oil market is almost zero so a perfect hedge to that trade.   

    And what you said, ZZ!  

  131. GLD going parabolic.

  132. Oh Phil;  before you put a deposit down on that new Tesla S you've been eyeing for the family…….

  133. and here he is again… mr stick…

  134. USO moving up….

  135. Wow, gold exploded up, oil back at $106.30 but indexes still down 0.25-0.5%.  Imagine how they'd do on an up day.   

    Oil just gapped up in fact, $106.70 – getting ugly now, must be a rumor of some sort – nice short if they go back under $106.50 but scary with NYMEX close in 20 mins.  

  136. phil oil// the fed is forcing institutions to take on bubble-type risk with their stupidity…we never learn…i have a feeling this next collapse will trigger some sort of draconian action towards the fed…. the oil speculation horse is once again on the rampage out of the barn…now even if economy weakens…no qe3…it will take full blow nrecession to kill oil
    or maybe they are dumb enough to do qe3 with $100 oil and then it soars to $150 and ensures global recession

  137. TSLA/1020 – Wow, sounds like you can pay for the batteries by shorting the stock!  

    67M on Dow at 2:25 so dropped to 12M in the last 90 mins and that's how we rally – on no volume.  

    So there's $106.30 already on oil and that's how you play the futures.  If you keep those bad stops under .05, it only takes one nice run to make up for them and then you are short and ahead at a much higher strike than we started at. 

  138. Everything pulling back but gold so far.  (/YG) is a nice short below the $1,780 line (now $1,782.2). 

  139. Strangle on SHLD looks a little scary….Imp Vol on the weeklys is way up there…62.5/45 for this week can be had for .99cr

  140. Oh no, CNBC comes back with "THE IRAN THREAT" with Michelle in Israel telling us how scary the situation is. 

    She's talking up their missile capabilities.  "They will swarm us with their many, many small ships."  

    Now Syria is going to attack Israel she says.  Oh wait, now Lebanon….   Israel should just move…

  141. HEy Pharm – When is this VVUS decision supposed to be announced? My plan is to sell some ARNA if VVUS gets approved and ARNA pops. If it gets rejected and ARNA falls I plan to buy more in anticipation of their review in june (?) was curious as to your thoughts on this…  

  142. angel/oil
    If oil went to 150 and gas prices were above $5 a gallon, we would be in a depression, not recession.

  143. I think VVUS gets rejected and ARNA pops.  But it is gambling.  If I were to do it, I would buy the $2 calls for 15c, March.

  144. AAPL portfolio:   I have COVERED all 30 of the APRIL 490s with calls    APRil 540s sold at 13.85

  145. F''it, I will do it just to prove it.  15c for ARNA.

  146. SHLD/Sun – I think it's nuts to strangle them.  They could go 10% either way easily.  

    Well, mission accomplished, they got the NYMEX to close at $106.25, flat to yesterday.  

    I guess the guys who bought 671,000 barrels of Dec 2015 oil for  $94.61 today were geniuses!  Also the 4.1Mb that went in Dec 2014 for $97.22 – you would think there would be more interest in such bargains…  The 264,000 front-month contracts traded 195,000 times today, almost 100% turnover on the day.  

    $106.17 – hope you enjoyed the big show!  Gold $1,778.75.

  147. Reason for the above trade:   Tomorrow's event.   If it causes AAPL to tank, we have some downside protection, the covers.  If it ramps up, we still profit.  And…..we have 59 days to work with these spreads.  

  148. Phil
    Your commentary is great! The great Iran is going to rule the universe! Until they don’t, I guess we are in the soup with USO. On another matter, when would you look to roll the remaining GLL calls out? That trade looks like it will just need more time to pan out as well. Thanks and keep an eye to the sky for one of those Iranian super-duper missles! :)

  149. If the govn't want oil to go down, all they have to do is announce they're releasing reserves.  We fell $9 immediately last time they did that.  Guess the payroll cut will go right into the oil companies pockets.  Amazing how Obama doesn't understand that high oil will derail an entire economy pretty quickly.

  150. phil,
    You are right on that….I don't mind some risk but on taking a deeper look at SHLD that would be crazy!!

  151. lflan – still holding the 10 AAPL $490/515 spreads as well?

  152. Pharm – lol. I just am recalling back to last time when VVUS got rejected didnt ARNA initially go down? It definitely is gambling, but I have done quite well just selling the 1.5 calls against my shares of ARNA. COst basis down to $1.17 on my shares….I would think they at least grind up to 2.50 or $3 by the time their review rolls around (think you agreed with me a few months back when I mentioned that). ANyways, thanks for your expertise in the biotech field! ALl my positions I have from your recommendations are profitable and definitely owe you a beer if I ever get to go to one of these PSW Vegas events!  

  153. I just realized that the gold move is probably my fault – I published that list of hedge funds adding to their gold position. Bots are probably reading this page and reacted accordingly….

    Let's see – hedge funds are divesting themselves of their oil positions….

    Now, wait and see what happens!  :-)

  154. Jro – good to hear that they all have worked out well.  That is the name of the game…..slow and steady she goes!  Now, just go down, damnit!  This is getting fricken old.

  155. 2:00 PM On the hour: Dow -0.07%. 10-yr +0.32%. Euro +0.14% vs. dollar. Crude -0.36% to $105.86. Gold +0.84% to $1773.35.

    Michelle Meyer and Ethan Harris of Merrill Lynch say that the 21% Y/Y drop in inventory pulled out from January's Existing Home Sales report is only a temporary cyclical low due to delays in the foreclosure process. They reason that after the foreclosure process accelerates again, inventory will head up off of the new additions of distressed houses to the market

    Man in the street gas price reporter – – says national gas price average are about to spike after seeing wholesale spot prices in Chicago and on the West Coast jump significantly off an ongoing trickle down effect from crude oil price increases. $5 pump prices are already being reported in California, Florida, and Hawaii.

