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Free-Falling Thursday – Facebook Faces Fatal Friday Follow-Through

What a week to do an IPO!

Will Facebook save the markets tomorrow with a successful roll-out of the largest IPO of all time or will it be the straw that breaks the camel's back, with a disappointing open that sends the Nasdaq off a cliff along with their entire over-priced sector?  Either way – this is going to be fun.

We can argue the merits of Facebook's value (or lack thereof) all day long but, scam or not, it's very likely FB will set off a buying frenzy in the space and we finish the week off with a bang. If that doesn't happen – I will be very, very bearish but from what I'm hearing and the way they are extending the offer and raising the price – it's way oversubscribed.  Also, we have to consider that people are cashing out 1-5% of their holdings to raise cash for FB on Friday – sure it's moronic, but that's what people do so you have to put yourself in a position of someone who wants to put 5% of your portfolio in to Facebook (the way you wish you had put 5% into Google at $80 when they IPO'd) tomorrow – what would you be doing with the rest of your portfolio today?  

EZU WEEKLYMeanwhile, the rest of the World is falling apart with Europe turning sharply lower as Spain sells bonds at record high yields (5.106% for 4-year notes) this morning after announcing that their Q1 GDP was -0.4% at the same time as Moody's indicates they will be cutting the credit ratings of 21 Spanish Banks this evening AND, to top it all off – there is a run on Bankia, which Spain nationalized last week – with $1.3Bn pulled from accounts this past week!  This sent Spain's markets down 1.6% and Italy (who is next) fell 2%, sending the Euro down 1% to $1.2668 and the Pound followed it down to $1.5832 (while EUR/CHF holds steady at 1.2009 in the most blatant currency manipulation ever witnessed).

Wow – that's a lot of bad stuff!  Maybe too many bad things – as in a bit suspicious that all this bad stuff happens at once – as if maybe someone WANTS to force a panic bottom?  If so, I applaud them – we certainly needed to shake things up a little and nothing gets a rally finally going like a good old blow-off bottom.  This morning's 0.5% drop in the futures looks more like a flush to me than a sustainable move and I think we may take advantage of a morning dip (if it lasts) to firm up some put selling on our Twice in a Lifetime list as we test some 10% drops in our International Markets – a nice, bouncy area in the very least:  

Ugly, isn't it?  On the one hand, we are very worried that this could be the prelude to a 2008-style market melt-down, where we still have another 20% or more to fall but, on the other hand – we fear the Fed and their endless intervention, which makes it foolish to be too bearish on this market.  Cashy and cautious is how we're playing this but we're willing to lose a little doing some bottom-fishing here and, if we're wrong, we either stop out or load up those disaster hedges (see yesterday's post or Monday's post), which will put a ton of cash in our portfolios in the event of a sell-off.  

In Member chat yesterday, we were discussing our disaster hedges and I pointed people towards a classic post titled "Hedging for Disaster – 5 Plays that Make 500% if the Market Falls" that we used in April, 2010 to ride out a similar dip with style.  Hopefully Facebook won't disappoint us tomorrow and I'll be able to write up a full post over the weekend but, if not, I'll certainly be putting up a few new trade ideas in Member Chat – just in case!  

I don't want to oversell the short case here.  We've been layering our shorts since Friday, the 4th, when I titled the morning post "The Blow Jobs Deal to the Market Could be Huge" and my comment on the release of the Jobs numbers at 8:30 (which caused a pre-market rally) was: 

I don't think these numbers are good at all and it's just more evidence that the economy is not picking up and still has significant weakness.   If suckers want to buy into these terrible numbers – let them, it's a good chance for us to add some more shorts because your entire bullish premise cannot be that the economy sucks so badly that our Uncle Ben might give us another Trillion to play with to distract us for another year.

We didn't allow ourselves to get sucked into the pre-market pump job yesterday, following through withour plan from the morning post to use a quick momentum trade (DIA) to ride out the morning move up and thank goodness we held those short positions as I really think we'd be missing them this afternoon (or Monday for that matter!). 

EEM WEEKLYAt the time we were already loaded for bear (see that Thursday's post and our Long Put List) and we only needed to add two additional disaster hedges that day in Member Chat:   

  • EDZ June $12/15 bull call spread at $1.10, selling $13 puts for $1 for net .10, now $2.35 – up 2,250%
  • EDZ July $13/17 bull call spread at $1, selling $12 puts for $1.10 for a .10 credit, now $1.70 – up 1,800%

So, when your hedges make 2,250% on a 7% drop in the S&P – they tend to provide good cover for your bottom fishing – even when you enter too early.  In fact, a non-Member asked me yesterday about how you can adjust a too-early entry on CHK at $18 and my reply was:  

A nice trick for CHK is – let's say you bought it for $18 and you are a dumb-ass who doesn't hedge or cover or enter by selling puts and now CHK is $14. You can sell the stock ($14) and sell the 2014 $10 puts for $3.30 and buy the 2014 $10/20 bull call spread for $4 and that means you are left in the $10 spread that's $4 in the money for net .70 so all CHK has to do is flatline at $14 and you make $3.30 back but you free up $13.30 in cash (using some margin for the short puts) and you get all of the upside to $20 with a max profit of $9.30 less the $4 you lost in the first place is still a respectable $5.30 if CHK gets back to $20, which is way better than you'd do with your $18 basis. 

Meanwhile, your worst case to the downside is CHK is put to you at net $10.70, which is 23% lower than it is now so – FOR FREE – you are getting 23% of additional downside protection, drastically lowering your break-even and taking 90% of your cash off the table. 

THIS is why people subscribe to Philstockworld – we teach you how to do this stuff!

Options are not scary – they help you to be flexible and give you the tremendous ability to hedge your portfolio so you can survive any sort of market turmoil.  We try to stay balanced and have trade ideas that will profit in either market direction – when you have one position that makes 2,250%, it makes up for a lot of 20% losses on the "wrong" side of the portfolio, doesn't it?

