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TGIF – Stop the Rally We Want to Get Off!

I have never hated an up market more.  

Even on October 1st, 2008, when I wrote "Hedging for Disaster," where we added 3 ultra short ETFs at Dow 10,650 (SKF Jan $100s at $19, DXD April $55s at $14.20 and SDS March $77s at $9.95) we still had some hope that the Congressional bailout would stabilize the markets, although my comment at the end of that post is just as relevant today as it was at that market top:  

Congress  many think Paulson and Bernanke and Warren Buffett are kidding when they say we are about to go over an economic cliff but I think there is certainly enough evidence to merit serious concern.  In part, we have a crisis of confidence and – even if it were true that we could "muddle through" without a bailout, if just 1/3 of the investors believe that we can’t and pull out of the markets, what good will it do the remaining optimists?

You know how that story ends, of course – the stimulated "recovery" was very short-lived and we went right back off that cliff, dropping 2,000 points that week and another 2,000 by March 9th the next year.  Our hedges worked out nicely, of course, with SKF topping out at $1,200 on Nov 21st (up 5,600%), DXD was at $110 on October 10th for a nice $40.80 profit in 9 days (287%) and SDS ran to $130 on the same day and returned 430%.  

The other day, I published a list of 12 Long Put Plays for Members (see yesterday's Alert), which I worked at in the morning, after I put up my 10 Bullish Ideas in the morning post.  Why?  Because, after watching the open and reading the news, I could only conclude that this rally is still fake, Fake, FAKE!  Back in October '08, we were already 25% off our 2007 highs where I used to make fun of the market going up every day, like on October 2nd of that year, when I said:

Superman ReturnsUp, up and away – it’s Super Market!

It’s bugdet proof, oil proof, terror (threat) proof, housing proof, inflation proof and pullback proof 3 weeks in a row!

This is truly a Market of Steel (and the recent movement of X underscores that) and looking at the movement of the past week we really do have to believe it can fly…  Is the US consumer (driver of 2/3 of the economy) really impervious to harm?  What, if anything, is our stock market Kryptonite?

At that time, the Dow was just popping 14,000 but, a week earlier, on October 1st, as we were still climbing to new highs and everyone told me I was an idiot for not loving the rally, I said:  

Is today the day?

I’ve been saying for quite some time that the banks need to step into the confessional box and tell us just how much of the $2 Trillion drop in the value of US housing (so far) they are on the hook for.  So far we’ve had a Billion here, a Billion there but the big boys have so far had their heads firmly in the sand and that means it’s time for a kick in the ass.

Since ostriches are herd animals, we can expect one admission to follow the others as banks would always prefer to say "Yeah, I lost money too" AFTER someone else admits it.  As usual, we have to look to Europe for leadership and we were on top of this story over the weekend (thank you Richard) as ING announced on Saturday that they would take over accounts at NetBank, WHICH WAS SHUT DOWN BY THE US GOVERNMENT FOLLOWING LOSSES ON "SUBPRIME MORTGAGES AND OTHER LOANS."  Gee, wouldn’t you think this should be a more prominent story in the US?  Once again the sharpies at the WSJ seemed to miss this one.

I do not point these things out to remind you how brilliant I was in my analysis at the time but I do have to remind you that A) I do kind of know what I'm talking about, B) Macro Fundamentals can turn bad long before the market realizes it and C) Once a rally gets this big, you can make incredible amounts of money with hedges which, ironically, makes it a little safer to go long!  

While the technicals on the Market look great, as Springheel Jack noted on yesterday's SPX Chart, this is also what a blow-off top looks like and, with the volume we're seeing lately – how can you trust these moves in the first place.   

It's very hard for me to simply convey why I don't like the rally but it's mostly because I read a lot, I talk to people from all over the World, many of them movers and shakers who are themselves astute business people – but I also have a certain perspective from outside the top 10% bubble that a lot of my peers lack.  

Like it or not, the bottom 90% are ultimately your customers.  Even if you exclusively service the top 10% in your business (I do!) still, at some point, the bottom 90% are their customers.  Way back in June of 2007, I wrote "The Dooh Nibor Economy (that's "Robin Hood" backwards!)," where I pointed out that we (yes, I'm one of THEM) were extracting wealth from the Middle Class at a dangerous and unsustainable rate and I predicted that the continuation of the trend would lead to revolution.  

So far, we've had the Arab Spring and Occupy Wall Street but not much else, yet already we are right back to where we were in 2007, with skyrocketing food and energy prices, lower wages and benefits (and even higher unemployment) and an ever-widening wealth gap.  Rather than wake up the top 1% and instilling a sense of Social Responsibility, OWS has caused the wealthy to circle the wagons to the point where the GOP is running a Bankster to just end the pretense and directly sell this country out – MADNESS!!!  

Now we understand how the French Aristocracy could have been so "stupid" and deaf to the complaints of the people – because we're doing it now.  The top 10% is fiddling while Rome (and Athens and Madrid and Lisbon and London and Dublin) is burning all around us and we're playing the markets as our "Bread and Circuses" event, meant to placate the public with a spectacle that impresses them with the glory of the Empire, even as that Empire crumbles into dust.  

Just like the Romans, our Government is emptying the treasury to put on a show and the nobles, as is their manner, are finding ways to profit from it while it lasts.  While there is indeed good money to be made betting on an up market, there is PHENOMENAL money to be made catching a crash, which is why we like our Disaster Hedges (see "Fake News Friday – What a Fool Believes" for our main hedges as well as our top 10 bull plays) and, with DXD at $12.76, we can buy July $13 calls for just .90 – 1/14th of what we paid to insure ourselves in 2008, before DXD doubled on a 20% market drop.  

So there's nothing wrong with having $100,000 of bullish bets – especially if you use our usual hedging techniques, as long as you have, for example, $3,000 of Disaster hedges.  If the market keeps going up and up, you can always pull the hedges with a 50% loss and I'm sure you'll make more than $2K on your $100K (or you may as well have TBills!) but, if we do fall off a cliff – that $3K can become $15K and save you from a nasty drop!   

We made plenty of bullish bets this month, let's make sure we're well covered into the weekend and, of course, as I said in last weekend's Income Portfolio Reviews, I'm for getting back to cash at this point anyway.  The market is just too scary up here and, if the rally is real, we will have another 20% to participate in.  Maybe we'll miss the first 5% but Dow 13,000, S&P 1,400 and Nas 3,000 are pretty solid floors to go bullish off if they hold up.  On the downside however – get a daily chart and look back at October 2008.  Then read what I said, then look at the chart, then read what I said.  

What's different now?  

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  1. Oil Lines

    R3 – 109.33
    R2 – 107.75
    R1 – 106.93
    PP- 105.35
    S1 – 104.53
    S2 – 102.95
    S3 – 102.13

    Yesterday's high and low – 106.18 / 103.78

    Dollar – R1 is 80.94, PP is 80.65 and S1 is 80.22.

  2. People at The Economist are also puzzled by the US economy and the numbers:

    The first puzzle: why is GDP growing so slowly? Since the recession ended, growth has averaged 2.5%, roughly around its pre-recession trend-rate, which means no progress closing the massive gap between actual and potential output that opened over the course of the recession.


    The second puzzle: unemployment is falling more quickly than the GDP data can explain. 

    The third puzzle: why hasn’t inflation fallen further? Phillips-curve based models that prevail in most forecasting shops would have projected much lower inflation given the size and persistence of the output gap than has actually occurred. [...]

    Or you could go with a simpler but more pessimistic explanation: both the level and growth rate of American potential output is much lower than we think. This would resolve all these puzzles: GDP growth of 2.5% is above, not at, trend, the output gap is closing, and it was probably smaller than we thought to begin with. That would explain why unemployment is falling so quickly, and why core inflation hasn’t fallen further. The excess supply of workers and products that ought to be holding back prices and wages is not as ample as we thought.

  3. Phil -
    Long dated puts are so cheap right now that you can buy a put spread that kicks in after 10% down to cover you for a 10% – 30 % move down on the stock.
    + Do a buy write on the stock and keep selling calls to easily burn off the entire cost of the hedge.
    I am net short but started doing this on stocks that I don't mind owning long term. 
    Buying premium is not so bad right now + if vol. picks up those long date put spreads could make a lot of money – especially if you stop out on the stock and keep the put spread – but for those of us who cannot trade all day – its a nice easy way to dabble in some longs
    Pick a stock you like – hopefully one with a div. and look at the numbers on the options 
    to get even more tricky- you could do your normal buy write with 1/2 position and sell 1/2 near dated puts hoping to get a less expensive fill – with the knowledge that you are protected from 10% down to 30% down.

  4. Good Morning all – been back in the US since Monday but with a bad case of jet lag. Feeling much better today. India was awesome. I was quite shocked at the transformation there. Lots of stories to tell over the weekend!

  5. I will let others come up with examples but I did this on BHP -
    Bought stock and 70 – 60 August put spread for net $76.74  (stock is at 74.80 currently) Sold 2x April 80 calls for .60 or $1.20
    Net cost of stock $75.50 – currently have $1.25 in premium to burn between now and August – assuming I don't roll the puts earlier. so one more month of selling $1.20 in premium and I own the stock and put spread at 74.80. with two or three months more to sell premium – $3.60 –  5% return plus BHP pays a 2.20 div. so that bumps this to 6% – there div. is complicated and don't have time  to go into it right now.
    Anyway those calls are easy as hell to roll so I like my 6% with limited downside and large upside.
    Sure other people could figure out other stocks to do this with that would work much better –  but it seems like a safe way for non-active traders to get wrong

  6. welcome back Nicha—-that was a long vacation

  7. bhp would have been better to initiate with a near term put but think they have a div. coming up

  8. Weekly volatility sheet is up to date with yesterday's prices. AAPL, GOOG, FAS, XLF and TLT still standing out outside the predicted bands…

  9. Phil/Up Market Hatred

    Why do you hate this up trending market.  I commented months ago that "they" were going to keep pushing this market higher so that Obama could get reelected.  That's exactly what is happening and it won't be long before he starts highlighting the fantastic economy and market in each and every one of his campaign speeches. 
    You should be happy not sad because he's your guy right?
    Anyway, it looks like they're going to ensure the steady melt up with the ongoing rumors of QE3.
    Obama is a shoe in unless "they" decide to pull the rug out from under the economy 2 months before the election like they did to Bush.  Wouldn't that be a dirty trick by those nasty investment bankers…..let Obama go on and on and on about how great this phony market and economy is….then stick it to him right at the finish line. 
    Time will tell.