    Plans for increased small business spending hit a four-year high, as a new survey finds 28% of such business owners plan to increase capital expenditures in the next 12 months. But it's a muddled picture overall, as more businesses still say they've cut spending in the past year vs. those who shelled out funds, and it's still tough to get credit.

    A better measure of Americans' confidence in the economy?: The Original Tooth Fairy Poll reveals that the average gift from the Tooth Fairy dropped 16.7% to $2.10 last year. A chart of the Tooth Fairy Index overlayed with the DJIA shows that kids fare better when the stock market is rising.

    Yum Brands (YUM +0.2%) and McDonald's (MCD +0.1%)remain a favorite of traders who remain undaunted by the 52-week highs that both stocks etched out recently or their exposure to China. Even if China's economy stumbles, a huge migration into large cities by the population bodes well for low-cost eateries, reasons Stephen Weiss of Short Hills Capital.

    Goodyear (GT -2.5%) "could go to zero," Wasatch Funds' Michael Shinnick says, citing balance sheet weakness and massive underfunding of its pensions. Shares are -7.2% YTD but trade at ~$13, pretty far from zero and well above the 52-week low of $8.53. GT recently showed up in Randall Forsyth’s rundown of companies with the biggest pension shortfalls.

    It looks as if Cisco (CSCO) gained a healthy amount of router share in recent months, likely at Juniper's (JNPR) expense: whereas IDC estimates the global router market fell 2.3% Y/Y in calendar Q4, Cisco reported 8% growth for its router business during its FQ2 earnings call. In addition, Cisco's switch business also grew 8% in FQ2, better than the 5.1% Q4 growth estimated for the market by IDC. (previously)

    Google (GOOG -0.7%) has filed an application to provide video service to residents of Kansas City, Mo., setting the stage for it to offer a cable-TV-like package in addition to high-speed internet service it plans to sell there later this year. The move, while affecting just a small footprint and serving as an experiment, is potentially huge as it unlocks a new, subscriber-based revenue stream.

    Credit Suisse's Kulbinder Garcha is the latest to weigh in on what Apple (AAPL -0.2%should do with its giant cash stash - $98B as of the end of December – contending AAPL will have enough cash flow over the next four years to fund a dividend of at least $10/share plus buybacks. Garcha hikes his target price on the shares to $600 from $550. 

    “Congress, 535 commoditized temple monkeys pawing through the ruins of America in search of bribes. The bicameral whorehouse on Capitol Hill works like a vending machine. You put coins in the slot, select your law, and the desired legislation slides out.”

    -Fred Reed, May 30, 2009

  156. pharmboy money flow
    With tick data you can get net amount based on how many stocks fill at bid vs ask price. More at ask flow in, more at bid flow out. I also whatch for large blocks and which happened. Sometimes a big tick goes over ask! BOT BS for limit orders, it disappears very quick in real time, highlighted in red or green helps. Wind gust over 60 mph have made today connection worthless, temp is 35 so at least the 19" snow has been glued down. I'm on my laptop now it crashed my big system. Loaded again, afraid to trade today.

  157. SHLD / Sundevils – The market actually does assume more than a 10% move! The 45/60 weekly strangle has you more than covered. Obviously really risky, but volatility crush is going to be violent on this one…. But not for the faint of heart!

  158. still can't believe cmg and pcln…
    FU MoMos!!!!

  159. Phil Fred Reed! very smart in 2009.

  160. EXEL….selling may $6 straddle.

  161. Speaking of earnings, TSL in our 5K portfolio does report tomorrow before the open! We just adjusted the position on this one.

  162. I call bullsh*t on capital expenditures.  The tax incentive ran out in 2011.

  163. Phil
    Nice call on gold short off the 1780 line made a Quick $60.00
    Also made a couple of nickles and dimes on oil shorts today

  164. Non Sequitur by Wiley Miller :-)  

  165. Using the PPs to a T….I am very close to jumping over the cliff myself.  I have screamed into the pillow a few times.

  166. Phil, GMCR down, calls down, puts down, vix steady…what am I missing. I live to be enlightened!

  167. pharm
    Open Window, Scream, "I'm not going to take anymore!"

  168. 136.50 on SPY should be revisited if they can get through this 'zone'.

  169. Zone!
    I see nothing to bring the market up EOD, maybe!

  170. There goes ARNA,

  171. Phil – What is your best guess for market direction for tomorrow and Friday?

  172. Down….oh, wait, I am not Phil.  Sorry.  Time out for me.

  173. Pharmboy – LOL … I always suspected that you and Phil were one and the same!

  174. GLL/DC – If we hold this level on gold we'll have to do something.  There's nothing we can do but wait until CNBC gets tired of banging the war drums.  

    Nice job working those bots, StJ!  ;)  


    Congrats Bert, good hit and run, which is all we can do in this madness.  

    Down/Rpme – Not even sure what the question is.  If the VIX goes down then the  price of calls and puts go down as they have lower implied volatility (other things being equal).   If the question is why does GMCR go down but the put on it does not go up, it's because it's not going down fast enough to affect the implied target of the stock into expirations.  This is why we say "Always sell into the initial excitement" – when a stock is moving quickly, you get the best premium, as the stock slows down, even if it's heading in the same direction – the premium begins to collapse.  

    Direction/Diamond – My best short-term guess is going to be reflected in the $25KP.  So far, I've been pretty wrong but I still think we're due for a correction and we once again did not hold 1,360 on the S&P so, despite putting up a very nice list of stocks to watch today – there's nothing to buy at the moment.  

  175. NYSI

  176. ARNA going nuts.

  177. diamond
    Phil, JRW, and pharmboy one guy? WOW!

  178. EOD/shadow…there you go.  Elevator up!

  179. aussie….yes

  180. Phil DOWN, does it quack, swim, fly, and sold on expensive plates?

  181. lflantheman
    In plain Engl close todays calls long and short??????????????