Yesterday I called for taking the money and running on our Long Put List (initiated 3/15, last full update: 4/19) and our final outs were:  

  • AXP July $52.20 puts at $1.38, now $1.20 – down 13%
  • BIDU June $115 puts at $2.10, now $2.95 – up 40%
  • CAT May $95 puts at .95, now $3.30 – up 247%
  • CMG June $375 puts at net $7.05, now $4.90 – down 30%
  • FAS July $60 puts at $2, now $3 – up 50%
  • GE Sept $19 puts at $1, now $1.30 – up 30%
  • GOOG Jun $540 puts at net $5.45, now $5 – down 8%
  • HD Aug $50 puts at net $2.50, now $3.20 – up 28%
  • IBM Jul $180 puts at net $2.05, now $1.90 – down 7% 
  • ISRG July $430 puts at net $5.20, now $4 – down 23%
  • IWM Aug $71 puts at net $2.10, now $2.45 – up 17%
  • KO Aug $70 puts at net $1.70 now .72  – down 57%
  • LVS June $55 puts at net $3.35, now $7 – up 108% 
  • MA July $370 puts at net $8, still $8 – even
  • MMM July $82.50 puts at net $1.82, now $1.90 – up 4%
  • PCLN July $620 puts at $9, now $23 – up 155%
  • QQQ July $61 puts at $1, now $1.80 – up 80% 
  • V Sept $100 puts at $2.60, now $2.55 – down 2%
  • XRT June $62 puts at net $3.05, now $3.70 – up 21%

Not too bad with 12 of 19 winners and, of course, we took advantage of exits on some like CMG, that were earnings plays but we're ignoring that.  These are not positions we WANTED to win – they were there to protect us in case there was a major market sell-off.  The fact that 7 of our 19 picks went against us is one of the reasons we DON'T think this sell-off is all that bad yet and, of course, if we do fail to hold 1,320 on the S&P and 775 on the RUT – then it's game back on for those 7 as we have cheaper entries now than we did back in March.  

I think AXP, MA and V would be my 3 favorite shorts if Europe begins to melt down but, as I said above, I think this is a blow-off bottom and it's time to buy, not sell – we'll see how things play out….

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  1. Oil Lines

    R3 – 96.64
    R2 – 95.40
    R1 – 94.29
    PP – 93.05
    S1 – 91.94
    S2 – 90.70
    S3 – 89.59

  2. Selling puts on the “twice in a lifetime” basket, reminds me of why I’m just happy to be here. Thanks PSW…

  3. Phil / FAS / Hedges
    So I had a nice wake-up email from my broker that the short 91 FAS puts I closed yesterday was a mis-trade and I didn't get out at $7. I'm therefore still holding the 2 short 91's priced now at most likely at $9+ with FAS at 82. I sold these for $2.69.  I did short 6 of the 85's for $2.70 for a net credit of $8.10, but these are down some as well.
    Any FAS plan or hedging plan to get out of my mess?  Feels like everytime I start to play FAS short the damn thing burns me days from expiration! 

  4. Good read about the Facebook Effect on the SF Realestate market.  Glad I'm not renting there anymore!

  5. PP for today:

  6. Econ numbers for today:


    Japan Gross Domestic Product Annualized / 4.1% (3.5% expected)
    Japan Gross Domestic Product (QoQ) / 1.0% (0.9%  expected)
    Japan Nominal Gross Domestic Product (QoQ) / 1.0% (1.0% expected)
    Japan Industrial Production (YoY) / 14.2%
    Japan Japan Machine Tool Orders (YoY) / 0.4%
    Spain Gross Domestic Product (YoY) / -0.4% (-0.4%  expected)
    Spain Gross Domestic Product (QoQ) / -0.3% (-0.3%  expected)
    US Continuing Claims / 3265K (3225K  expected)
    US Initial Jobless Claims / 370K (365K expected)

    Numbers from Japan were surprisingly strong and the numbers from Spain met their weak estimate!

    Getting the US jobless claims lower is going to be difficult as they have averaged over 350K for the last 10 years, dipping below that between 04 and 08 when we had the construction bubble!

    Let's not forget later today:

    10:00 EST – US Leading Indicators (0.1% expected, last was 0.3%)
    10:00 EST – Philadelphia Fed

  7. We have few numbers tomorrow (good for the FB IPO I guess):

    China April Property Prices
    German PPI
    Canada CPI
    US Revisions – Factory orders and durable good

    Not much impact expected except maybe the German PPI if it runs hot!

  8. Good Morning!

  9. Phil you are surely painting the devil on the wall!!! be careful you might get him. Or black Peter

  10. Burrden FAS well I as well still have a FAS different play but what else roll roll and roll possible once Phil is finished painting the devil we will go up again.

  11. Facebook – It "feels" like tomorrow will be a non event. As well it should be…..
    Phil – any predictions on the over/under?  A little PSW contest would be fun.  :)

  12. AAPL traders:   I'm presently trading AAPL by way of selling put and call weekly premium (short strangles).  I'm using puts and calls about 15 points or more out.  So right now Im short the May 19 530 weekly puts and the May 19 560 weekly calls.  You have to be flexible on these and willing to roll either side, so needs some margin.  Alternatively, you can make it into a condor, to tie up less margin.     My bias on the stock short term is a further downward push.  Could AAPL get to 500 before it gets to 600?  Well, I don't know, but I wouldn't rule out the possibility.  I'll be online later this afternoon.

  13. Our FAS play bull call 86/88 4.69/3.41 now .78/.31 83p sold for 1.14 now 2.16 all ending tomorrow still not to bade 

  14. AAPL / lflan – Good plan. The weekly volatility for AAPL is about 3% so your 15 point should keep you somewhat "safe" – if anything is safe in these markets!

  15. FAS at 81.50! Ouch….

  16. TNA under 50 now….

  17. FU FAS!  StJ, you should re-update FAS Money…it's a bloodbath.  FU FAS!

  18. FAS / Burrben – Not a good day indeed… But I can see you are learning from Jabob!

  19. stjean
    There was a TNA trade late in the day yesterday.
    This Friday's May 47/49 BCS for $1.60

  20. And CHK under 14….

  21. I wish XRT had AAPL and JCP in the holdings. Showing some traction today though

  22. Thanks dclark… I will update the spreadsheet now!

  23. OK, both portfolio updated. Thanks again dclark!

  24. Waiting for 1306 – 1310 on the ES to start shopping…..

  25. ….may be hear sooner than I thought…

  26. And wheeeeeeee……..

  27. hear – here

  28. CHK,BBY,FCX,GLW,AAPL WTF??? When will these POS stop dropping?
    FU longs!!!!

  29. CMG below 400. Happy Jabob day!

  30. stjean
    I only wish it had helped either one of those portfolios! :(

  31. It's really hard to make you happy Jabob…

  32. FU FAS, I'm out.  Welcome to FAS money burr, you just lost $3000.  Good job.

  33. Updated econ numbers:

    US Leading Indicators / -0.1% (0.1% expected)
    US Philadelphia Fed / -5.8 (10 expected) – Slight miss there!