  10. Economist/StJ – wow, and I thought that was a good magazine….The unemployment numbers are revised UP every week for the past 18 weeks….what's not to get….

    Economic news Thursday focused once again on Jobless Claims (351K vs 355K expected w/ prior revised higher to 365K). Once again higher revisions have been seen for 18 consecutive months. Naturally, this makes for a better headline. – EFT Digest

  11. Good Morning:   Well, let's make this a better AAPL trading day than yesterday.  Right now we are long 50 April 575s and short 30 March weekly 585s.   Premarket AAPL is near 585 and that's where we want it.  If you hold those short 585s don't let them get away from you should AAPL move up.  I'll be moving out of them most likely at open or shortly thereafter, and hopefully for a profit.  After that we'll see how to manage the remaining longs. 

  12. CBOE announced that for today, due to market volatility, order reasonability edit parameters have been removed for AAPL options. I wonder what they are expecting?

  13. TLT—ouch!

  14. Good morning,


    IWM      81.41,  81.61,  81.96,  82.12,  82.34,  82.67,  82.94,  83.18,  83.33  and  83.74


    Also, I have a P-Bar to IWM 82.34

  15. XRT  / Phil –  Got a nice surprise this morning, got assigned the short calls we had at the XRT. So now i am short some hundread shares of XRT (in the red). What is your advice? 
    I know that If i was long i would sell calls, what do you do with short positions? Thanks in advance!

  16. JR,

    Where did you see that P-Bar?  I don't show it on my chart.

  17. Cheap calls.
    Interesting that calls are so cheap.   For example you can buy the MSFT $15 2014s for only about a dime of time premium, effectively getting the stock minus the dividend at almost 50% off.  Presumably the reason calls are cheap is because there is no demand for puts, creating a great Spring Sale on puts, and it is just a matter of put/call parity. Theoretically cheap calls would indicate little expectation of upside. But then cheap puts indicate little expectation of downside either.
    This seems to create a strong argument for scaling into cheap calls in strong companies and waiting for either greater volatility or upwards movement to sell short calls against them, since the  increased volatility that comes with downside movement will increase option prices for both puts and calls (parity again)

  18. RIG is a beast, with a capital B.

  19. Expiring today are the FAS Mar 102 Calls

  20. $TRIN is rising fast….. must be some selling going on. (TRIN >1 means selling, <1 means buying)

  21. Expiring today are the TNA Mar 60.

  22. stjeanluc Please let me have you link again to the volatility sheet thanks

  23. Although VIX is in the crapper.

  24. exec / P-Bar

    3 of them, yesterday afternoon !!

  25. Good morning!  

    Busy day for rolling our positions.  Dollar slammed down to 80.32 at the open and that's 0.5% so that much of the move up in oil and the indexes is total BS this morning.  Oil is up  to $106.28 but we had a nice run earlier in the Futures and now the USO April $41 puts are $1.57 but we're not looking to DD into the weekend – in case something blows up – well want that firepower for next week.  

    Nas and AAPL looking a bit weak this morning and volume a whopping 178M at 9:37 on the Dow so no wonder they ditched the Dollar to goose the Futures ahead of that dumping. 

    If you want to play AAPL up, I'd go with BBY, who will sell tons of IPads this weekend but have a p/e that is 1/2 of AAPLs at $25.08.  You can sell the 2014 $23 puts for $4 and buy the the Jan $20/25 bull call spread for $3.15 for net .85 credit on the $5 spread that's 100% in the money and your worst case is owning BBY (who no longer have any real physical competition with CC gone) for net $22.15, which is still 11.6% off the current price.  

    Other than that, I said yesterday I thought $570 was the likely pin for AAPL and they're at $580 now so I'm looking to fill that gap back to Tuesday's close.  

    Obviously oil is the usual short on the .50 lines (now coming back to a cross of $106 on /CL) but watch that Dollar, which is being shredded to keep the markets up while the big boys dump their shares.  

    We have our put list from yesterday and if we hold 1,400, we have our bull plays too but otherwise I like CASH into the weekend.  

    Let's be super-careful out there!  

  26. JRW,
    Please explain P-Bar

  27. Gotta DD on the DIA $129 puts  at .30 – goes for $5KP and $25KP!

    $5KP – Let's kill TSL – too scary.   

    FAS Money – March $102s ($5.80) can be rolled out to next weekly $103s at $6.05 and that's good for me.  

    IWM Money – March $60s ($2.40) can be rolled to next week $61s ($2.60) 


  28. Needing a roll today – XRT and SCO (depending). The FAS put will expire worthless.

    TZA cost is $3.05 and the DIA puts costs $1.03. We sold 1/2 the USO puts yesterday at $2.00.

  29. JR

    By P-Bar, you're referring to quick spikes to test a level correct?
    I usually get them but nothing the last two times you mentioned it.

  30. Exec…yes.

  31. chasw / P-Bar

    Phantom bar (a test spike showing a future target)

  32. 5KP & 25KP/Phil
    You just posted:
    "Gotta DD on the DIA $129 puts  at .30 – goes for $5KP and $25KP!"
    We were holding DIA (March quarterly) $128 puts…is that what you meant?

  33. For those in ARIA – A FDA panel questions the risks and side effects of a drug developed by Ariad Pharmaceuticals (ARIA) and Merck (MRK) to treat sarcoma. Shares of ARIA -1.9% premarket, MRK inactive.

    Doesn’t mean anything at this point. mTOR inhibitors all share the same issues, and this one is best in class. I would buy any weakness.

  34. FAS Money – Rolling the FAS Mar 102 (now 5.10) to next week's Mar4 103 (now 5.45)

  35. JRW

  36. Laddo … yes.

  37. Big spike in oil as the Dollar plunges to 80.  Total joke but a bit dangerous to play right now.  if we go higher, then I'll be interested in a DD on USO, maybe around $1.30 (now $1.50).

  38. FU PCLN!!!

  39. IWM Money – Rolling the TNA Mar 60 (now 2.55) calls to the the TNA Mar4 61 Calls (now 2.65)

  40. Volatility link / Yodi – Here is the link:

    I'll post the new sheet for next week tomorrow and also post a monthly sheet since it's expiration Friday.

  41. Interesting… bucking the dollar again.

  42. At the open: Dow +0.24% to 13285. S&P +0.13% to 1404. Nasdaq +0.06% to 3058.

    Treasurys: 30-year -0.53%. 10-yr -0.45%. 5-yr -0.25%.

    Commodities: Crude +0.59% to $105.72. Gold -0.74% to $1647.15.

    Currencies: Euro +0.34% vs. dollar. Yen +0.1%. Pound -0.65%.

    Market preview: Stock futures move up after U.S. consumer prices rose less than expected last month. S&P +0.2%. Quadruple witching day may add to volatility, which has been missing of late. European markets are mostly higher, while Asian bourses are mixed. The dollar turns down; Treasury prices remain under pressure.Still ahead: consumer sentiment, industrial production. 

    10:00 AM On the hour: Dow +0.03%. 10-yr -0.36%. Euro +0.67%vs. dollar. Crude +0.57% to $105.7. Gold -0.39% to $1652.95.

    February Real Earnings: -0.3 for real average hourly earnings M/M, -1.1% Y/Y. Real avg. weekly earnings -0.3% M/M. Avg. workweek +0.6%- Technically, paying workers less money for more hours is bullish but you know what I mean…

    Feb. Industrial Production: 0% vs. +0.4% expected, +0.4% (revised) prior. Capacity utilization 78.7% vs. 78.8% expected, 78.8% (revised) prior.

    Feb. Consumer Price Index: +0.4% vs. +0.5% expected, +0.2% prior. Core CPI +0.1% vs. +0.2% expected, +0.2% prior. - Sucks but better than the sucking they expected.  

    Not surprising given the above data:  Mar. Reuters/UofM Consumer Sentiment74.3 vs. 76.0 expected and 75.3 in February

    More on Consumer Sentiment: Inflation expectations rose to 4.0% from 3.3% in February, the highest level since May 2011. The weak print on sentiment combined with larger inflation concerns delivers a small hit to stocks, now flat after a modestly higher open.

    Optimism???  What kind of BS spin is this?  Optimism about the job market jumps in March, with 19% saying now is a "good time" to find a quality job, up from 13% previously, according to Gallup. It's the highest read since September 2008, though still not a great number as 78% continue to say it's a "bad time." - Correct headline would be "Top 10% able to find work, 12% of bottom 90% are idiots."

    Really people, define RECESSION?!?  The growth outlook for the eurozone has deteriorated over the past 3 months, says Ernst & Young in its Spring quarterly forecast, now expecting 2012 GDP to contract 0.5%. Among the individual countries, Ireland's GDP is expected to fall 0.1% against a previous forecast of +0.5%. (full report)

    Eurozone January exports +11% Y/Y, imports +4%, leading to a fall in the bloc's trade deficit to €7.6B from €16.1B in January 2011. Adjusted for seasonal factors, the eurozone posts a surplus of €5.9B, the fifth in a row. A surge in exports of German cars and machinery helped do the trick. (PR)

    Canadian January manufacturing sales fell 0.9% vs consensus of +0.2%. The aerospace industry led the decline, off 34%, but motor vehicle sales rose 2.6%. The inventory-sales ratio climbed to 1.32 from 1.29. The loonie remains marginally stronger vs. the dollar, buying $1.0091.

    U.K. commercial property values fell 0.3% in February, according to IPD. The declines are concentrated outside of London as markets that had been on a slow recovery track dipped negative again. The struggling retail sector led the way, with a dip of 0.4%. (via)

    The eurozone may increase the combined size of its bailout funds to €700B, according to officials. This would be over the "opposition" of the Germans who are at least talking a good game about keeping it at €500B.