  182. Big selling, get out!

  183. no one worry as long as the magical sloppy buyer is around and there is no volume..

  184. All this dropping has nothing to do with the Dollar, still at 79.30.  

    Oil $105.95, gold stubborn at $1,779.  

    Dow volume 83M at 3:49.   Looks like we're aiming to close at day's lows…  

  185. phil--will you please explain why CMG and PCLN keep hitting new highs and why EDZ can't go up 2 days in a row even when the market goes down???

  186. The BOTS are trying to cut the slide!

  187. Phil – Thanks!  I am leaning slightly bearish into Friday is why I asked.

  188. Elevator down….??  Sitting on floor 136 (S1) in my PP chart this am.   For the love of god and angels(cur), please go down.

  189. 25KP / Phil – The AAPL 495 puts are now $0.97. Do we keep them overnight?

  190. yodi      holding 30  bull call spreads April 490/540  and 10  bull call spreads Apr  490/515  in the aapl portfolio.   we will hold these for now.  

  191. Must. Not. Close. At. L.O.D

  192. lflantheman

  193. Bots / Phil – I got you about $0.20 on oil with my comments. I'll try harder tomorrow…

  194. Phil
    Very strange end, seems the manipulation bots are loosing to a big guy's sell program!

  195. Spread oil short vs. gold.  About the only thing I like at the moment.

  196. Why/Jabob – PCLN is now more baffling than CMG as their model is being blown up by GOOG with their new travel thing.   CMG is an enigma unto itself and EDZ, of course, won't go down until we go down and spook Asia, although as we speak EDZ is actually higher than it was yesterday (small victory).  

    AAPL/$25KP, StJ – Sure, it's an overall weak finish – can't ask for more than that on day one.  

  197. ABX, not gold.

  198. Too expensive to stick save, do it after the close!

  199. TLT $116.75!  

    Dow volume up to just 119M at the close so not much conviction to the sell-off either.  

    Check out the sector chart below this box, amazing we're only down half a pointish with everything out of favor (except commodities).  

    MSFT back to highs.  

    AAPL Meeting/Angel – That's why I like those shorts.  Easy to disappoint at this level.  

  200. FAS (3X) not keeping up with XLF today:
    XLF = -1.29% and FAS -3.22% (should be -3.87%).

  201.   it might not even disappoint.. but i suspect any gap up on the news will be met with selling for a few days…then maybe another run into ipad 3..tough to keep it down with treasury buying!

  202. At the close: Dow -0.21% to 12938. S&P -0.28% to 1358. Nasdaq -0.52% to 2933.

    Treasurys: 30-year +0.78%. 10-yr +0.37%. 5-yr +0.18%.

    Commodities: Crude -0.21% to $106.03. Gold +1.2% to $1779.55.

    Currencies: Euro +0.06% vs. dollar. Yen +0.69%. Pound +0.7%.

    Market recap: Stocks closed lower in thin trading amid uncertainty about the implementation of Greece's debt deal and an unexpected contraction in eurozone business activity. Gold rose to athree-month high; crude oil eased past $106/barrel. The dollar rose to a seven-month high vs. the yen but lost ground vs. the euro. NYSE losers led gainers two to one.

    Citigroup's economic surprise index remains at a very high level (meaning the news has been mostly good over the past weeks). If history is any guide, the news is about to turn worse as this read is as mean-reverting as they come. Maybe of most interest is the refusal of the 10-year Treasury to play along – past correlations imply today's yield should be around 5%!

    Japan is finally getting serious about fighting deflation, writes Scott Grannis – trying to permanently increase the supply of yen with massive bond purchases paid for by creating reserves. The beneficiaries should be the Japanese economy, the Nikkei, and dollar/yen ( already up 5.1% in 3 weeks).

    Germany stands alone, resisting IMF (Washington) pressureto increase the size of the permanent bailout fund in return for the agency's contribution to the Greek bailout. The inside dope says Merkel will give in, but – under domestic political pressure – needs to put a up a good fight. The G-20 meets this weekend. 

    Among homebuilder shares, Toll Brothers' (TOL -4.9%) unexpected FQ1 loss outweighs January's rise in U.S. existing home salesBZH -5.5%KBH -4.5%MHO -5.9%MTH -5.5%RYL -4.4%. Shares slide despite optimistic remarks from TOL CEO Doug Yearley that "in general the market feels healthier than it did one year ago."

    Analysts at Credit Suisse and Deutsche Bank downgrade stock ratings for Medtronic (MDT -2%), as the medical device maker deals with a slowdown in some of its end markets. Some 60% of MDT’s current sales are in declining or low growth markets, CS says; DB is concerned that the company will have trouble growing in the near term.

    Chiquita Brands (CQB +9.2%) posts a narrower-than-expected Q4 loss and says it is refocusing its salad business, which has struggled amid stiff private-label competition. The owner of Fresh Express bagged salads plans to expand its organic offerings and offer heads of lettuce while going into private-label. CQB also plans to consolidate several Midwest processing plants into one Chicago facility. - I love those bagged salads – huge time-saver.  

    Chesapeake Energy (CHK -2.5%) trades down after missing Q4 estimates late yesterday, despite a big jump in profit. Revenue actually rose 38% Y/Y on higher sales and production, as well as from a hedging gain that boosted bottom-line results. Additionally, the company says it plans to more than double its oil and liquids production by 2015 in an effort to become a top U.S. oil producer.