    Not bullish at all!

  34. Good morning!  

    The conspiracy theory is we are being flushed out of the market against the FB IPO which will hit $60 or better and rocket the Nasdaq 3% tomorrow, taking the rest of the indexes up about 2% and ripping the bears' faces off.  It's a very tough call and CASH IS KING because we don't need to guess that nonsense when we can make so much money just waiting for the trend to form and THEN taking a leveraged position.  

    If, for some reason, FB fails – it will be a catastrophe.  If Europe blows up – it will be a catastrophe that FB can't mitigate.  Even if tomorrow is good – do we really want to be bullish over the weekend?  So let's tread carefully and I feel better being in cash than being involved at this point.  

    NONETHELESS – I'm fairly confident we can hedge against another 20% drop in the market so let's say we have $100K to invest and we start by taking $5,000 and buying 20 SQQQ July $55/70 bull call spreads at $2.50.  That's $5K spent on protection and we put a stop at $1.25 ($2,500) and now we're covered against a 10% drop in the Nasdaq moving SQQQ 30% up to $70(ish) for $30,000 on the spread.  

    That means we can now deploy our remaining $95,000 and we are roughly 1/3 covered against losses so, as long as we stop at least some of our positions out with 20% losses – it should be pretty hard to hurt us.  

    So now that the Long Put List is dead (and we still like AXP, MA and V as downside plays if the S&P can't hold 1,320 and they are slow-movers, which is the whole point to the Long Put List – you catch a winner and move on to a fresh horse) so long live the Twice in a Lifetime List.  Keep in mind these are 1x entries on stocks we should be THRILLED to double down on AFTER they drop 20% or more.  

    • AA ($8.50) 2014 $8 puts can be sold for $1.50
    • ABX ($35.91) 2014 $30 puts can be sold for $4.50
    • ALU ($1.45) 2014 $2 puts can be sold for $1
    • BAC ($6.97) 2014 $7 puts can be sold for $1.75
    • BTU ($25) 2014 $20 puts can be sold for $4.10 – WOW! 
    • CCJ ($19.37) 2014 $17 puts can be sold for $3.30
    • CHK ($13.83) 2014 $13 puts can be sold for $5
    • CSCO ($16.70) 2014 $15 puts can be sold for $2.05
    • FTR ($3.20) 2014 $3.50 puts can be sold for $1.30
    • HMY ($8.88) 2014 $8 puts can be sold for $1.40
    • HOV ($1.83) 2014 $2 puts can be sold for $1 
    • HPQ ($22.04) 2014 $23 puts can be sold for $5
    • MT ($14.30) 2014 $15 puts can be sold for $5
    • JPM ($34.59) 2014 $30 puts can be sold for $5
    • OIH ($35.90) 2014 $30 puts can be sold for $4
    • SVU ($5.15) 2014 $5 puts can be sold for $1.85 
    • WFR ($2.05) 204 $3 puts can be sold for $1.40 
    • X ($22.25) 2014 $20 puts can be sold for $5.10 

    Keep in mind that once you have the spread, you are super-covered for the first $25K you spend, really for the first $50K if you plan to stop out with less than 50% losses.  But there is NO hurry as long as the S&P is below 1,320 as that's VERY BAD and likely to get VERY WORSE.  

    If the Dow breaks below 12,500 the DIA June $120 puts at $1.25 give you good bang for your buck so watch those.  

    Another nice hedge is TZA June $22/26 bull call spread at $1 and you can sell any of the above puts to pay for those!  

    It's looking ugly but the volume is light and this isn't all that bad for a panic so far.  If the Dow holds the line, I'll be encouraged but not really until the S&P is back over 1,320 and the RUT is over 775.  

    Again – our bullish premise if FB has a good IPO and rallies the markets but, a day later OR THE SAME DAY – Europe could blow to bits and nothing else will matter so cash, Cash, CASH! is the way to go.  

  35. TLT approaching $123 – starting to feel like a bear put spread set-up.

  36. stjean I am always happy ;-)

  37. FAS / Burrben – And you wanted to start the FAS Strangles again! I am a little too busy with business right now to think about some other portfolio, but the next one will be based around TA signals. In this market fundamentals seem to be taking a backseat for now!

  38. TLT topped at around 125 last September. A bad weekend in Europe and we could get there.

    And keep in mind, there is more coming from other part of the world – look at Russia right now. Lots of unhappy people there. Brazil is slowing down. India is facing stagflation and China is lying about what is going on there.

    Suddenly T-Bills are looking OK even at 1%!

  39. Gold flying – possible harbinger of QE or just wishful thinking? 

    Thanks 53787!   And it's the personal relationship I build with random numbers that I cherish the most as well…  ;)

    FAS/Burr – What kind of BS is that?  They tell you you executed a trade and then call backsies?  That's BS!!!  Nothing to do but wait until tomorrow and see what it costs to get out (you already did the roll part).  MAYBE it gets better and, if not – well you have to get out anyway.  

    FB/Burr – Nice little bubble they are forming already.  

    Dow made a very swift pop off 12,500 but that's to be expected on the first attempt.   Still, something for the Bulls to hand their hats on and a good reason to bottom fish – CAREFULLY!!!!

  40. Here are my lines for XLF. You have to think that they make a stand at $14 now! But we have gone down fast over the last 2 weeks!

  41. What time will we know the result of the FB IPO? TIA.

  42. Down Goes WFR!  Down Goes WFR!!!

  43. WFR 1.89 -11.27%

  44. @Felipe
    With the oversubscription of FB you  still would not then buy /NQ futures for a quick pop and sell it before 2:00 p.m. tomorrow?

  45. Long Put list: are we initiating a small position on the stocks we'd like to own long term – then selling puts as a DD?