    Merkel remains opposed to enlarging to the so-called EU firewall, otherwise known as the ESM (size €500B). Speaking to reporters in Berlin, she says officials are discussing ways to combine the current rescue fund, the EFSF, with the ESM. (previous)

    Angela Merkel is reportedly lobbying for her finmin Wolfgang Schauble to be next president of the Eurogroup, replacing Jean-Claude Juncker. This smells of a ploy to give France's Sarkozy a much-needed "victory" when Schauble's name is withdrawn and he can show his voters he is standing up to German influence. 

    German Bund yields pop above 2% as money flows out of "safe" fixed income worldwide, not just in the States. The 10-year bund is 6.5 bps higher at 2.03%, sharply above 1.74% from earlier this week.

    Spain's debt/GDP ratio rose to 68.5% at the end of last year's end, thanks to a budget deficit of 8.5% of GDP, well above the 6% target. In 2007, debt/GDP stood at just 36.2%.

    The CFTC plans to target high-speed trading firms that increasingly hold sway over the market and risk disruptions, according to Chairman Gary Gensler. The agency want to implement a new computer system that will help it download and track orders in an effort to keep up with trading algorithms that execute high volume strategies for firms in the blink of an eye.

    Among the proposals in India's budget is a doubling of the import duty on gold to 4%, a move that could cause a significant drop from the record 969 tons of the metal brought into the country in 2011. The finmin blames the importation of gold for being one of the key drivers of the country's current account deficit. GLD -0.6% premarket.

    Indian shares reverse big gains to close sharply lower (-1.2%) after the finmin proposes a budget with a raft of tax hikes, but no real reform. Hoping for a big reduction or even scrapping of an equity transactions tax, investors got just a nominal cut. Budget-busting subsidies for fertilizer, food, and oil remain. EPI +29.6% YTD.

    China's National Bureau of Statistics highlights the problems of data collection in the country, saying officials in the city of Hejin in northern Shanxi province forced some hotels, coal miners and aluminum makers to report false numbers. The NBS "is demonstrating its resolve" to improve accuracy, says BofA's Lu Ting, "but it has a long way to go."

    Global Hunter upgrades Transocean (RIG) to a Buy rating from Neutral after analysts meet with project managers to take a pulse on the status of the firm's operations. "While there are still many rigs left to be cycled through the yard, we feel that incrementally the business will perform up to its previous standards set." Shares +3.3%premarket.

    Shares of Buffalo Wild Wings (BWLD -2.5%) get tripped up by a downgrade by Wedbush to Neutral from Outperform after analysts identify margin risk for the company. Taking a pulse on the Street shows that BWLD is still on the books with 8 Buy or Overweight ratings, 9 Holds, and one lonely Sell.

  43. JR

    Are you looking for a bounce off the P-Bar level?

  44. Apple (
    AAPL) ranks first in JD Power's smartphone customer satisfaction survey for the seventh year in a row. HTC finished close behind, followed by Samsung (SSNLF.PK). Much of smartphone satisfaction is tied to battery life; the study finds that battery performance is by far the least satisfying aspect of smartphones.

    Apple (AAPL) has already begun production of new 13-inch and 15-inch MacBook Pro models that feature thinner form factors thanks to a lack of optical drives, claims Digitimes. Though Digitimes has a mixed track record with such claims, the article is in-line with earlier reports. Speculation also exists upcoming Pro models will feature high-res displays and solid-state drives.

    UBS ups its Apple (AAPL) price target from $550 to $675, expecting the iPhone 5 launch in October to be more of a catalyst than the new iPad. "(We) expect the company to accelerate the number of initial carriers it sells into to drive its biggest launch ever." 

  45. OK, S2 for the dollar is 79.94 and S3 is at 79.51! Didn't think we would need these lines so soon!

  46. AAPL portfoli:     I bought back the March today 585s for 2.00 and I've made a fairly bold play for today.  I've covered the 50 April 575s  with 40  March today  575 calls sold for 6.55 .  This will be in the green unless AAPL exceeds 592 today, which I doubt. it will.    I agree with Phil's premise that AAPL will finish today near 570 to 575.   Thus the trade. 

  47. AAPL / Iflan – Can you please change your prophecy to: Apple will finish today between 575 and 580.
    I have a BCS 570-575 expiring today, dont want any nasty surprises. Thanks :-)
    Also, MrMocha, please take the above into consideration in case you decide to trade AAPL today :-)

  48. exec / Bounce

    Not necessarily, just that if it is a target, you can trade accordingly !!

  49. Phil, thank you for the FAS suggestion back in January.  I held the 70/75 BCS, with the sold 70 puts(which I cashed a while back), until this morning when I sold the spread for $4.98.  Back then you were making this a bull play as a just in case, because you felt we might be too bearish.  I listened, and have been paid, so thank you.

  50. AAPL Portfolio / lflan – I am showing 60 Apr 575 calls (40 @ $42.75, 10 @ $37.25 and 10 @ $32.20). 

  51. Question for the board – has this happened to anyone?  I had 5 $82/86 March FAS bull call spreads.  Should be in the money and Zecco told me they would exercise them after the expiry and place the money in my account.  I woke up this morning to find they exercised 3 of the short calls so I now have five long and two short calls…the shorts I'll have to buy back at price and the longs – well I guess I can sell three of them now – but I couldn't believe they'll "take apart" a spread like that – anyone see such a thing?  

  52. AAPL 570 today – baloney.

  53. jerconn,
    I have had that happen to me in the past. I just exercise the corresponding number of long options to cover the short underlying security. I have never had an issue.

  54. MIDNIGHT RAMBLINGS///  yes it was a rawhide moment..but nevertheless the only agenda both parties share is: centerfuge the fact we coalesce over self interest!
    forget hollande..the french may elect him but as they fade into well deserved irrelevance they peaked when lafayette was alive..their corporate chieftains will abandon the republic for less taxing envorons..alongwith their zillionaire 'socialist' calrisima

  55. AAPL port:   BTC the 40 March 575s (stop loss order )  at 10.00

  56. AAPL/iflan – I know u took some lumps yesterday – but don’t stray from ur basic premises, my man. Nothing has changed. Nada.

  57. AAPL port   BTO 10  Mar today 595s  (10)  at 1.25

  58. jerconn -  The buyer had the right to them and took them bc they were so far ITM.  it can happen at any time, and you probably had several buyers.  Unusual, but not unheard of.

  59. Economist/StJ – I'm planning on going over a lot of that stuff tomorrow so keep 'em coming if you see them.. 

    Good rules Samz.  I'm all for sticking with stocks you WANT to own when the market drops 20% but, otherwise, cash is king!  

    India/Nicha – Welcome back, looking forward to getting the lowdown. 

    Good pairing on Futures, pro-gas, anti-oil as gasoline up to $3.32 already.  Hopefully oil tops out at $106.50, even though that won't give us our put pricing for a DD – I'd rather stay with dry powder over the weekend.  

    Hatred/Exec  - I hate it because it's no fun.  I love being bullish off a  bottom but this is just annoying now as I find very few stocks that seem reasonable to buy and tons of stocks that LOOK like great shorts but aren't because the market goes up and up and up – making it tricky to time the top.  

    Dollar 80.02 (down 1%).  Euro $1.317 (up 1%), Pound $1.585 (up 1%), Yen 83.32 (down almost 1%), EUR/CHF 1.206 (normal).  So the Yen, once again, backed the wrong horse.  Now their switching back and forth strategy is not paying off – possibly because some Gangsters figures out how to game it.  This is the one thing the BOJ is VERY good at – printing money for Banksters.  That's why Japan is 225% of their GDP in debt and the country is still in a 20-year recession – because all the BOJ deficit policies ever accomplish is giving more money to Corporations and the people just make less and less while the companies book record profits and saddle the workers and their children and their grandchildren with unpayable debt burdens.  Thank goodness we're smarter than that, right?  

    AAPL held $575 very well so far.  We'll see if they can get the Nas green.

    XRT/Dpast – Well you also should have the cash to buy them with and XRT is down .70 so not a bad deal for you as you picked up hunreds x .70.  I'd just keep a tight stop to squeeze what you can and then look to sell the April $57  calls ($4.40) as they have a bit of premium and that's a reasonable pullback target for XRT.  Haven't looked at $25KP yet, may not do the same there.  Depends how the EU close goes.  

    Cheap calls/JMM – Yes and you can sell front-month calls when premium comes back, or, if it doesn't, then MSFT will probably still be doing well.  

    DIA/$25KP and $5KP, Laddoo – Thanks for pointing that out, I thought we were in the $129s and .40 was the most I wanted to pay for them, .25 is fine for a DD on the $128 puts in both portfolios but we're pretty screwed if this rally continues next week – be aware of that!!  

  60. stj….I'll have to catch up on the prices at EOD.  Thx.

  61. Hi Phil, newbie question here.
    On a BCS example below, what is the best and most profitable way to exit? Go to TOS and create a closing order by selling the vertical Jan13 5/7.50 at $2.05 or should I exercise the $5 call at $5 and buy back the $7.50 Call?
    The trade was BCS on BAC Jan $5/7.50 and sold Jan $7.50 put 
    $5 Call bought for $3.39, now $4.55,    $7.50 Call sold for $1.62, now $2.55    $7.50 Put sold for $1.27, now .64.      Thanks

  62. Ross and Pharm – thanks, at least I know Zecco isn't screwing me over.  I know the callers have right to exercise whenever they want but I thought the purpose of a spread also for the market makers was to keep it together…anyway I'll sell corresponding numbers of the longs…

  63. Good Morning All – I saw this on a post and thought it was interesting -
    FY 2011 – Total US Govt revenues were $2.080T
    FY 2011 – Total Income Tax Refunds Issued were $415B
    Net of Refunds – Total US Govt Revenues were $1.665T(unless this calculations is wrong somehow)
    FY 2011 – Total Outlays were $3.6T 

  64. Phil/Hatred,
    I hear ya…..I'm sitting primarily cash waiting for a healthy pullback before I get in, and it won't come.  Like I said above…..I don't think they are going to let it happen before the election……but after could be ugly…..especially if the Repubs win.

  65. MSFT / Jmm – That was one of the points I made in my post about calendar spreads. In cases when you are dealing with companies that pay a low (or no) dividend, why not by deep ITM LEAPS instead with almost no premium and sell front month calls against it. It works great in an IRA where it mimics what you can get in a margin account when buying the shares. The MSFT LEAPS you mention are like buying the share in a 50% margin account. And that can be done in an IRA. I meant to ask Craig about that for his IRA portfolio. If you play with companies paying more 5% dividend, you miss out on that, but if you are not or just making medium term trades, then it's a better deal IMHO.