    The halt in trading for Vivus (VVUS) is set to last all day with a FDA panel still in full gear. Last year experts on the FDA panel voted against recommending approval for Qnexa 10-6 and questions today are once again focusing on the drug's potential risk for birth defects and heart problems. (live webcast

    Hewlett-Packard (HPQ): FQ1 EPS of $0.92 beats by $0.05. Revenue of $30B (-7% Y/Y) misses by $700M. Company expects FQ2 EPS of $0.88-$0.91, below $0.95 consensus. Reiterates guidance for FY12 EPS of $4, below $4.08 consensus. Shares -2.5% AH. (PR)

    Garmin (GRMN +9.2%) COO Cliff Premble highlights during a conference call that the company sees its marine segment as a key driver for growth with new sonar and autopilot solutions that serve the sail and large boat market. In 2011 marine revenue grew 12% – compared to a 5% decline in automotive/mobile revenue – and for 2012 the company targets steady growth of 5%-10% for the segment.

    Another big day for FuelCell Energy (FCEL +14.3%), as the maker of fuel-cell power plants announces plans to form a German-based JV with Fraunhofer IKTS to expand in the European market.Yesterday, FCEL shares moved on Apple's plans to power its North Carolina data center with major solar and fuel-cell installations.

    Amazon Web Services (AWS), which is now believed to pull in over $1B in annual revenue, is rolling out a service that allows developers to more quickly build apps relying on AWS. The service moves AWS beyond its traditional focus on nuts-and-bolts cloud infrastructure, and could be evidence Amazon (AMZN) plans to more directly compete with PaaS solutions such as CRM's andMSFT's Azure.

    Citing concerns that recent changes to Google's (GOOG) privacy policy raise the risk of identity theft and fraud, 36 state AGs send Larry Page a letter outlining their issues with the changes. GOOG's new policy, which begins March 1, will allow it to combine users' personal info from web history and YouTube with other Google products; existing users can't opt out without exiting the whole Google system.

  203. Look for an a.m. post from me re the AAPL shareholders meeting and how to  further protect our AAPL portfolio should a downdraft occur afterwards.  The meeting takes place at 10 a.m. pacific so there will be time for us to make some morning portfolio adjustments if needed.  The portfolio had a so-so day today, up just a little.  I had to be on the road for 3 hours, which puts a crimp in my trading abilities.   



    Tilson has been bearish on Green Mountain [GMCR  69.22    -0.53  (-0.76%)   ] for quite some time and despite recent gains he remains skeptical.


    Green Mountain Coff…


    69.22     -0.53  (-0.76%%)



    “We’re still short because if you look at sell through data – it is not showing the unbelievable sales that Green Mountain is reporting – inventories didn’t come down as much as I would have expected them to.”

    Also he feels the Street isn't factoring in a big headwind.

    “The patent on their K-Cup products goes off and there will be a lot of competitors.” 

    Tilson sees the situation as comparable to the situation faced by Pfizer as Lipitor comes off patent. “When the drug comes off patent, pricing goes down and the stock reflects the change,” he says. 

    “But in this case, Green Mountain is spinning a story that when the patent comes off they won’t see a decline in market share – and that’s just silly.”

  205. VVUS gets PDUFA ok with 20-2 vote.  THAT is incredible.

  206. VVUS approved 20-2….Wonder how ARNA will react

  207. . I meant PDUFA….Whatever that means :)  

  208. Pharmboy had a good idea the other day of looking into XL for the IRA portfolio.  Does anyone know anything about XL?

  209. Prescription Drug User Fee Act (PDUFA)- google it! :)


  210. tilson has been the poster boy for intiitating successful short positions..put him in a colored box (red) with roubini grant rogers and tboone

  211. Hi Phil :
    I've got 10 EDZ April $12/$18 BCS paired with sale of July $12 P at $1.90 for net $.05 on $6 spread as a hedge against $200k of  other BCS and buy/writes.Should I close it out and go with one of your other hedges recommended above. If not,do I roll the April $12/18 BCS to the  July $12/18 BCS when the April Expires? I have to admit I'm not sure what I need t o do with this position.Thnaks

  212. VVUS/Pharm – Still halted?  I would think they would fly on that news.  

    XL/Craig – You have to really study those re-insurers to figure out their exposure.  It's a crap dividend but at least you can get decent money for selling puts and calls.  Just make sure you get reliable info on their financials first – notice in 2008 they took a $2.6Bn hit that essentially wiped out a decade's worth of earnings – that can be unpleasant.  They fell from $80 to $2 and now back to $20 based on the belief that lightning won't strike twice but they have $31Bn of "Other Liabilities" and $5Bn of other debt against $3Bn in cash and $33Bn in Long-Term Investments so the entirety of your position is based on your faith in those Long-Term Investments.  

    EDZ/Dflam – They are as good a general hedge as any and you're in for free so you can spend $2 to roll to the July $10s and you can get $1 back by rolling the caller to the April $12s but that's no fun so I'd take out the caller for .50 and just make sure that, if EDZ goes lower, you do sell the July $14s for at least $1.50 (now $2) but, hopefully, you'll get that much for the April $14s on a good bounce (now .95).  

    This is my favorite country!  Accountability update: The former CEO and chairman of Iceland's Kaupthing Bank have been indicted on fraud and market manipulation charges as the country continues to forge its own path – accountability for those who wrongly profited and letting failed institutions fail – in the clean-up from the financial crisis.

  213. No wonder banks didn't want Cordray at the CFPB – he is about to take a stab at the cookie jar…

    The U.S. Consumer Financial Protection Bureau is starting an inquiry into bank checking account overdraft policies and may initiate related enforcement actions during the probe, director Richard Cordray said today.


    Large banks such as JPMorgan Chase & Co. and Wells Fargo & Co. as well as smaller institutions rely on overdrafts for revenue in retail banking. Banks and credit unions were set to charge customers about $38 billion from overdraft fees in 2011, according to a Sept. 15 estimate by Moebs Services, a Lake Bluff, Illinois-based economic research firm.

  214. With Lflan recently starting an AAPL virtual port over the last several months, does anyone have any experience with Andy Zaky's bullishcross newsletter?  Apparently, he has also done very well mainly trading aapl.