  46. Gold – with all the news of spainish bank runs and more capital flight from Eurolands, yet all US indexes going down, gold weak, euro weak, and dollar stronger but not so much as to absorb all the loose Euros and more.. where the hell is all this capital going? just paying off JPM losses? Some must be going into gold.. buying physical, which may take a few days to show in futures?

  47. TNA: BCS from last night (May 47/49)- what are we doing with it now?

    Phil/CHK- I am long the $15 june calls (down 50%) and short the $18 June calls (up 73% but only sold 1/3 the number of my long calls). Could you suggest an appropriate adjustment. Thanks.

  49. Scottmi/ where is the $ going?

    TLT now at 122.69

  50. Dow and SPX bottomed at their 200 day EMA.

  51. Phil – observations and questions regarding suggested entries for the Twice In A Lifetime List;
    I realize premium is higher for longer-dated short puts, but so is the length of time margin gets tied up (opportunity cost). Delta is lower on longer-dated options, so rate of premium burn on short puts will be relatively slow. Perhaps you’ve articulated this before, but could you explain why the tradeoffs make sense? What are your thoughts on selling shorter-dated puts, pros v cons?

  52. What is the difference between the EMA and the SMA?  Exponitial verses Simple?  TIA

  53. Phil, what do you see happening with USO?  I'm in some Jun 35 calls, more or less even for the time being but is there upside or should I get out of them before the weekend?

  54. roberthjrfl / EMA — Yes.

  55. Moving averages / Robert – See for a good explanation:

    Exponential moving averages reduce the lag by applying more weight to recent prices. The weighting applied to the most recent price depends on the number of periods in the moving average. There are three steps to calculating an exponential moving average. First, calculate the simple moving average. An exponential moving average (EMA) has to start somewhere so a simple moving average is used as the previous period's EMA in the first calculation. Second, calculate the weighting multiplier. Third, calculate the exponential moving average.

  56. From Cobra: AAPL long-term view

  57. WFR – down 16%. Overreaction to the CFO departure?

  58. FIdelity trading – i'm rolling a 401k plan into a self-directed IRA (finally). Fidelity houses the 401k now and wants to make it easy to drop it into their "no fee" IRA and offering a fee schedule of (after free trades used up) 7.99 trades for stocks, and 7.99 plus .75 per contract on options.  (i'm asking for the 7.99 on options to be dropped so just the per contract). i see they have something called "Active Trader" any users of this and/or comments on Fidelity? thanks

  59. newt, TNA did the 45/48 at $2.40.

  60. Phil, something to play tomorrows spike in the qqq's with a little cash?

  61. boltdude/WFR   No…..

  62. Thanks on EMA

  63. Scottmi/Fidelity – I highly doubt they'll drop the $7.95 on the initial purchase of contracts.  That is just their standard trading fee on a buy or sell.  Also, I believe that to get the $7.95/trade, you have to be enrolled in paperless delivery so just double check that so that you don't pay $17.95/trade. 

  64. scottmi / Fidelity — I do most of my trading with them. They are a highly conservative company but I like the fact that they are not public and have over $3T in assets under management.  Their trading platform (ATP — Active Trader Pro) is solid for the most part but is starting to show its age. It isn't as wide ranging as TOS as far as tools go. They have two other complementary apps, one for options (option trader pro) and one for back testing (wealth lab pro). Customer service has been top notch and i often get better than market fills when placed at market. Overall, other than no futures trading, I can't complain.

  65. Devil/Yodi:

    Ran into the devil, babe, he loaned me twenty bills
    I spent the night in Utah in a cave up in the hills.

    Set out runnin' but I take my time, a friend of the devil is a friend of mine,
    If I get home before daylight, I just might get some sleep tonight.

    Predictions/1020 – I think the buzz around FB means it's going to pop no matter what.  There are plenty of funds who won't want to seem like idiots if they miss something aside from the 900M potential buyers who use FB daily so I'm looking for a 25-50% pop, even after the re-price and that should bring us to about $45 at the end of the day.  

    AAPL/Lflan – I'm concerned that AAPL has been run down to further depress the Nas ahead of FB and tomorrow they may use it to pop it in a double whammy (although I guess you could argue the opposite too).  So I'm a little worried about an outsized move in AAPL causing problems.  

    FAS/Yodi – I don't know what you are referring to there.  Obviously, FAS is way low at $81 and should come back but not tomorrow.  

    $25KP/StJ – What did we do that cost us $8,000 in our closed positions?  Was it taking the loss on the long FAS calls when we rolled?  

    FAS/Burr – You have got to scale in on these things.  Don't play FAS if you are going to get forced out by a .50 move in XLF – that happens all the time so all you are doing is playing Russian roulette waiting for the next time you let yourself get thrown out at the bottom.  If you play a stock, you HAVE to expect a 10% drop minimum and if you are playing an ultra – you have to expect a 30% drop MINIMUM and if you are not ready, willing AND able to ride that out – then why play it in the first place?  

    Philly Fed – What a disaster!  

    By the way, how long before there's a rumor that FB is pulling their IPO?  I say about 11:10, along with a rumor that Spain is shutting down a bank and Greece is out of the EU this weekend (actually I think I started that one the other day).  

    TLT/Canuck – Getting to that point we like to short them finally.  Just gotta be patient and everything happens eventually.  T

    TLT/StJ – $125 is a good point.  I'm certainly not enthusiastic about shorting them into the weekend.  

    Gold $1,573.  See, yesterday we were sorry we got out of GLL calls, now we are happy…

    FB/Robert – I have no idea on time.  

    WFR dropping like a rock. 

    NQ/Flip – I like it as a gamble.  The Qs should be attractive too as a flyer.  

    Long Puts/Newt – No, just selling the puts as a 1x entry on the ones you believe in and really, Really, REALLY want to establish a larger position in if they are put to you at 20%+ off and the stock is another 20% lower by then and THEN you go to 2x and hopefully our economy recovers by 2016.  

    Capital/Scott – Forex trades $4Tn a day, that's a whole lot of $1Bn bank runs before you can call it missing money.  Gold, as we can see, is flying – likely as a safe haven for EU investors at the moment.  I still believe US equities are being forced down and this move is not reflective of what's really happening – which is money is pouring into the US markets from all over the World.  FB is going to raise $16Bn tomorrow and, if I'm right about $45, then over $20Bn and that too is a whole lot of bank runs to suck up before it's filled.  