  66. jerconn,
    No broker looks at it like a spread as far as exercise and assignment.  If you get assigned the broker's job is not to assume that you want the other leg exercised.  It is up to you to decide whether or not you want to exercise that option.   It has been known to happen for you to get assigned options that still have extrinsic value.  If the broker automatically exercised the other leg that had extrinsic value you would be pretty pissed about losing that money.

  67. Jon Stewart classic:


    Stewart is flexible enough to transition from Fox News to world news. After The Guardian published a cache of alleged emails from Syrian dictator Bashar Assad, Stewart paid a visit to “Homs Despot.” The emails revealed Assad’s music preferences through iTunes purchases.

    “This guy massacres his own people with impunity, but makes sure he purchases his music legally?” Stewart said. “I’ll taunt NATO and the world community, but even I won’t f#ck with Apple,” he mocked.


  68. will this mkt ever have a down day???
    PCLN to 1000? AAPL to 2000? Fakebook to 1000000000000000???

  69. It has not been a good week for the IB PR departments and Felix pours it on:

    Frank Partnoy makes a great point: the word “client” has been over-used by investment banks so much that by this point it “has become Orwellian doublespeak”. But the problem is much deeper than one of semantics. When all counterparties are considered clients, then that creates a corporate culture where all clients are considered little more than counterparties. And that, in turn, can be evil and poisonous. [...]

    All big banks are public companies. Public companies are always under a lot of pressure, from their own shareholders, to grow. But as a country, we have a public interest in seeing those banks shrink. The tension is clear. And if regulators try to get banks to shrink, the banks in turn are going to make even greater efforts to extract the highest profits possible from the businesses they retain. Which is another way of saying that they’re going to rip off their clients even more. So let’s be assiduous when it comes to regulation, because neither banks nor their boards are going to lift a finger to protect client interests. Not when they’re trying to maintain and maximize their own profitability.

    All crooks…. 

  70. FAS/Hoss – You are very welcome.  There were a bunch of plays in case people weren't balanced – I do hope people took them but now is definitely the time to take that money and run.  

    Zecco/Jerconn – That's strange but I guess someone exercised and you got stuck with it.  No harm really, you can just cash it out and move along to the next position and not really different than rolling, although really you are so deep in money it should work out fine for you and, as Ross notes, you can also do the exercise, worst case.  

    France/Angel – Is it really that easy for corporations to relocate?  I hear the rich are already fleeing France but will be interesting to see what the corporations do.  I'm sure it would be a relief for France if their banks left without sticking them with the bill – I wonder which Government will want to support them instead?    

    BAC/Turning – The $5s are $4.80 and the $7.50s are $2.60 so net $2.30 out of possible $2.50 is pretty much done.  You can cash it and leave the short puts (still .62 so not fun to cash out with BAC at $9.50) or you can just cash the $5s for $4.80 and buy 2x the 2014 $7/12 bull call spread at $2.30 each and you are well-protected by the $7.50 callers or you can be more aggressive and roll the short puts to the 2014 $20 puts ($2.42) and pick up another $1.80 towards an eventual roll of the Jan $7.50 caller.  If BAC is over $10, you have 2x $3 ($6) on the long calls vs your $2.50 caller and you're in very good shape.  On the downside, if you stop out one set of the long calls at $2, you pocket $2.20 out of a possible $2.50 on the BCS, which is about where you are now anyway.  I hope that wasn't more confusing than helpful…

    $2Tn deficit/Ink – I really hope not!

    Oil back over $106.50 (never made $106) so the next cross under we can play (/CL).    VERY tight stops at the $106.50 line, of course as it is Friday. 

    USO Apr $41 puts tempting at $1.49 but only brings basis to $1.75 and what if oil spikes way up on Monday and we're allready DD?  That's why I'd rather wait on those.  

  71. PCLN 666

  72. Here's the link showing the FY11 Revenue(second page): 
    Here's the link to the Treasury's FY11 PDF showing the total tax refunds(bottom right corner of second page) 

  73. Thanks Phil, not confusing at all.

  74. I think this is the time to back up the truck for VIX. This is as low as its EVER been, and I can't see it staying here. Buying July 15 Calls.

  75. (PCLN_) target boosted at Morgan Stanley to $775, according to Morgan Stanley. Company can gain market share in Europe. Overweight rating.

  76. $25KP ($2KP!) Update:

    Wow!  Of course this is why, last year, we made a very strong point of differentiating realized (-$3,463) and unrealized (-$19,708) losses.  In a portfolio like that, that uses the margin of the larger account to sell premium, you can get some ugly balances when things go against you.  What matters though is, on a trade by trade basis – do we have a plan?  

    • DMND – $25.29 is "on track" for our long-term recovery.  The declining VIX is killing this trade, not the performance of the stock.  The June $29s are $1 and we can spend another $1.20 to roll  down to the $25s and then we're on the money and participate in all the upside.  If DMND drops, then I'd consider a DD but too early to make that move now.  
    • XRT – At $61.20, we're on the hook for 10x $5.70 on average.  We sold them for $1.95 so the loss is 10x $3.75 and we certainly don't like XRT enough to sell puts but let's be smart and sell 10 BBY June $25 puts for $1.70 and then we can feel good about shorting 10 (rolling to) XRT April $57 puts at $4.50.  That puts us short $6.20 so .50 more than we were but now we're hedged as it's doubtful BBY has bad numbers and XRT stays at $61 and we've sold a lot more premium than we would have sticking with just XRT.  So there's a $3,750 unrealized loss we can feel good about making progress on.  
    • SCO – I'm not ready to capitulate on the March $34 puts yet but I am ready to sell 10 April $34 puts for $2.45!  Obviously, by end of day, we kill the March $34 puts, let's call it a stop at $1 (now $.75 but a rip off at that price).  
    • TZA – If we weren't so behind, I'd spend $1 to roll down to the $16s and DD but let's give it the weekend.  
    • SQQQ  - June 
    • USO – Waiting for $1.30 to DD (basis is still $1.99 on these 20).  
    • FAS – March puts will expire worthless.  July puts were a smart sell.  April $100s I'm not ready to give up on and the Oct bull call spread protects them.  All looks good to me despite the big paper loss there.  
    • TLT – Now these I feel obligated to do something about.  The April $114s are .85 and we can roll those to the April $110s ($2.50) for $1.65 and that puts us in for net $4.04 and a DD at $2.50 drops our basis to 20 at $3.27 and that seems like a reasonable amount to expect a bounce back to so let's do that and, if TLT looks bad next week, we'll sell calls to cover and roll lower.  Don't forget, if the Fed does announce more easing through note buying – these things rocket back to $116-$118 range.  
    • DIA – Did the DD there, 1/2 out at .45, of course but not the second it hits it unless it looks like we're lucky to get there, more like a stop and I know that's tricky so, when in doubt, sell 1/2 of the 1/2 half right away and put a tight stop on the rest.  
    • VXX – Also one I kind of want more of but let's see what the weekend brings.  

    So, short story – nothing in that unrealized $19,708 loss that can't be fixed.  

  77. Yes!  Nice move down in oil off that last entry.  Don't forget how great a .40 move is and make sure you scale out if we bounce. 

  78. Just a bit of historical information from The Oxen Group on Apple release dates…this is from an article we did last week:

    Bullish bias on release days…bearish day after…


    Just saying cuz not sure it will get to 570-575 based on history today…probably not even on Monday.

  79. To me, there are far greater concerns than crooked governments and crooked markets…..

  80. That was nice of them!  Now we can use $106.05 as a stop line with a .10 trail that we raise by .05 for each .25 we drop.  Clear?  

  81. For the record, I would've taken that pending market crash today and been quite pleased…

  82. Wow, I love this new talking point that we should strip-mine the country to find all the mystery oil that's buried all over the place. 

     If the Dems are smart, they should say:  "OK, if there's 2.3Tn barrels of oil laying around in the US – shut the F up about destroying ANWR for 12Bn barrels max you morons!"  

    See, $106 holds, as expected on oil and stops us out.   Now we see what happens at $106.25 but those .25s have not been reliable at all so we may have to wait for either $106 to fail or $106.50 again but I hope oil just collapses now, would be more fun to trade and better for our SCOs. 

  83. Huge market spike in SPY.  Wow oh wow.  They don't want this to fall at all.  Back against the wall…..

  84. Out of TSL a bit early…..

  85. 1020 / concerns — You should watch "Cool It" if you haven't already.

  86. Dow: Must… never… show… red… ever…

  87. Weasle--red? imagine if PCLN or AAPL or CMG were in the Dow… It would be at 100k!!
    FU PCLN!!!

  88. Phil/Strip mining

    That's a great idea. 
    They could start with Cleveland proper.  We might solve our energy shortage by simply squeezing the excess oil out of the Cuyahoga River and surrounding land.

  89. Drat--the profit in RIG isn't keeping up with the loss in PCLN.  PCLN could go up a long ways before it starts coming down. Stop out now or wait till Monday?

  90. Weasle/Red

    That's the plan.  Pretty soon everyone will believe we have a robust economy as demonstrated by our robust market.
    Just hop on the Rocket and go along for the ride.

  91. Felix wonders if the stress test were meaningful:


    But capital levels are only half of the equation; the other half is leverage. And look at the Tier 1 leverage ratio for the different banks under the stressed scenario, on page 27 of the PDF. Citigroup plunges from 7.0% now to just 2.9% after the stress, while Bank of America is much more robust, dropping from 7.1% to 5.3%. And here’s the scary thing: of all the big banks, it’s the ones with investment banking arms which fare the worst. There are 19 different banks listed; seven of them end up with a leverage ratio under 5% in a stressed scenario. Citi’s one; the others include Goldman Sachs (4.5%), Morgan Stanley (4.5%) and JP Morgan Chase (4.0%), its “fortress balance sheet” notwithstanding.

    Now, picture yourself in the kind of crisis where stocks are down 50% and unemployment is up to 13%. And imagine that you discover that the counterparty you use for all your financial transactions is levered 25-to-1. You will change your counterparty. That’s known as a run on the bank, and it’s fatal.