  215. VVUS at +20.  What a frickin' joke the FDA has become.  Topiramate + speed.  Way to go ladies and gents.  Make a mockery of the system.  They actually talked about mail order.  Speed is a schedule 2, like opioids.

  216. Phil/AAPL
    Looking for some thoughts on this:
    I sold some AAPL Oct. $390 puts a couple weeks ago, with the stock at $491.
    However, those puts have not moved an inch and are still at $10.20 or so.
    Looking at other strikes and other time periods, I see the expected time decay and decay due to the increase in price of underlying..
    More important, should I buy these back and sell a diffent month? Different strike? Both?

  217. Phil – Seeking Alpha.  It's perfectly clear why Kostorhyz outranks you.  It's because he is a "boutique research firm analyst". 

  218. Portfolio spreadsheet is up to date now.
    Phil – The FAS Money is up nicely over $6,000 now with about $15K of Reg-T margin needed for the FAS strangle. I don't know why, but with the same setup, we have not been doing as well with the IWM Money portfolio. We have been a lot more aggressive selling premium with FAS than with TZA and TNA. We have made well over 40 trades with FAS but only 30 with IWM. On the other hand, the IWM BCS is potentially worth more. But I guess we could maybe sell more premium. Maybe FAS is just good to us!
    The $5KP is also OK, up about $500 with about only 60% of the cash deployed but I am worried about the TSL calls as they report tomorrow morning. I guess could go either way. 

  219. Hey Phil and fellas, a question to the assembled wisdom of the group….
    I'm over in Thailand right now, and some friends here  (Aussies) are starting up a FOREX trading company. They,re basically quants, and they believe they've got their algorithms knocked, and are looking for clients. They're just beginning to look at marketing their services. It's not my bag, but I volunteered to give them my reactions to their test pitch….
    In short, they've been making live trades on there system for 3 months now, and the results are very good, but they're looking to use the trading performance as sales material. I told them that IMHO 3months isn't a lot of data, and that if they're going to try to sell their system based on it, their audit and accounting on that data better be bulletproof.
    My suggestion was that to make the results they have look the very best, they needed to have them audited and verified by a Top TIER accounting firm, IE somebody who's got an international reputation to protect. They're confident in their results, but they need to be able to validate them to investors (whom we all know to be a pretty skeptical crew).
    So the question is… If you could get your results audited by any accounting firm in the world, and you wanted the most trustworthy firm out there to validate your results, who would you use? I've got a couple of Ideas, but there is so much experience and savy here, I thought it would be a good idea to ask you guys who YOU'D trust if you were looking over a prospective investments data.

  220. AAPL Options / Maya – Looking at other long dated options around the same strike price you will see very little movement as well. I am guessing you sold these puts around 2/10. The Jan 13 390 have gone from $14.14 to $16.25 since then while AAPL is up $20. But options prices are a based on many factors – volatility being most important. I am guessing that IV changes in your particular strike have made the difference. In TOS, it looks like IV went from 31% to 34% in that period for that particular option. It doesn't look like much but it can make a big difference – that is how you make money selling strangles around earnings for example, taking advantage of higher IV sometimes by few percentage points. I think that is why it is so frustrating for people to trade options sometimes because you could pick the right time and the right direction and still not show the profit that you expect.

  221. STJ
    Thanks for that..I did talk with my broker and was just informed that the IV HAD INDEED GONE UP FROM 29 to 34!
    So, with that, any action to take or leave things as they are?
    BTW, appreciate your work with maintenance of the portfolios.

  222. STJ
    Where can I get info on IV?
    I don’t use TOS (fidelity is my broker)

  223. Maya, I think that lflan would be a better person to advise you on AAPL… From where I stand, 390 seems safe between now and October so you would stand to collect the entire premium, but there are better minds on AAPL on this board!

    As far as historical IV is concerned, I am not sure. TOS has a nice Thinkback feature that let's you "rewind" time and see where options stood at a certain time (and that is not perfect as it averages out the day) but I don't know about other places. 

  224. Actually, I lied Maya – I just remembered that Optionistics keeps historical data on options. You might have to pay for some of the services, but what you are looking for is free. Go to and enter your paramters and you are set. For example, for your option I had the following chart:

    The red line is the IV and as you can see, it has been climbing. You can choose to display other parameters like the greeks for example. 

  225. What is IV?

  226. IV = Implied volatility

  227. lflan/AAPL – thanks for the update.  I was also caught up most of the day, so I decided to close out the new $490 calls and take profits in the morning, since I couldn't monitor the position today.  I am left with only the 10 $490/510 BCS now.

  228. sorry, I meant the $490/515 BCS…

  229. Mitt Romney's tax plan to close the deficit – lower the highest tax bracket from 35% to 28%. And that is not going to help the top 1%.

    I’m going to limit the deductions and exemptions particularly for the higher-income folks. For high-income folks, we’re going to cut back on that, so that we ensure that the top 1 percent keeps paying the current share they’re paying and more.

    David Frum doesn't think that the math computes:

    Yes, I can imagine that a scale-back in the deductions for state and local taxes or mortgage interest might conceivably balance the value of the tax cut for a family at the lower edge of the top 1%. But what possible change in the deduction schedule could offset the value of a 7 point tax cut for somebody earning more than $1 million, much less more than $10 million?

    It's unreal that we seem to be faced with the same ideological crap every time with this crowd. What's next, they'll tell us that it will trickle down? Let's face it, the GOP cares only about the top 1% – for the rest of us, there is always lip service. But good lip service though… 

  230. Big Chart – Rolling over a bit.  RUT and S&P with excellent demonstrations of the power of the 5% Rule.  On the others, don't forget those 2.5% lines are significant, we just didn't bother drawing them as the market swings had been so wide last year there was no point in sweating the small stuff.  As the VIX calms down, those 2.5% lines gain more power.  