    TNA/$5KP, Newt – We have an opportunity to take out the $49 caller for $1 while our $47 calls are still $2.25 so I'm hoping to see a good bottom at the EU close (11:30) and we can flip the $5KP bullish.  In the $25KP, I'm more inclined to roll to June while it's cheap and let the caller expire.  $1 is completely ridiculous for a day, isn't it?

    CHK/Ksone – Why do people not cover?  How about full cover and put a stop on 1/3 the cover when CHK is going UP and another stop on 1/3 the covers when CHK goes UP MORE?  Wouldn't that be a smarter way to play it.  Why does everyone try to hit a home run on every at bat when statistically it's very impressive just to hit .300?  You are uber-bullish in CHK and your June $15 calls are $1.03 but CHK is at $13.76 and just 29 days for them to gain 15% just to justify the $1.03.  Why not let some other sucker pay $1.03 for 10% out of the money CHK calls and you can spend $1.70 to roll to the July $13s ($2.73) so for net .70 more, you drop your strike by $2 and gain 30 more days for CHK to come back.  Yes it's a $2 spread but you should be THRILLED to get even on this deal and you can roll the June $15 callers to the July $17 callers (now $1.05) so it's really a $4 spread IF CHK RECOVERS.  If not, you'll sell some July calls after the Junes expire and do it all over again – wash, rinse repeat until CHK recovers or you get bored.  

    Trade-offs/Bolt – Better for a weekend discussion but, if there is QE next week, you won't see this VIX again for a LONG time – nor will you see these prices.  HPQ 2014 $23 puts were $3.32 two weeks ago so it's possible, if HPQ bounced and the VIX goes lower, that you can very quickly make $1.50+ on those short puts.  How much will you make with short-term contracts in the same situation?  This is a trade for INVESTORS, not traders and sure, we'll take a quick 30% if it's handed to us but, on the whole, we REALLY want to own these stocks at these prices LONG-TERM and we intend to tie the margin up on 20 years of ownership so we're certainly not concerned about whether we tie up a little bit now for 19 months.  Anyway, the net ordinary margin requirement for selling the HPQ 2014 $23 puts at $5 is $4.50 so you make over 100% in 19 months if HPQ holds $23 (now $22.17) – are you seriously not satisfied with that kind of return?  If I am willing to buy 1,000 shares of HPQ for $18 (the net) and I sell 10 of these contracts for $5,000, I'm using just $4,500 of net margin and I have $13,500 cash on the side from the allocation and, even if I do nothing with the cash, $5,000 back on the entire $18,000 allocation is a very nice 27% paid to us for NOT owning HPQ.   If you feel the need to mess around with short-term options – then use the $13,500 and have some fun! 

    EMA/Robert – Try Investopedia, they are pretty good with that stuff.  

    USO/Jerconn – Well there's a reason we stopped playing it.  Could go either way at this point.  You have the holiday driving weekend coming up but demand sucks and the weekend may only serve to prove how lousy it is.  You're a much braver man than I am to be predicting what USO will do short-term.  

    WFR/Bolt – I sure hope it's an overreaction!  

    QQQ/Rpme – Sure, the tomorrow $63s are .20 and we were at $63.60 yesterday morning so not out of the question they could double up (or be worthless) tomorrow.  

  66. Phil, on a couple of occasions I deduce from your commentary that you may favor moving money out of an IRA (in order to relax margin requirements in an IRA account) before reaching the eligible age to do so without a penalty. I wonder whether you could comment on this or is this something I should discuss with a financial advisor?  Thanks in advance!

  67. Berkshire — Newspapers?  Really?  I don't get it.  I guess they're "understandable" as Uncle Warren likes to put it.

  68. Phil,

    I have 50 WFR 2014 3/7 BCS at $1. The $3 is at $0.37 (bought at $1.34) and the $7 is at $0.13 (bought at $0.34). Need help adjusting. Thinking of covering the $7s and selling 25 $3 puts for $1.5 and/or DD on the $3 calls to lower by basis. What do you think?

  69. Long Puts, TNA 25k/ Phil: Thanks.

  70. How about playing QQQ but further out, say June instead of the weekly?

  71. Lowest RSI on Nasdaq since Aug 8th of last year.  Right now it is roughly 27, in Aug it was 19.  That 8pt difference in RSI is still about 120 points off the Nasdaq straight down.
    Dow is 29 RSI and McClellan Oscillator is probably around -260 to -270 if I had to guess right now which would make it 4th lowest of year but who's to say it won't bottom at lowest of year.

  72. Finally CMG fails $400!  

    FAS Money – Let's sell 6 June $75 puts for $4.25 and put a stop on the May $85 puts at the same (now $3.70) but hopefully we get out cheaper.  

    IWM Money – Let's add 4 more March $80s at $5.45 and sell 2 TNA June 47 puts for $4 and we'll deal with the roll tomorrow if we have to.  

    $5KP:  Going for it on the bull side.

    • EDZ – Let's cash out for $3.  
    • TNA – 10 more at .25
    • CHK – Let's buy back the June $17 caller for .45 
    • TNA – Let's buy back the May $49 caller for .60. 

    $25KP:  Going for it here too. 

    • DMND – Up today!
    • BBY – Not looking.
    • FAS – Fine 
    • CHK – Fine 
    • AMZN – Now it's getting interesting at $4.60, let's put a stop at $4.25
    • TNA – Same as $5KP, let's buy back the $49 caller for .60 and see what happens into lunch.  
    • I do want to spend money on the above QQQ hedge – the July $55/70 bull call spread is now $3 so let's get 10 of those with a stop at $1.50 and we're spending $1,500 for $15,000 of coverage in the event of a catastrophe.  Since we started with $25KP – that's 60% back even if the entire rest were somehow wiped out in the worst crash ever.  

  73. Phil/FB  I totally agree it will pop.  It could be like Walmart on a black friday, except there is only one way, in or out, with only one fire marshall to be found…. :)

  74. By the way – we are playing these virtual portfolios because they are open and the point is to learn how to adjust in changing market conditions – overall I LIKE CASH – just in case anyone is not getting this message….