    In other words, banks don’t need to just survive the stress test; they need to be able to keep their customers in a stressed situation as well. If a bank comes near to insolvency, it will go bust, as its customers rush for the exits.

  92. PCLN has an interesting max chart. The first week in Jan 2003 was a bad one for them (1.49). Who needs options?? That was 44,866% ago …. I wish I could say I tucked $1k away into a retirement portfolio I forgot about back then and now had $450k. Oh well.
    Puts the latest insanity in perspective, jabobeast, keep in mind this POS could be 1,000 before the "FU's" become "thank you's"

  93. Gasoline topped out at $3.34 but, at $320 per penny per contract, that's fine…  

    Banks/StJ – I have a very simple fix.  No one charges money management fees other than on performance.  Boy would you see things suddenly get realistic if the banks can only make money when they make their clients money.  Step 2 would be banks can't do prop trading – if you have clients and you take their money to invest – then you can't make your own bets.  How that is not obvious, I cannot imagine.  There, I've reformed the Financial Industry in 10 seconds – anything else need fixing?  

    PCLN hits the Lloyd line…  

    $2Tn/Ink – Isn't that $400Bn worst than expected?  Why is this not news?  

    You're welcome Turning.   I was a bit worried there. ;)  

    Letter from House Democrats to Obama for release of Strategic Petroleum Reserves 

    VIX/Oak – Tempting but 15 used to be the middle.  I do like them here, of course, but it is speculative – make no mistake about that.  

    Dow/Jabob – If AAPL were in the price-weighted Dow from $400 in Jan, they would have added another 1,600 points and we'd be around 15,000.  IBM is only up $17 x 8 points per $1 is 136 by comparison so AAPL could have replaced anyone and added at least 10%.   

    Cleveland/Exec – I think Cleveland requires the nuclear option.  Turn it all into glass and mine the silicone once the radiation fades.  I don't think anyone would mind not going there for 30 years…  8)  

    PCLN/Oak – If it's just the long puts, I'm for sticking with them.  One day they will pull back 5% and that's 35 points! 

    Stress/StJ – Oh come on, everyone knows it's a total joke, don't they?  

  94. CDE – good time to setup entries to good miner… Can sell the Sept $20 puts for $1.30 – a 65% return in 6 months on $201 of margin per contract. And yes, i would be HAPPY to own them at $20 if put to, and would then slap a buy/write on them to then bring it even further down.

  95. Phil,
    My XRT 55 and 56 calls got assigned this morning before your recommended roll, so now I am short at $61.10 (market). How would you play this trade to minimize my losses (currently $3.50/share)?

  96. 226M on the Dow at 12:15 is 2 days of volume almost anytime this month.   

    Lots of going nowhere for so much volume….   

    Nat gas flew up to $2.32, that was a big winner today.   

    Oil tested $106.50 and failed, now $106.42 with the Dollar at 80.07, Euro $1.3166, Pound $1.528 and 83.33 Yen to the Dollar coming into the EU close. 

  97. CA bond funds bounce hard right off the 200d MAs.  PCK never made it there.  Tell me 'they' did not trigger peoples stops.

  98. Dow volume / Phil – Indeed, I also 227 millions share on my Google feed. On pace for at least 400 millions today when we averaged ony about 130 million this week. 

  99. Phil/Nuclear

    Stop…..don't even suggest it to our politicians……they're dumb enough to think it's a great idea and demand that the option be implemented immediately.
    This market is eating the shorts alive!!!

  100. there has been a big uptick in negative china stories on bloomy last few months.

  101. i still think we are in multi-year period of underperformance by eem….next recession will be a bloodbath and eem will get hit the usual… the biggest beneficiaries of the global debt bubble are emg markets…and when it goes…they wont be the same for 20 years

  102. Banks/Phil - Too bad the SEC, FINRA, etc. are in on the game or your idea would work wonders for the industry. 
    $2T/ Your guess is as good as mine.  Maybe the math is off and somehow, someway the $300-$400B is already baked into the revenue numbers.   

  103. Hey Phil,
    I see you responded to someone with the same question regarding XRT, disregard mine please and thank you


  104. AAPL port:   I've covered all 50 of the April calls with April 600 calls.  At 41.70

  105. I covered USOs with next weeks.  The chart is turning bullish right now with the butterfly doji from yesterday.  Also bought FCX calls.

  106. Nuke vs NatGas/Phil – interesting news item above re nuclear plans getting sidelined for a renewed interest in nat gas fired power plants. Any go-to plays suggest themselves to you in this context?  Took a look and CPST and was suprised to see them down near penny-stock levels.

  107. Iflan – the April $600's are $21.80. 

  108. option ex is causing volume today

  109. XRT/Ging – It's the same play as the $25KP, you buy buy back the stock (taking the loss) instead of the calls and then the roll is the same.  

    Wow, that last guest on CNBC did the trick for oil, jammed up to $106.80 as he hit all the bull talking points.  Unfortunately, not getting our $1.30 on USO…

    XRT/Ging – No problem.  Obviously, that one's a big deal (or seems to be until you get used to assignments). 

    Gas/Scott – CHK.  That's the only way I like to play nat gas.  UNG tempting but, because they decay over time, they are not a long-term hold as they go lower.  CHK is.  At $24.94, you can sell the 2014 $20 calls for $7.60 and the $25 puts for $5.40 for net $11.94/18.47 – 66% if called away above $25 and 26% discount if put to you. Not bad at all.  

  110. XCO XCO XCO….go go go…..that one has been a money machine.

  111. Monday Mar 19
    William Dudley Speaks


    Richard Fisher Speaks
    7:30 AM ET


    Housing Starts
    8:30 AM ET

    8:55 AM ET

    Ben Bernanke Speaks
    12:45 PM ET


    Naryana Kocherlakota Speaks
    5:30 PM ET


    Weekly Bill Settlement

    Jobless Claims
    8:30 AM ET

    Money Supply
    4:30 PM ET

    New Home Sales
    10:00 AM ET

    Dennis Lockhart Speaks
    2:30 PM ET


    James Bullard Speaks
    9:00 PM ET


  112. Pharm- FCX calls?

  113. citi economic suprise index at a 4 month low
    its negative…but not that negative…just indicates economists have caught up to economic improvement…. economic data not surprising on upside as much im more worried that philly fed real-time biz conditions index been decelerating since mid-dec., while investors think US economy acceleratin… shanghai copper inventories new record today, +784% ytd….copper stuck in range for 3 months as optimism for economy/stocks soars….no uptick in home sales, while everyone thinks housing has bottomed… record low rates…big stock gains. also… its insane that people think -7% decline in US gasoline demand yoy doesnt mean my opinion…no way that is indicative of strong economy..

  114. Heres a cool video about just another way GOOG is impacting our society in a good way (for a change).   They are using the Douglas County, Georgia sewage water to cool their giant datacenters and in the process conserving water and reducing pollution by evaporating water that would have been released back into the river and treating any leftover water a further time.  Like the color of the pipes too.

  115. FCX/pstas – yes.  Few Apr $38s.  They are at the bottom of the channel.  More of a swing trade, and if gold/copper bounce, then they are going to swing up.

  116. I shorted SCCO a few days ago, but was stopped out with a break even today.  Just watching the miners and they look like they could bounce a bit, b'f the trend down continues.

  117. 11:00 AM On the hour: Dow +0.07%. 10-yr -0.32%. Euro +0.74%vs. dollar. Crude +0.78% to $105.94. Gold -0.09% to $1657.95

    12:00 PM On the hour: Dow +0.01%. 10-yr -0.25%. Euro +0.69%vs. dollar. Crude +0.79% to $105.94. Gold -0.25% to $1655.35.

    12:37 PM European shares close higher, the Stoxx 50 hitting its highest level since late July. Stoxx 50 +0.5%, Germany +0.2%, France+0.4%, Italy +0.5%, Spain +0.7%, U.K. +0.5%. The euro +0.7% to $1.3170.

    1:00 PM On the hour: Dow +0.02%. 10-yr -0.21%. Euro +0.76% vs. dollar. Crude +0.97% to $106.13. Gold -0.27% to $1655.05.

    The action in Treasurys through 2011 and thus far this yearreminds Jim Leaviss of 1993-94, where 2011 (1993) proved wonderful only to have things crash down in 2012 (1994). One key difference: "There's no way that central banks are going to hike rates this year is there?" TLT -8.5% YTD after rising 28.8% in 2011. 

    No surprise to hear from hawkish Richmond Fed President Jeffrey Lacker that the Fed should raise rates sometime in 2013, a year earlier than the FOMC has suggested, but John Shipman says the timing of the trial balloon is important. With Treasurys tumbling this week, it makes sense to send a hawk like Lacker out to start tempering some of the stock market euphoria. So far, stocks are still higher.

    Why quantitative easing is the only game in town (

     The High Cost of Low Interest Rates (The Fiscal Times)

     Why Some Countries Go Bust (NYT Magazine)

    chart of inflation expectations from the UofM consumer survey shows they tend to spike and then quickly fall back over the past half a dozen years. One bit of worry, the last two big moves higher – in 2008 and 2011 – presaged significant market sell offs. 

    Is the end of the gold bull is on the horizon? (Marketwatch)

    With the end of the first quarter approaching, ICAP Corporates' Ken Polcari sees a key reason why the rally isn't likely to stall soon: Professional money managers, scrambling to match their benchmarks, "don't get paid for sitting it out." Treasurys are plunging, so that money has to go someplace – "The herd mentality is alive and well." 

    Canada's real estate and consumer debt levels have risen to unsustainable levels and represent a threat to the whole economy, says TD Bank chief economist Craig Alexander. "The Bank of Canada is in a bind," he continues, arguing high debt levels make it impossible to raise rates.

    "Hungarians will not live as foreigners dictate," says PM Orban at a rally, responding to EU threats to halt aid if the country doesn't do as it says. Among the requests is for Hungary to change the oath of office for central bankers to reflect their role as part of the EU. One sign in the crowd: "Colonization:1956 Soviet Tanks, 2012 Western Banks." 

    All of a sudden building auto assembly plants in the U.S. is all the rage with not only the Big 3 American automakers planning to ramp up operations – but also foreign companies. It's a combination of factors that includes stronger market demand, a formidable yen, and the effects of natural disasters in Japan and Thailand that has companies such as GMFFIATY.PKBAMXY.PKVLKAY.PK, andDDAIF.PK mapping out a strategy to assemble more cars in the U.S.