    Speed/Pharm – Well no wonder people are so excited.  I love the way they drive down these stocks with rumors ahead of good FDA news – as if it isn't leaked…

    AAPL/Maya – Well they have 4,200 open interest so it's not for lack of trading.  Not sure what other strikes you are looking at but it's an October put with a delta of .13 – it's not like it's going to move much regardless.  If your goal is to day trade, then these are useless but, if your goal is to collect $10.20 when AAPL finishes October above $400 – then what's wrong with them?  

    Botique/Kongen – Thanks for pointing that out.  Perhaps I should start selling tchotchkes to improve my ranking….

    FAS Money/StJ – FAS is more volatile and, to me, more predictable than TNA so less trades and more tentative betting the RUT is why.  I'm willing to bet big XLF won't fail $13.50 or go above $15 but I don't have the same conviction when the RUT strains it's range.  Also, as you note, with IWM, the short TNA trading is just a placeholder while we wait for our bullish position to mature.  TSL is down on German subsidy cuts, earnings hopefully will be good.  

    Trustworthy accounting/GMarts – LOL, what an oxymoron that is these days.  Usually, people want to see about 6 months and the audit has to simply be from a reputable firm.  Obviously, Deloitte, E&Y, KPMG or PWC are the international kings but you are probably better off going with a small firm with strong ties to one of the big 4 as they'll charge a lot less and you can switch when it's worth it.  The big firms aren't single entities anyway, they are more like a network of independently owned and managed firms who enter into alliance agreements to operate under the marquis name – that's why knowledgeable investors won't be overly impressed that you spent a lot of money to get audited.  

    Trickle down/StJ:  

  231. Pharmboy,
    I have VVUS , time to take profit.

  232. "Boutique", when referring to analysts, always means "has only worked for companies you've never heard of and never will."

  233. You all may have seen this years ago, but somehow I keep getting reminded of it whenever  I read more stories about how the central banksters know what they're doing by all simultaneously flooding the world with more liquidity (and debt):,14318/ 

  234. STJ
    Thanks for the link.

  235. Phil
    It all kinda comes together now, between the info from STJ, the broker and your thoughts..makes sense.
    BTW, the short puts are financing a Jan 2013 BCS, and I was trying to fine tune them and squeeze…..just a liiiitttle more….

  236. Phil
    Since I am on a roll…
    you likely know by now, I own significant number of AAPL shares and in order to sleep better without selling, have bought July $500 puts, paid for by the sale of July $475 and July $450 puts(have margin, thank god!)
    Thought process being that, if shit hits the fan, I can roll the $475 puts, sell calls etc, and would not mind being assigned AAPL at $450, after having sold it at $500..For a 10% discount..
    I keep selling weekly puta and covered calls to juice it all with good success and “small weekly gains”
    Do you see anything wrong with this?
    I am sure you have a better mouse trap…so feel free to share .
    Am trying to figure out a way to buy the $515 July puts, but have to figure out how to pay for them..

  237. Here's a must read:
    What I see keeping people from making money is a lot of what I call 'over-analysis' , and a lot of 'emotional interference' with trading.   There is only one basic question I think about before making a trade……Is this stock more likely to go up, or down?    Once I've answered that question I can begin to profit from the move, fashion a trade if you will.   And if the trade turns bad on me I quickly get out of it and look for something else.  And while leaving the trade I'm not thinking "bad stock! bad stock!"  I'm just thinking……….well, you know, I'm not thinking of that last loss at all, because I've already moved on.  For me it's just about finding a winner and sticking with it until the trade no longer works.   That's why, right now, I like AAPL so much.  AAPL is a winner.  Is it probably going to go up?  or down?    (duh…..)   So pick a long-term bullish trade on AAPL and go do something else.  Or, if like me you get a thrill out of trying to squeeze every last dime out of it, then trade it frequently, but always considering that it's more likely to go up than down over the long term.    So I believe there is a lot of over-thinking of this stuff.   And I'm not the only one that thinks like this.  Spend a little time on Optraders site and you'll see that his trading methodology is very simple……if it's going up, we go long.  If it's going down, we short.    We are in a bull market here gentlemen.  Don't miss the opportunity just because you would have to admit that you were wrong.   Better to be wrong and rich than right and ……  not so rich.   So, what the hell am I doing up at 4 a.m. ?   I need to get some sleep so I can trade tomorrow.   I'll be on later with that AAPL shareholder's post I promised you earlier.  

  238. Somebody asked earlier about Andy Zaky and   Andy focuses on earnings and fashioning the best possible AAPL bull call spreads for Jan, April and October.  For example, now he's looking at April and October spreads, but mostly April.  He wants to get in at the best possible prices but does not focus on AAPL price so much as on upside opportunity.  He does not play AAPL's  downside, which  could be considerable at this time (or soon, anyway).  He also analyzes the market as a whole and suggests hedging strategies for the market as a whole.  Very good advice all around, but not even close to Iflan when it comes to day trading AAPL.  In fact he does not day trade at all, he does medium to long term (over a year) trades.  What Iflan has opened up to is the potential to make tons of AAPL money on daytrades. You won't find that on bullishcross…FWIW

  239. Good morning!

    Wild ride on the Dow (/YM) already as it was up 60 and now up 20 in Futures – rest of the indexes are similar.  

    Bad news is the Dollar fell to 78.80 to get us there, which is down almost 1% from 79.50 yesterday so even up 80 is lame.  Euro topped out at $1.334, Pound $1.5711 (still not $1.58), 80.11 Yen to the Dollar and EUR/CHF is at $1.205.  

    Oil topped out at $106.60, gold $1.780, silver $34.75, copper $3.84, nat gas $2.68 (huge move off $2.53 yesterday) and gasoline gapped up from $3.10 to $3.27 at 6pm for no particular reason that I saw.  That is a massive move for gas and devastating for our economy but no one seems to care at the moment.  