  75. $25KP Loss / Phil – Closing the FAS Oct 100 cost us $7400! Then the July puts turned negative on us and the new Oct position is also underwater. FAS has been good to us all year but is costing us about $10K right now. Better sell more premium…

  76. Phil
    Good morning
    Earlier this week, thinking it was relatively safe, I sold the AAPL weekly $530 puts for $0.89, now $3.50.
    Woould you hold till tomorow or roll to the next week's $510's for about even?

  77. Phil/BBY   To you, I dedicate this little ditty…. ;)

  78. PHil – perhaps you mean the July SQQQ 55/70 spread?  That's what you posted this morn, tho perhaps you meant to hedge to the upside this time around…but I'm assuming you meant SQQQ for the $25K and not QQQ…

  79. FAS Money / Phil – The June 75 puts are now $4.60 and so are the May 85 Puts so we have an even roll and that's what I'll report in the portfolio.

  80. IRA/Hemas – Financial adviser for sure!  An IRA is fine for some things but I favor having a trading account that you can work with the IRA and try to set up your probably winners in the IRA while your hedges you expect to lose can be in your margin account where you take short-term deductible losses (and ask your guy about the good and bad of electing trader status for tax purposes while you are there).   So, for example, I love the CHK 2014 $10/20 bull call spread at $3 so I buy that in the old IRA as I may get a 233% gain I'd like to not be taxed on.  In my regular margin account, I sell the 2014 $10 puts for $3.30 to pay for them.  Now, if it's a huge winner, I make $7 that I pay no tax on in the IRA and $3 that I pay regular cap gains on in my trading account.  If I stop out of the spread at $1.50 in the IRA but CHK holds $12 and I make $2 in the ordinary account – then I pay the tax on that and I can use that $2 to refill my IRA account.  If I stop out in the IRA at $1.50 and I get assigned CHK at $8 and lose $5 per contract there – then most of my losses are ordinary and offset (hopefully) other gains.  

    Newspapers/Rain, Soccer – Munger likes newspapers, I think that's what's driving it. 

    Gold $1,580 – not really making sense with the market move.  Silver flying as well but copper down at $3.46, nat gas fell from $2.67 to $2.53 not helping CHK today and gasoline down to $2.89.  

    WFR/Japar – There's nothing really to adjust.  You could DD on the $3s and you'll have 100 at net .67 but you'll still be down about 50%.  Of course you have 19 months to go and that would be great if they get back to $4, where they were in March or $5.95, where they were in Feb and even the lowered guidance has them earning .45 a share next year, which is really only down from .54 estimated in Feb, when they shot up to $5.95 on a roughly 10 p/e expectation.  Oh, who am I kidding – I'd DD! 

    QQQ/Cjji – I'm was just answering a question about the possible pop tomorrow.  Frankly, if we don't get a big pop tomorrow I wouldn't want to be long June anyway but the June $64s are .77 and would likely lose the same .20 as the May $63s will tomorrow if we don't get a move up but they could do very nicely if we rally back as the Qs were $67 two weeks ago.  

    FAS/StJ – Nope, better take a stand – it's more fun!   Anyway, we have our SQQQ covers.  

    Going to be tense with Dow testing 12,500 again but not looking good.  DIA June $119 puts are $1.10 and let's do 20 of those with a stop at $1 for $25KP.  

  81. STO CCJ Dec $17 puts for 1.65

  82. Bilingual – interesting article on the merits of bilinguality, in re patterns of thought.

  83. aapl still taking it on the chin

  84. Just so you guys know how I'm working with AAPL today:     I'm daytrading it using a condor setup.   Went into the morning with a condor in this weekly's May 19 options:   BTO 570 calls/STO 565 calls    STO 530puts/BTO 525 puts.    Now with the stock moving down I bought back the 530 puts and let the 525 puts ride until I was significantly profitable, then sold the 525 puts, now holding only the bear call spread, which is also profitable at this time.  I'm working with hundreds of contracts.  The way AAPL is moving you can't just buy or sell puts or calls and come out ahead.  You have to "work the trade".   This stuff moves so fast I can't post the exact trades, but I want to let you think about the methodology I'm using to daytrade the stock.  Long term?  I don't think it's bottomed out yet.  And I agree with you Phil….anything could happen tomorrow.   

    Phil and others
    This morning I FINALLY was able to get out of my "held way, way too long" TZA from January 23rd, at an exact break even, including commission. I sold it at $22.17.  I sold HALF the position. I am holding the other half, since it is now break even, and I'm not sure about the next few days. So this was a SCALE OUT.   I have been PATIENTLY holding these TZA shares from January (which TOTALLY violates my own max time limit for holding TZA / TNA), waiting for them to come back. So patience paid off in this particular case.
    PHIL,  this is my FIRST EVER  "scale" (in or out).  Previously, I have always either bought an entire lot, or sold an entire lot. But by following your 'oft emphasized scale in-scale out method, I've now broken even on half my lot, and held the other half in case the bottom REALLY falls out over the next week or two. I'm placing a stop on that half, to dump it if it goes down much from here.
    I also BOUGHT one full lot of TNA this morning at $48.66 using a Limit order that I entered about 4 days ago, when the TNA was around $52.
    So I am now "balanced" two thirds Bullish in TNA, and one third bearish in TZA.  I'm very happy with this combination.
    (and other TZA/TNA players)

  86. Still looks like they are using AAPL to crash the markets to me.  

    At the open: Dow +0.06% to 12607. S&P +0.06% to 1326. Nasdaq +0.12% to 2877.

    Treasurys: 30-year -0.03%. 10-yr -0.08%. 5-yr -0.04%.

    Commodities: Crude +0.81% to $93.56. Gold +1.16% to $1554.35.

    Currencies: Euro -0.03% vs. dollar. Yen -0.19%. Pound +0.62%.

    10:00 AM On the hour: Dow -0.18%. 10-yr -0.02%. Euro -0.17% vs. dollar. Crude +0.47% to $93.25. Gold +1.1% to $1553.45.

    11:00 AM On the hour: Dow -0.28%. 10-yr +0.06%. Euro -0.06% vs. dollar. Crude +0.24% to $93.03. Gold +2.3% to $1571.95.