    Shipping and tanker stocks run red hot off with Frontline (FRO +19.7%) leading the pack. Traders attribute the strong move to a momentum swing after the Baltic Dry Index finally pulled out of its death spiral earlier this year. Gainers: OSG +8.3%SFL +5.7%,DRYS +5.9%PRGN +4.2%

    Back in January, Morgan Stanley (MS) disclosed (.pdf) it had cut its net exposure to Italy by $3.4B by executing "certain derivatives restructuring amendments." Today, Bloomberg reports the cut was a result of Italy paying Morgan Stanley $3.4B to "unwind derivative contracts from the 1990s that had backfired" thanks to plunging swap rates. (earlier

    The 10 largest U.S. prime money market funds more than doubled their exposure to French banks to $18.2B in February. It's the 2nd straight months of gains after the funds spent most of 2011 pulling cash out. Safe haven countries like Switzerland, Sweden, and Canada all saw funding decrease last month. 

    More FREE MONEY!  The ECB upgrades the collateral (mostly Greek government debt) pledged as security for loans by Greek banks, according to sources. The move means the paper is subject to less of a haircut, meaning Greek lenders can borrow more (estimated at €25B) against it.

    Deutsche Bank downgrades a mixed bag of financial stocks this morning on valuation and a mixed macro outlook. In addition to Morgan Stanley, the firm also cuts TD Ameritrade (AMTD-1.1%) and Blackrock (BLK -0.6%) to Hold as well (I,II).

    Fossil fuels can't possibly account for the world's energy demands – forecast to grow 5X by 2050 – according to Matthew Frankel as he tells investors not to give up on the solar industry. While he calls out First Solar (FSLR +4.1%) as his favorite name in the sector for its propensity to break its own records for PV panel efficiency, he also notes that a better way to bet on solar is by using the Guggenheim Solar ETF (TAN) or Market Vectors Solar Energy Index ETF (KWT).

  118. OK, NOW the economy is having an impact on me!
      Don't cry in your beer, it's already watery: After the U.K. raised taxes on beers, brewers followed in suit by skimping on the alcoholic content of their offerings in order to protect profit margins. Anheuser-Busch InBev (BUD +1.1%) recently weakened Stella Artois, Becks, and Budweiser – while Carlsberg trimmed the alcohol in its Carlsberg Export to 4.8%. 

    It looks like no news is good news for Research In Motion (RIMM +5.2%). Shares are jumping after RIM announced it wouldrelease its FQ4 report on March 29 … and didn't provide a warning to go with its statement, after having repeatedly done so with similar announcements in the past. Many on the Street expected a warning to arrive.

    Another nugget from Sears Holdings' (SHLD10-K filing: The company's pension plan returned a paltry 1% in 2011, which led to a massive underfunding based on the assumption it would return 7.5%. According to estimates from Paulo Santos, this puts cash needs at a "whopping" $1.05B and $1.43B over the next 3 years. But somewhat typical with Sears, the worse the news seemingly sounds – the higher shares go. SHLD +1.3% for the day, +166% YTD. - Too bad they are too scary to short

    Xerox (XRX), typically associated with copiers and printers, has won a an 8-year, $858M IT services contract from the state of Texas, and has displaced IBM in the process. Xerox will help Texas consolidate 28 data centers into 2 major facilities, and also help upgrade those facilities. Texas is far from alone in embracing data center consolidation (III).

    Ha!  I thought so - Mail and document-services company Pitney Bowes (PBI-2.6%) slips after Moody's put the company's investment-grade ratings on review for a possible downgrade because of the continuing deterioration of its operating results.

    Three lunchtime reads:

    1) Inside the Chinese boom in corporate espionage

    2) Branchout is exposing the social media bubble

    3) How much is Apple worth?

  119. That was a typo above…..the 600 calls were 21.70.

  120. PCLN 675….
    700 today?

  121. See, all this movement and the PCLN July $450 puts are still $4.59 (was $5).  That's why I like those, even if we decided something changed and PCLN deserved to be up another 5% in 3 days – not too much damage compared to potential rewards.  

    Copper/Angel – What does +784% mean?  Not possible they could have taken in that much.  Maybe they are just admitting what they already had?  

    GOOG/Kinki – At least they are trying.  

    $700/Jabob – Sure, why not?  

  122. Order placed :   Sell next weekly AAPL bull put spreads   560/535     30 for 3.10

  123. ft guy just tweeted sov restructuring more to follow

  124. Gonna be a lot of work to update the AAPL portfolio tonight lflan!

  125. Pharm / XCO – how are you playing?  selling puts here?

  126. ipad 3 unimpressive    heavier  shape matters   go buy ipad 2 refurbished

  127. Amazingly, you can sell AAPL April $750 calls for $1.40 and, just as amazingly, it's too scary to sell AAPL calls that are 28% out of the money over 35 days!    PCLN is $100 higher than AAPL and their April $750s are "just" $2.30.  

    S&P having a lot of trouble with 1,400 in the Futures (/ES now 1,399 with S&P at 1,404.75).  

    BAC $9.50!   Those guys on BNN should kiss my ass.  WFR $4.07, GLW $14.31 and SCO on track for April.  Those were the last trades I gave them.  

    OSTK April $5 puts are .25 and I believe they are being de-listed 3/19 – worth a toss in case they drop like a rock.  

  128. Hi Phil your comment on PCLN — I just roll 10 today 64 short call to april 660 short call and then stock up another 15 point, you merntion it deserve to go another 5% — should I sell next week 650 short put or just keep roll up and out till price break, thx

  129. AAPL / Phil – The Jun 890 calls are $1.12 now! That's 52% out of the money 91 days for now. Insane!

  130. Speaking of AAPL, looks like a $585 pin so far….

  131. For all that hubbub about witching and options related volatility, this has been the least volatile day 2 weeks or so.  Dow: +1, -1, +1, -1,…

  132. And let's not forget, these AAPL Jun 890 calls assume an AAPL market cap of 828 billions!

  133. please don't tell me mr stick is coming out again ;-(

  134. Maybe he'll see his shadow and go back in Jabo….

  135. The volume has gone dry…..t'will be easy to push it up.

  136. PCLN/Gucci – You just rolled to April $660 short calls?  Well they are $29 with PCLN at $674 so too much premium.  No, I would not change them so early and  no, I would not sell puts but, if they keep going higher, you may want to cover with a long artificial buy/write to stop the bleeding.  

    USO/$25KP – I think I was unrealistic in my target for the DD on the April $41 puts – now $1.35 as the NYMEX spikes into the close (2:35) so let's DD here.  

  137. Hi Phil could you show me how to do artificial buy right thx

  138. PHIL i just tweeted that quote  @BNN"#PHIL DAVIS WANTS HIS DOGFLOWER VETTED'i am sure they will be puckering up next time you are on! EY?

  139. Schools – a critical history of state schooling.. for after hours of course, unless you are already too bored with today!

  140. Well, they got oil bubbling, no?


  142. I think you will get your $1.30 Phil, patience.  $41 is the USO pin.  Sheesh.

  143. $41 is also R2 in my PP sheet above.  How convenient.

  144. Man, the whole ploy on USO yesterday to spike it down, sell the ____ out of the short puts (they hit $1.50 for the $41s), buy the $40s for 25c, and presto……

  145. Artificial/Gucci – Just like a buy/write but with bull call spread instead of stock.  With PCLN, pick a price you actually wouldn't mind owning them, like $400 and you can sell the 2014 $400 puts for $27 and then use that $27 to buy the 2014 $700/400 bull call spread at $40 so net $13 cash and TOS says another $40 in margin on the short puts and now you have $87 upside between $713 and $800 and that plus rolling your caller up a little gives you a nice cushion for a start.  As PCLN goes up, if you add one more $100 spread each $50, you can stay ahead of the stock no matter how high it goes.  

    Speaking of high – Oil back at $107 and $107.50 on the May contracts (which is what /CL is now).  That should be it for the move up and we can resume our usual line shorting.  Our SCO puts stopped out a while ago, unfortunately but the April $34 puts are just $2.80 so not much damage on the early roll.  

    And wouldn't you know it – we did hit $1.30 on the button on the April $41 puts!  

  146. Fukushima Cleanup – Josh Wolfe (Forbes, Lux Capital) sent around this article about Kurion and the cleanup effort.

  147. CMG over $410.

  148. FU CMG!!!

  149. We hit that R2 107.75 line for oil right on the button – some good programming on the algos…

  150. How the F could CMG be down EVERY day and then ALWAYS close higher?

  151. Oil – what a crock of sh!t!

  152. USO/Phil – and thank you for that. I made the $1.30 my initial entry. 107.75 seems to be a very invigorated price.

  153. BNN/Angel – Either that or you'll get a visit from Canadian HomeSec.  

    I wish I had the ability to buy all the NYMEX barrels for April.  There are still 75M scheduled for delivery and if you actually bought and accepted them ($8Bn) and you shorted 275 May at $107.50 ($29.5Bn) you could flood the inventories with oil during April and crash the May contracts a lot harder than Obama can with the SPR.  75Mb is 18Mb/week of inventory build!  Imagine what that would do with 4 consecutive weeks of those numbers!  

    And, of course, since we're short 275Mb, we wouldn't give a crap how cheaply we sold our 75Mb physical…

    2:00 PM On the hour: Dow -0.01%. 10-yr -0.19%. Euro +0.72% vs. dollar. Crude +1.04% to $106.2. Gold -0.2% to $1656.25.

    Top UBS strategist Jonathan Golub tries to put a positive spin on the recent surge in Treasury yields, arguing a further rise would signal "more robust growth prospects," and thus higher stock prices. Golub, who has a year-end target of 1475 for the S&P, adds equity valuations are tied to both Treasury yields and corporate debt spreads, and the rise the former has been largely offset by the decline in the latter. 

    Coal stocks (KOL +1.4%) trade higher, helped in part by excitement stirred up by chatter tipping off that Warren Buffett iskicking the tires of several names in the sector. Leading the charge:BTU +5.5%PCX +10.1%ANR +6.3%JRCC +4.1%, WLT +2.6%.