    Thursday's economic calendar:

    8:30 Jobless Claims

    10:00 Mass Layoffs

    10:00 FHFA House Price Index

    10:30 EIA Natural Gas Inventory

    11:00 EIA Petroleum Inventories

    11:00 KC Fed Manufacturing

    1:00 PM Results of $29B, 7-Year Note Auction

    4:30 PM Fed Balance Sheet

    4:30 PM Money Supply

    2:06 AM Asian markets are mixed, with many of the region's banks under pressure, though Japan is higher as a weaker yen benefits exporters. Japan +0.4% to 9596. Hong Kong -0.7% to 21390. China+0.2% to 2407. India -0.6% to 18043.

    Ifo's index of German business confidence rises to 109.6from 108.3, better than the 108.8 expected. Current conditions rises to 117.5 from 116.3, beating expectations of 116.5. Business expectations up to 102.3 from 100.9, vs. 102 expected

    The European Commission now forecasts a mild recessionfor the eurozone, with the region shrinking 0.3% this year. As recently as November, the EC had expected 0.5% growth this year. One of the sharpest country revisions is for Spain, now expected to contract 1% vs. prior forecast of +0.7%. Stocks give back gains after the report: London +0.2%. Paris -0.1%. Frankfurt -0.3%. Euro +0.5% to $1.3314.

    Spanish PM Rajoy has reportedly asked European officials to raise Spain's debt reduction target to 5%, arguing the current 4.4% target will be impossible to meet. Sources say the EC is preparing to cut its eurozone growth forecasts, and Spain may latch on to the downward revision to argue its target needs adjustment. 

    With the market up over 8% for the year, and more than 20% from last October's lows, Doug Kass says the next big market move is lower. He's putting his money where his mouth is too, now holding his largest net short position of the year. “There are good advances and bad advances – this one is bad,” Kass says. If history is any indication, a sell-off is coming.

     "I have great confidence the Fed is ultimately going to get their way," says Lee Cooperman, explaining the bear case on Treasurys. "I don't think people understand how risky a U.S. government bond is at 2% return." He's keeping his money in what has worked – gold, the S&P, Apple (AAPL), and Qualcomm (QCOM), among others. Treasurys have worked too – how about a little love?

    As interest surges and money flows into ETFs, where's the sell-side analyst coverage? Josh Brown: "ETFs make up 30%-40% of all daily volume in the markets, and yet they are only 'covered' by Morningstar and a handful of blogs… A million analysts analyzing the same 500 stocks based on the same metrics and coming to the same conclusions – what a waste."

    Improving data (IIIIII) pushes Deutsche Bank analysts to believe housing has entered a real recovery: "We wonder if forecasters have counted this sector out for so long that they are overlooking the possibility that it could pose an unexpected mild boost to the [economy] in the year ahead." But it's too soon to declare victory, as millions of homes still wait to be put on sale by distressed owners and banks.

    That sounds more like it: Shanghai denies plans to easehome buying restrictions, keeping itself in line with Beijing's goal of curbing speculation and cooling rapidly rising prices. But with home prices now falling in China's major markets, it might be time to relax the restrictions. 

    Economists expect China’s Premier Wen Jiabao to target an expansion of around 7.5% in his report to the National People’s Congress next month, a slight pullback from the 8% goal maintained from 2005-2011. A cut in the target growth rate would suggest policymakers are prepared to accept slower growth as the cost of shifting the economy’s drivers to consumption from exports and investment.

    China could face an economic crisis unless it implements deep reforms. That's the conclusion of a report, to be released Monday by the World Bank and a Chinese think tank, which challenges how China's economic model has developed over the last decade and stresses the need to scale back China's vast state-owned enterprises.

    Asian companies are preparing to accelerate acquisitions in Europe to take advantage of asset prices depressed by the region's debt crisis, says Colin Banfield, Citigroup’s head of M&A for Asia-Pacific. Asia-to-Europe acquisitions have already hit $14B YTD, vs. $7.3B for the same period last year, and last year ended up at a four-year high. 

    C. Howard Wietschner, the head of Goldman Sachs' (GS) hedge fund division, is retiring after 18 years with the company, the company has disclosed in a memo. Goldman's efforts to bolster sagging profits by reducing compensation expenses have led togrowing defections.

    RBS (RBS) 2011 net loss widens to £2B vs. a £1.1B loss a year ago and worse than consensus of a £1.1B loss this year. The loss would have been narrower if not for a £950M provision to compensate some customers improperly sold personal-loan insurance. I-bankers still getting bonuses, though bonus pool is cut to £390M from £950M a year ago.

    BofA (BAC) will accelerate its expansion in China, adding as many as five branches in the country over the next 2-3 years from its current three outlets in Shanghai, Beijing and Guangzhou. BofA is also open to other options including a securities venture with a local partner.

    The U.K. and Japan are urging the U.S. to rewrite the Volcker Rule, concerned trading restrictions on U.S. banks could hit sovereign debt markets at a particularly fragile moment. In a high-profile expression of their concern, U.K. finmin George Osborne and Japanese counterpart Jun Azumi have written an op-ed in the FT.

    Anadarko Petroleum (APC) and BP (BP) are liable for civil damages related to the Gulf oil Spill, District Judge Carl Barbier ruled yesterday, exposing the two firms to billions in potential fines. The government will now pursue civil penalties in a trial set to begin Monday.

    Vivus (VVUS) shares resume trading, +90.6% after an FDA advisory panel votes to recommend Qnexa. Also with weight-loss drugs waiting for approvalARNA +18.8%OREX +14%.

  240. Boston Scientific (
    BSX) says its ION and TAXUS Liberte Paclitaxel-Eluting Coronary Stent Systems have received FDA approval for use in patients experiencing a heart attack. They are the only drug-eluting stent systems in the country with an approved indication to treat heart attack patients. Shares +1.4% AH.