    11:46 AM An early rally attempt in Europe fails and shares close sharply lower as Spain's recently bailed out Bankia (-14.5%) has tofend off chatter of a bank run. Stoxx 50 -1.4%, Germany -1.2%, France-1.2%, Italy -1.7%, Spain -1.2%, U.K. -1.2%. The euro flirts with a 18-month low before bouncing, now flat at $1.2709.

    12:00 PM On the hour: Dow -0.41%. 10-yr +0.16%. Euro -0.06% vs. dollar. Crude +0.15% to $92.94. Gold +2.75% to $1578.85.

    Initial Jobless Claims: 370K vs. 365K consensus (prior week revised to 370K from 367K). Continuing claims +18K to 3.24M.

    Today's upward revision in last week's jobless claims makes the BLS a perfect 20 for 20 this year in needing to revise higher the previous week's print. Jobless claims have declined 101K this year if one bases their calculations on the announced headline each week. With the revisions, they've hardly budged.

    Apr. Leading Indicators: Leading Index -0.1% vs. +0.1% expected, +0.3% prior. Coincident Index +0.2% vs. +0.2% prior. Lagging Index +0.5% vs. +0.3% prior.

    May Philly Fed Business Outlook: Business activity -5.8 vs. 10.0 expected and 8.5 in April. New orders -1.2 vs. 2.7 prior.

    More on the Philly Fed Business Outlook: Input price pressures tailed off, as for the first time in nine months more firms reported price drops for products than increases. The number of companies reporting a decrease in employment outpaced the number reporting an increase, 16% vs. 14%.

    The Bloomberg Consumer Comfort Index slides to -43.6 last week from -40.4 previously, the 4th consecutive decline, and the lowest level since late January. The fall erases nearly the entirety of 2012's improvement. A reading below 40 translates to "severe economic discontent," says Gary Langer, whose firm compiles the data. (chart

    Chinese consumer confidence rose to a seven-year high in Q1, making China the world's fourth most optimistic nation, but that hasn't translated into increased consumer spending. In fact, China's discretionary spending has actually cooled as consumers opt to either save money or pay for education for their children.

    EIA Natural Gas Inventory: +61bcf. Futures -1.39% to $2.58. 

    Mexico's Q1 GDP increased 4.6% Y/Y vs. expectations of 4.5% and from 3.9% in 2011 Q4. The strong performance of the peso this year has failed to dent manufacturing or exports, with March's trade surplus of $1.6B the highest for one month since 1985. Mexico (EWW) vs. Brazil (EWZthis year.

    The divergence earlier this year between the Citigroup Economic Surprise (pointing to an improving economy) and Treasury yields (not) has been resolved in favor of Treasurys. Another decline this week has brought the mean-reverting index closer to its mean, while Treasury yields plumb historic lows. 

    Yesterday's drop in stocks and gain in bonds put the S&P 500 dividend yield 50 basis points higher than the 10-year Treasury yield. There were just 3 days in 2011 when the spread was greater than that – all would have been pretty good times to buy shares and go the beach for a few months. (h/t Bryan Mortenson) 

    The IMF calls on the ECB to cut rates and consider additional unconventional monetary policies. David Hawley from the agency says inflation expected to fall below 2% gives the central bank room for action. He also says the IMF will refrain from official contact with Greece until after new elections in June.

    "A powerful short squeeze," might well be the result of a Greek exit from EMU, suggests a BAML team, which sees the eventpushing the ECB to open up the Bernanke playbook. The call is a nice balance to much of the alarmist talk, but what happens down the road as the Spanish economy continues to contract?

    Bankia chairman Jose Ignacio Goirigolzarri hits the wires telling depositors they can remain "absolutely calm about the security of the savings they have in the bank," and calls the fall in deposits "seasonal." Bankia shares bounce, as does the IBEX, -1% after being down nearly 3% earlier. (previous)

    Lloyds (LYG -2.8%suspends two derivatives tradersfollowing a probe into allegations of the manipulation of the Libor interbank rate. Sources have said that staff have either been fired or resigned at banks such as JPMorgan, Deutsche Bank and RBS over the affair. 

    "What we're seeing in the eurozone is a slow-motion bank run," says Mike Riddell of peripheral (and even France) deposit flight that's made headlines this week, but has been going on for 2 years. The flight remains small in percentage terms vs. say, the U.K.'s Northern Rock which lost 5% of its deposits in a day and faced queues around the block.

    WHUCK???  Fitch's estimate of $566B in additional capital needs for the world's largest banks is likely to create a tradeoff for the lenders. A better capitalization ratio could lead to lower risk premiums, but more capital means ROE will suffer, maybe by more than 20%, thus reducing the bank's ability to attract investment.

    The world's 29 largest banks will need to raise an extra $566B in new capital by 2018 to meet tougher Basel III standards, according to a Fitch study. The extra capital would be a 23% increase on what banks held at the end of 2011, or roughly equivalent to three times their combined annual earnings. U.S. banks will be hit particularly hard by the relative capital requirements for risky activities.

    Having as bad a time of it as JPMorgan over the past

  87. Having as bad a time of it as JPMorgan over the past week is Morgan Stanley (MS) amidst renewed worries over its exposure to the EU periphery and the impact of what could be an imminent cut in its credit rating. The stock has given up the entirety of its big post-Thanksgiving rally, now -10.5% YTD

    Gold adds to earlier gains, +2.7% at $1578.60 and bouncing off 10-month lows on technical buying and as shorts get squeezed. Big miners rally: NEM +6.1%ABX +6.4%GG +7.9%,KGC +7.5%IAG +6.4%AEM +6.1%AUQ +10.8%. Smaller miners jump even more: MUX +14.7%BAA +13.7%PVG +11.1%AZK+10.6%.

    The bubble in the ratio of natural gas to crude oil has finally popped, and J.C. Parets doesn't see a recovery any time soon: "The average over the last 20 years has been a 10:1 ratio. We’re nowhere near that… When prices mean revert, especially after being this extended, they tend to trade beyond historical averages… I would not be shocked to see single digits."

    Emerging market demand will lift Brent crude to $115/bbl in H2 of this year, Saxo Bank's Ole Hansen predicts: "We are still seeing demand rising… All the growth in oil demand is coming from China, Brazil, India. Oil prices to a great extent will be determined by the developments in those countries."