    Procter & Gamble (PG) has begun constructing "one of the largest manufacturing sites in Asia," in the Chinese city of Guangzhou, reports China Daily. The plant, which will go live in 2H13, will make baby care products and other consumer goods. P&G plans to invest $1B in China through 2015, as it targets both wealthy and poor consumers in the world's #2 economy.

    GM and Ford (F) have hiked prices on many of their Indian models, following a 2% hike in the country's excise tax for vehicles with larger engines. The tax hike could do a number on Indian auto sales, which are already seeing tepid growth thanks to high gas prices and financing costs, and a stressed transportation infrastructure.

    Starbucks (SBUX +0.2%touches a 52-week high before pulling back, as coffee futures trade at ~$1.83/lb., far from $3-plus reached last May. The Brazilian crop through September next year could rise to a record of 52M 132-lb. bags. But consumers shouldn't delude themselves into thinking SBUX would roll back price hikes initiated when coffee prices were high.

    This American Life retracts Mike Daisey's January storydetailing labor practices at Apple's (AAPL) factory in Shenzhen owned by Foxconn. "We should've killed the story (before it aired)," says Executive Producer Ira Glass. "We didn't think he was lying to us … That was a mistake." (PR

  154. See – markets never go down — must be safe to re-enter the market!!

  155. Oil up $4 off yesterday's low.  I think we do this every options expiration week – big spike low and then massive recovery so they can roll their barrels.  

    CNBC says Linsanity bubble has burst.  

  156. Oil – Phil, just to clarify, the goal is to sell the SCO the SCO April $34 puts anticipating a leg down?  Is that the only oil play right now that you rec?  Thank you as always.

  157. House GOP budget rolls back defense cuts they previously agreed to.

    Dow volume, since opening at 180M, now 252M so 70M since the open is back to our normal, slow days – Incredible.  

    SCO/Ink – That was our earlier play from the $25KP, we had sold the March $34 puts, made a little on those, now selling April $34 puts to make some more.  Do that 12 times a year and it's $12 just collecting half.  

    Dollar catching a little (very little) action into the close, now 81.10 – we'll see if it can go high enough to cause some damage.  

  158. Phil THEN: I will be dusting off my french canadian HACCENT and trowing some pork pie in de hoven!

  159. The new iPad review on Engadget:

    They really love the display. But it comes to disposable income if you already have an iPad 2 (or your loyalty to Apple).

    The new iPad doesn't do anything substantially better or particularly different than the iPad 2, offering the same rich world of content as before. But, it's the amazingly high quality window into that world the new iPad offers that is completely unmatched — for the moment. We have no doubt that others will be bringing similarly high-res offerings to market soon, but for now the new iPad takes the cake. Is it worth a purchase if you still have the original iPad? Yes, absolutely. The iPad 2? That, dear readers, largely depends on how much disposable income you're swinging around, but if you have the means…

  160. Wrote some April  SCO 33 puts for 2.20, that is a steal, protected to around 110 a barrel.

  161. Generally money is flowing out of stocks at this time, not much faith in the weekend. Aside from that if this closes like other opex weeks a mini stick to 83.07ish. Now that it is posted anything but that!

  162. Phil, if Warren Buffett is looking into coal companies, as owner of BNSF would it make sense for him to own the mines in the Powder River Basin?  BNSF and UNP haul that coal out.  That way he could negotiate rates with himself.  Who are the big players in the PRB? 

  163. Phil looked at this  PCLN bull call spread It cost s 187.00 and not 40.00
    Artificial/Gucci – Just like a buy/write but with bull call spread instead of stock.  With PCLN, pick a price you actually wouldn't mind owning them, like $400 and you can sell the 2014 $400 puts for $27 and then use that $27 to buy the 2014 $700/400 bull call spread at $40 so net $13 cash and TOS says another $40 in margin on the short puts and now you have $87 upside between $713 and $800

  164. Peabody (BTU) and Alpha Natural (ANR) Grant.

  165. Need some direction. Rig  $58.
    Some of you were talking about selling RIG April $52.50 calls and puts and received a credit of $5.45.
    Thinking of rolling the April $52.20  puts to April $57.50 for a $2.44 net.
    Any advice?

  166. Oh, and others.  Here.

  167. Oil – /CL looks like getting pushed up to pin USO at 41..   are those short calls going to be made to deliver?

  168. TLT / Phil – Are we safe to resume the TLT money machine? Wk4 Mar BCS 111/112? I can get it for 0.3$. Or too dangerous?

  169. Ahh, no worries mate! VIX down 10%+ in a flat market!

  170. Fisker Karma - Uh oh..!

  171. The option guy on Bloomberg mentioned "selling" puts as a strategy…. What! Isn't that too dangerous Cramer?

  172. Pharmboy, How about Arch Coal (ACI)?  Would Warren be restricted from owning mines and shipping?

  173. PHil PCLN, I think you mean bcp 700/800 for $40 that is why up side $87 between  713 and 800

  174. AAPL/lflan – 30 on each side or 30 in total?

  175. Oil Rustle – This is the weekend Iran's access to finance is cut-off so anything to do with Iran is an excuse, I guess.  

    PRB/Grant – Not sure Berkshire could buy another railroad at the moment though, as they'd run into regulators.   BTU is the only one I really like in the coal space.  What Buffett really needs to do is get himself a cheap shipping line and send that coal to China using his railroads – that's a good little business…

    PCLN/Yodi – LOL, meant $700/800.  Context can be helpful..

    Funny how the VIX crashes ahead of the market moving down.  

    RIG/RIP – They could go much higher.  If you're willing to sell puts, why not sell the Jan $50 puts for $4 and then you can take the stock off the table (assuming you have it) and flip to a 2014 $55/70 bull call spread at $6.50 for net $2.50 on the $15 spread.  Worst case is you're back in the stock at net $52.50 and you have $15 upside at $70 with $56 in your pocket less whatever margin (TOS says $5 on the short calls).  

    USO/Scott – What short calls?  

    TLT/Dpast – I'd take a shot, good risk/reward but it is broken at the moment so not a sure thing.   Tons of Fed speak next week and I doubt they will tank Treasuries at this point.  Let's do 10 of the TLT next week $111/112 bull call spreads in the $5KP and 20 in the $25KP for .46 as we can do that 2 times and get it right once and still make money!  

    PCLN/Gucci – Yes, sorry, it was $700/800, of course. Upside is $87 because you are also selling the short puts to lower the basis.  

  176. I will take note of the stick and high sale 83.07 no matter where it closes.

  177. USO – the 4800 or so that were outstanding..belonged to Someone!

  178. Wow, the week's over already?  Very exciting this week – next week will be very interesting too with all the Fed talk and early earnings from ADBE, JASO, TIF, AIR, KKD, FRED, GSI, DFS, CAG, FDX, SLW, WTSL, DRI, KBH….  busy, busy…

    Have a great weekend everyone!

    - Phil

  179. Do the oil contracts expire today or next wed

  180. Volume on Dow made it to 355M at close so a healthy 90M in the last hour – mostly selling it looks like. 

    USO/Scott – At $41.03, they forced delivery on the 18,000 $41 contracts too so those people will have USO put to them short next week – interesting.  Clearly they don't mind or they would have gotten out for .05.  I sure wouldn't risk it over the weekend.

    Oil/Bert – I assume you mean Futures, which run until next Weds so still a chance for a nice dump next week but chances get slimmer each day they keep things up.  

  181. When you get a chance lflan, please post the numbers for the trades you did today. No rush though as I won't update the portfolio tonight!

  182. i can't  recall puts ever being this cheap… or calls for that matter.  1st time in years ive bought options naked. 
    if you cant beat em, join em, right?

  183. USO – yes the 18,000 open interest is exactly what i meant. Of course, i realized it right after i hit 'send..'  Doh!  yes interesting.. my tinfoil hat says someone with deep pockets who expects (knows?) oil is going to be somewhat lower at the top of next week had a lot of those and was ok with letting them exercise. JP Morgan?

  184. Saudi Arabia books most oil tankers to supply US


    Saudi Arabia, the world’s biggest oil exporter, is booking the most tankers in years to supply the U.S., a sign the kingdom is fulfilling a pledge to compensate for a decline in Iranian sales, according to Dahlman Rose & Co. 

    Vela, the shipping unit of state-owned Saudi Aramco, booked nine so-called very large crude carriers in the past week to go to the U.S., Omar Nokta, a New York-based analyst, said in a report Friday. A further two vessels, each capable of carrying about 2 million barrels, were chartered earlier in March and all 11 are scheduled to load in the last week of this month or first week of April, Nokta said. Vela booked an average of one VLCC to the U.S. every other month last year, he said. 

    Iran’s oil exports will probably drop by 50 percent when EU sanctions take full effect in July, David Fyfe, head of the IEA’s market and industry division, said in an interview March 14. Iranian Oil Minister Rostam Qasemi, in an interview in Kuwait the same day, rejected that estimate and said the country was exporting in line with the quotas set by OPEC. 

  185. Barry's succinct summation of week’s events


    1) Initial Jobless Claims fall to 351k, matching the lowest level since Mar ’08
    2) Feb Retail Sales grow in line with estimates and Jan revised higher. Will it continue with gasoline prices .26 above Feb avg?, 3) Philly and NY mfr’g surveys rise but components mixed as New Orders fall in both
    4) Within MBA data, purchase apps rise to 8 week high
    5) FOMC meets and thankfully does nothing
    6) ZEW investor confidence in German economy over next 6 months rises to 22.3 from 5.4, well above expectations of 10 and to the best level since June ’10


    1) Global interest rates jump higher with 10 yr US yield in particular up by 30 bps to highest since late Oct and UK gilt yield also spikes 30 bps. Bond rally since Operation Twist talk began last Aug has evaporated $100′s of billions later
    2) CPI up 2.9% y/o/y, in line but still elevated compared to wage growth and Fed’s target rate of 2.0%. PPI up 3.3% y/o/y and Import Prices up 5.5% y/o/y
    3) Implied inflation expectations in 5 yr and 10 yr TIPS continue higher to most since last summer
    4) UoM confidence unexpectedly falls 1 pt as one year inflation expectations jump to 4% from 3.3% to the highest since May, 5) says avg 30 mortgage rate rises to 4.03% vs 3.88% on the week, highest since late Nov but still extraordinarily low though
    6) MBA said refi apps fell to 9 week low
    7) Gasoline prices rise another .07 on the week to $3.82 according to AAA
    8) NFIB small business optimism index up but less than expected and Plans To Hire falls for 3rd straight month, in contrast to payroll optimism
    9) FDI in China falls unexpectedly for 4th straight month
    10) India keeps rates unchanged as wholesale inflation up more than expected
    11) UK unemployment holds at 8.4%, the highest since ’95 as jobless claims rise more than expected.