    Tesla (TSLA -0.8%) shares were off sharply for a while today following a report noting the potential for Roadster batteries to die out (thereby requiring a replacement at a cost of $40K) should they not be charged for a few months, and thus discharge completely. However, shares rebounded after Tesla made an effort to address the issue (albeit without fully denying the problem exists).

    During its FQ1 earnings call, H-P (HPQ) struck a mildly positive tone about U.S. demand, but less so about Europe. The company also talked about how a decline in photo printing (no doubt due to web-based sharing) is hurting sales for its cash-cow printing division, and about how its current cost base is unsustainable. The latter suggests major layoffs could soon arrive. HPQ -0.8% AH. (live blog)

  241. AAPL/Maya – Good strategy but, like all good strategies, what do you do when a nuclear bomb goes off in Europe and you wake up with the market down 20%?  As long as you are comfortable with that, you're good.  That's the main problem with a concentrated strategy – especially one that relies on margin, you don't want to be in a position where you can get a margin call and end up with no cash and no stock.  The reason I like LONG-TERM bull call spreads in a toppy market is because, if the market crashes, then the VIX goes up and that helps maintain the net value of the spread, even as it goes further out of the money.  Generally, they will perform better than a stock in a crash.  

    AAPL is a good example, as they don't pay a dividend so why should I tie my money up in them?  The stock is $515 but I can buy 2x the 2014 $500/650 bull call spread for $54 and keep $410 in my pocket and I can use that margin to sell 1x the March $525 calls for $10.30 and that's a 10% premium on my $108 long position in 22 days.  

    If you don't mind being re-assigned AAPL at $400, you can also sell the Jan $400 puts for $18 and that gives you a nice buffer against a move up and knocks another 16% off my 2014s so now, in just the first month, we're at net $85 on the $150 spread that's $15 in the money and you have another 18 months to sell premium and $428 cash on the side so if AAPL goes up $50, you can simply spend $54 on the $550/700 bull call spread and put a tight stop on one of your lower spreads and then you can 2x the short calls and if AAPL goes up another $50 without ever pulling back, you can spend another $54 on the $600/750 bull call spread and 4x the short calls but, if AAPL falls $50 instead – you will be so glad you have this spread instead of the stock and short bear put spreads! 

    Keep in mind that, with the net $85 on the bull call spread and the short $400 calls,  you are in for net $485 so, even if you are wiped out on the bull call spread (virtually impossible), you still save $30 on a drop below $400 and, if we assume you have $40 left on the bull call spread, you are mitigating 1/2 the damage of a $100 drop (20%) which is always the goal of a good hedge.  

    Good point Iflan – Thinking is dangerous!   President Bush taught us that…

    6:00 AM Overseas: Japan +0.4%. Hong Kong -0.8%. China +0.3%. India -0.4%. London +0.2%. Paris -0.1%. Frankfurt -0.3%.

  242. Why dosen't Santorium and the rest of the GOP (except Paul) run for the Knessit. They seem more intent on protecting Israel than security of the US. They would fit right in to their present hawkish government.

  243. Could someone explain to me why is euro $1.34. Considering all the problems in Europe shouldn’t euro be less than $1?

  244. interesting..CMG vs. AAPL
    had you bought CMG 1, 2, 3 or 5 yrs ago…you would have made more with CMG.  In fact 5yrs ago would have yielded a 500% return for CMG compared with 475% for AAPL.

  245. There is only one basic question I think about before making a trade……Is this stock more likely to go up, or down?
    I agree that an opinion on this matter should underlie all long positions you open. The questions that always intrigues me though, is: Is this stock more likely to go up, or down before the market closes today? and Is this stock more likely to go up first? Though as Phil has shown, if you are scaling into a position,  you should want your longs to go down before they go up. Now I am starting to overthink.
    I had a look at the reviews of that guy's book "Rigged Money", but from what I read it seemed to me that the unwritten Book "Philosophy of Phil" would be a better buy as you would find gems like this that you can't get elsewhere:
    The reason I like LONG-TERM bull call spreads in a toppy market is because, if the market crashes, then the VIX goes up and that helps maintain the net value of the spread, even as it goes further out of the money.  Generally, they will perform better than a stock in a crash. 

  246. jomptien/Sanatorium and the Knesset
    It has something to do with religious fundamentalist apocalyptic theology which is based on ancient Jewish eschatolgy, which in turn was a kind of wish fulfillment fantasy of a powerless people wishing to overthrow the rule of Rome. Kind of like the T-Party today with Government. Anyway, contemporary religious nuts believe that when the End of the World comes and Jesus returns in all his majesty to punish the wicked (i.e. people like you, liberals, Democrats, manufacturers of contraceptives, Thomas Jefferson) there will be some kind of big battle between the forces of good and evil someone near Jerusalem. It is all very silly, but politicians like Santorum know that a lot of religious fundamentalists buy into this kind of crap and the pro-Israel stuff is a kind of dog-whistle for this kind of low-information voter.

  247. "ETFs make up 30%-40% of all daily volume in the markets…"
    How I would love to know for certain WHO, and  WHAT entities, is/ are trading them.
    Usual Suspects: the FED, 10 largest Investment/Commercial Banks, IMF, WTO, Bush/ Clinton/Bamster/Biden Trust Funds, Hedgies,

  248. Phil
    Good morning!
    Thanks, and yes it makes sense.
    But what do you do with the March $525 short calls if AAPL ramps up above that before March expiration? Roll them?
    Next question, so why doesn’t everyone utilize this strategy? A lot of people own the actual underlying and have never considered the strategy you outlined, including brokers, financial analysts?
    I will certainly look hard at it now…get comfortable with the possible drawbacks

  249. Phil/AAPL
    And if AAPL were a dividend paying stock, let’s just say at 2%….would you then hold the stock? Do buy/writes instead?