  186. Dylan Ratigan on Real Time tonite….

  187. Ratigan + Maher/1020 – That's going to be good.  

    NYSE finally made it over the line!  Now we're bullish….

    At the close: Dow -0.15% to 13233. S&P +0.1% to 1404. Nasdaq -0.03% to 3055.

    Treasurys: 30-year +0.06%. 10-yr -0.14%. 5-yr -0.07%.

    Commodities: Crude +2.05% to $107.27. Gold +0.04% to $1660.15.

    Currencies: Euro +0.67% vs. dollar. Yen -0.25%. Pound -0.75%.

    Market recap: Stocks finished flat after a weak reading on consumer sentiment and a lack of corporate news resulted in choppy trading. Volume continued light, especially for a quadruple witching day. But for the week, the Dow and S&P logged their best gains since December. Crude oil tacked on nearly 2%, while Treasury yields rose. NYSE advancers and decliners ended nearly even.

    NYSE trading volume that's hit a 10-year low could show that big money from pension funds and insurers still isn’t sold on stocks. So what’s fueling the rally? Company stock buybacks, Thomas Lee says – “for every $1 of equity inflows since 1990, there's been $3 of stock buybacks" – which he sees as a bullish trend. As returns on equities improve, Lee says, investors will start coming back. 

    Schnitzer Steel (SCHNlowers FQ2 guidance, now expecting to earn $0.28 – $0.35 per share, below Street consensus of $0.55. The company notes however, that while volatile pricing trends resulted in margin compression in the first half of FY12, long-term global demand for recycled steel continues to be strong.

    Transocean (RIG +4.8%) shares surge as the offshore driller said it reached a deal to get $650K/day for one of its rigs, "the highest dayrate we have seen in the current upcycle," Susquehanna says. The amount is "particularly encouraging," the firm adds, as the Deepwater Expedition had its prior contract cancelled in January due to non-performance. (also)

    Old favorite of ours:  Jefferies says Elan (ELN +6.5%should start moving ahead of the bapineuzumab Phase 3 data, which the firm expects in July. Jefferies estimates a 75% of FDA approval for bapineuzumab, but believes expectations are low with little being priced into shares.

    Microsoft (MSFT -0.4%) touches a new four-year high, capping a 26.5% gain YTD, as excitement over the upcoming release of Windows 8 should finally help it compete in the tablet market. But Nomura's Rick Sherlund reflects on the challenge of getting users to adopt MSFT's new touch-based user interface that will come along when Win 8 is put on sale.

    Now that Yahoo has filed suit against Facebook (and received plenty of criticism for doing so), speculation is up that struggling AOL will also try to monetize its patent portfolio. CEO Tim Armstrong recently claimed AOL has 700-800 "really important" patents, and activist investor Starboard Value estimates AOL's patents could produce over $1B in licensing revenue. 

  188. Phil/When Buffett plays Monopoly does he like to be the train,  the ship, or the top hat?
    There was a lot of surprise when Buffett bought his railroad, but probably it was part of a strategic plan involving the movement of coal to ASia-unless he is planning to ship LNG to West coast ports destined for Japan. As far as I can see his railroad does not go into West Virginia, so that probably rules out ANR which has many mines in WV. In any case coal from Wyoming's Powder River Basin seems like a more natural for shipping overland to Pacific ports and it certainly does have Buffett cars on its railroads. BTU, Cloud Peak,  and Arch Coal look like more natural targets. BTU also has huge interests in Australia, much of which also goes to Asia, and has the cutest stock symbol, though the company's name can hardly compete with that of Patriot Coal for sheer chutzpah.
    Coal stock are down a ton over recent months, and Buffett loves to sell puts,  so he probably has plenty of stock already.
    With shipping rates so cheap and the oversupply of ships, would there be any need to buy a ship company, other the fact that both trains and ships are symbols in the famous and beloved Parker Brothers game Monopoly? Of course Christoforo Colon was looking for a short cut to trade with India when he accidentally discovered another continent standing in the way, and it may be that Buffett just want to get the job finished five hundred years later, trade coals for curries, and get all the dots joined up.

  189. Samz:
    I was way behind in my reading of the posts and just saw your 8:55AM post on the BHP example.  One question: why sell 2x calls against the stock??  Isn't that too risky?
    Please correct me if I misunderstood.  Thanks.

  190. Had to redraw the 5% on the NYSE charts… Here is the latest level chart.

  191. bapineuzumab by ELN…..Ain't gonna work Phil.  LLY has the same one, and it failed…..

  192. Here on Phase 2 data.

  193. Phil, your comment on BAC was really confusing to someone who couldn't see the original question. Of course, I should have rolled my short 9 calls to 10s this morning, but you said not to (and I wasn't around much today anyway). I never expected the big move in BAC.
    I suspect you didnt see my comment in response to your instructions – that my cost to roll the 9s to the 10s was .39 this morning, but I was buying $.24 in the money, so net $.15 for a chance at $1. I thought it was good odds. Had no idea I would be oh-so-right by the end of today :)

  194. ARIA - FYI its FDA advisory panel is Tuesday. Here's an interesting SA article on how biotechs generally fare at Ad. Comm. events. Just for grins I bought a big pile of APR 17/18 BCS today for .18, ARIA would need to rise 11% to cash those in…

  195. The new iPad
    Having come across Sudden and unexpected $600, and to contribute to AAPL’s earnings, I got TWO new iPads today.
    Comparing it to the ipad2, the display is phenomenal!
    The photos are clearly much sharper also.
    The dictation for emails work very well also and I can now dictate instead of writing…
    Those are the advantages as I se them so far…still discovering

  196. Hedging for Disaster
    At the top of tioday's article, Phil references his October 2008 post – Hedging for Disaster. There are some gems in the comments sections as well. As questions are frequently asked here on rolling and covering, the following edited extract from that 2008 article is most enlightening (apologies for the length, but it will make for a good weekend read:
    October 1st, 2008 at 12:41 pm | PermalinkIgnore this user
    C/RMM – You really need to work on Stops on those things!  You can still roll the 1/2 $20s to the $22.50s for better than even now so why not do that.  You only have to give your caller his money back at $24.50 and your leaps should make that well worth it by then.  On the XLFs, isn’t that the uncovered bullish play against which you took the SKFs?  If so, you don’t want to cover, that’s your play on the bailout going through.  Just make sure you feel balanced enough on the short side (assuming we drop back at least past Monday’s lows if it fails).

    October 1st, 2008 at 1:02 pm | PermalinkIgnore this user
    C stops – On covers in general you can set stops at 25% on 1/4, 25% on the next quarter, then roll up to 2x coverage at a higher strike (if it keeps going of course) and then back to 25% on each 1/4.  If you half cover because you are bullish on a position, the same logic applies but with smaller numbers.  If you do this, it is also important that you re-cover on the way down.   Of course it’s not robotic, you have to think the move that is hitting your stop is real and sustainable but as a rule of thumb, it will keep you out of big trouble. 
    October 1st, 2008 at 1:18 pm | PermalinkIgnore this user
    C caller stops: the point is, have the caller not run away, stop him /?? yes, put in a buyback order GTC ?
    on upward move when callers become more expensive, have a stop paying 25 % on 1/4 of the callers ??  yes ?
    if it keeps going up, 25 % on next 1/4,
    if it keeps going up, roll 2x coverage to higher strike,
    iif it reverses and the stock goes down, re-cover.
    Do I have it now ??

    October 1st, 2008 at 4:06 pm | PermalinkIgnore this user
    the 25 % loss stop on callers (and putters): is that not very high ?
    have put a trailing stop loss on some C shorts,
    just missed doing same on some AAPL shorts, market closed.

    October 1st, 2008 at 4:35 pm | PermalinkIgnore this user
    25%/RMM – Well 20% on a $3 call you sell is just .60, not much of a stop.  I’m not into setting hard stops but it’s just the point at which you need to make a decision.  The idea is that if the caller goes from $3 to $3.75 and you take him out, you still have 3 X $3.75 in protection, that is just .75 less protection than you had when you started and it only cost you .75 to take him out.  Even if it drops back to $3 and you change your mind and re-cover, it’s a very minimal change to the overall coverage.  Once the first 1/4 is off the table, the next out would be $4.50, at which point you should be up nicely on your longs.  That $4.50 x 2 remaining can then be rolled (assuming you are still bullish and, if you weren’t, then why were you buying out the callers?) to 4 x $2.25 and you are still $10 covered but at a whole strike higher than the $12 you were covered at before and hopefully your long calls gained more than .50 each to make you at least even.
    What you don’t want to do is to be stopped out on spikes so you need to know the stock you are dealing with.  C and AAPL are both very volatile and if you set a stop it WILL get triggered.  The idea is more to trigger yourself to look closely at the play at that 25% mark and decide if the move is real enough to warrant taking out some callers.  In C today, it was up and strong all day so it made sense to take them out.  In AAPL they go up and down like a yo-yo so we’d want to see a real breakout before we start buying back callers, especially ones with such high premiums. 

  197. The wife and Kids got me an Ipad for my Birthday.  I just showed up yesterday.
    It's awesome.

  198. Phil/Selling into close

    It seems that we've been repeating a similar trend over the course of this long upward channel the last few months.  Fridays are typically weak, or at least somewhat flat, Mondays typically pull back in the morning only to have the Bots salvage it by the close.  Then Tuesday thru Thursday have been primarily positive low volume days.
    This is a very similar pattern to what we saw immediately following the crash when they initiated the QE's.  Is QE3 covertly being implemented or is this pattern related to something else?

  199. Aapl
    Tim Cook to announce at 6am PDT, what the company plans to do with it’s $100Billion Cash.
    Wonder what the reaction will be both before and after?