    Pres. Obama will seek support to tap emergency oil reserves from other G8 leaders at a summit this weekend before the EU's July embargo of Iranian crude, Kyodo News reports. While Obama would be criticized for a second release of the strategic reserve during his term, it could serve as "a smart bomb detonated in the heart of the Iranian economy with no physical casualties."

    Thermal coal used in power generation was once seen as Australia's safe bet, but lately the bet is looking risky. Australian thermal coal has fallen to $98/ton, down 21% from its average Q1 daily price Y/Y; with concerns from lackluster Chinese demand growth to the European slowdown to a glut of U.S. natural gas competing for Japan's attention, it's hard to see prices powering back anytime soon.

    Up in AH trading yesterday after announcing its CFO is leaving, MEMC (WFR -18.8%) has now fallen to levels last seen in 2001. The struggling solar wafer/polysilicon vendor crashed last week after the poor guidance accompanying its Q1 report raised fresh concerns about its long-term survival.

    H-P (HPQ) is planning massive layoffs that, along with an early retirement program and attrition, could reduce its workforce by 10%-15%, a source tells BI's Julie Bort. It's also claimed H-P's services division will report an "abysmal quarter" when the company delivers its FQ2 results on Tuesday. Multiple IT services/outsourcing firms posted weak Q1 results (III). (previous)

    Frontier Communications (FTR -1.4%) continues to trade near multi-decade lows after announcing it will refinance $500M worth of debt by swapping $500M worth of senior notes due in 2014 and 2015 at respective yields of 8.25% and 7.875% with senior notes due in 2021 (no yield is given). As of March 31, Frontier, which sports a market cap of $3.2B, $ had $8.3B worth of long-term debt on its balance sheet.

    Shares of Sears Holdings (SHLD) take off, up 8.2%premarket, after the company announces a partial spinoff of Sears Canada and shows improvement with its Q1 report. Trading sentimentstarts to tip toward the thesis that the Sears descendancy will be a slow incremental trimming of assets – rather than the sudden death spiral shorts are looking for.

    Facebook's (FB) IPO price range has been finalized at $34-$38, sources tell CNBC, and the company won't be filing anotherS-1 before it starts trading. Facebook can still price its IPO above its range, but SEC rules would prohibit a price higher than $45. 

    F Congress!  The USPS says it will close 140 mail processing centers between now and February 2013 without waiting for final Congressional approval. A second phase of 89 consolidations is currently scheduled to begin in February 2014.


  89. I'm inclined to get out even on the DIA puts at $1.10 in the $25KP as there was a nice burst of volume as we tested 12,500 and essentially held it so I'm gaining confidence in this being a tradeable bottom (for now).  

    Thanks to those who replied to my inquiry two days ago about the best books on the 2008-2009 crisis. I ended  going with Andrew Ross Sorkins' book. I got it in paperback last night. It is 618 pages, so that should keep me busy for a while. When I finish that, I will look at the others that some of you recommended.
    THANKS to all.

  91. Construction Industry / Minnesota
    A few days ago, after wrangling and arguing the issue for about ten years (literally), the Minnesota legislature passed a bill that will result in the building of a new stadium for the Minnesota Vikings (and a 30 year lock in lease, I believe).
    Construction is expected to take 3 to 4 years. Total spending is currently budgeted at 975 Million, but I'm sure that will be 1.2 Billion before it's over.
    This will provide a lot of work for those in the heavy construction industry – steelworkers, concrete, general labor, earth moving, all that kind of stuff.
    Sadly, they are paying for it largely through gambling (sorry Phil), mostly electronic pull tabs and lottery tickets and crap like that. Well, I'm against that, but it's not as bad as the general public subsidy that they tried to get pushed through. Like I'm supposed to pay taxes to subsidize this farce, so that the Football Team owners can get even richer (current owner, "Ziggy" Wolf) is worth over a Billion Dollars), to pay for a stadium I will NEVER go to.
    Every time I go to the store I see people who are obviously lower working class, furiously scrapping off Minnesota Lottery tickets. I always shake my head. Free Will and all, fine, but sad nonetheless.

  92. USPS/Phil
    I still don't understand why the don't just raise the cost of a letter to .70 which would not be a big deal considering the amount of mail people send is much less.  Increase the costs for catalogs which not many people want to begin with and junk mail and keep the rates stable for everything else.  Also it seems with a lot less mail that they can lay off some postal workers and give others bigger territories since again, there is less mail.  Kind of punishing the whole country to get slower mail service.  The other logical move is actually collect some corporate taxes and use just a tiny portion of it to subsidize the USPS.

  93. TZA   Decay   (LACK of)
    April 27     RUT=825.47     TZA=17.59
    May 16      RUT=772.11     TZA=21.21
    RUT percentage change= -6.464%
    TZA percentage change=  +20.58%
    divided by 3 = 6.86%
    This illustrates the fact that TZA (and TNA presumably) can move at MORE than the 3X rate, during times of consistent linear trending of the underlying, due to the compounding, in this case benefitting the owner of TZA shares.

  94. AAPL/Maya – I'd roll now as they could be much worse tomorrow.  The June $470 puts are $4 and that gives you a nice $60 to play with (12%) but if AAPL dropped 5% tomorrow (about $25), then those $530 puts would be about $25 and you'd probably have to roll to the June $520 puts, as they are now $14.90 and the $545 puts ($25 higher) are $27 so look how bad your position could possibly work out if you are unlucky…  

    LOL 1020!  I'll be remembering that one.  

    SQQQ $55/70/Jerconn – Yes, that is what I meant for the $25KP, NOT The QQQ spread – that would not be good protection!  

  95. and on an unrelated note, Donna Summer died, she was 63.

  96. Phil / USPS — Nice to see someone with the nads to make a decision without waiting for congress. 

  97. Hello All – Are gasoline prices going up for the rest of you not living in CA?  Prices here have gone up about 20 cents in the last week or so.  Good thing Jerry Brown wants to raise taxes on us….

  98. Phil – WFR – buying the OCT $1 calls for .89 and selling 1/2 the June $2 calls for .13 – do you like it?

  99. Donna Summer – Wow…. rest in peace….. :(

  100. Nice drop on USD/JPY to 79.15
    FXY now just above 124
    Buying FXY Sep put 121 for 1.90

  101. ink / gas — $4.25 here a couple days ago. Up about 0.25 from a couple weeks ago.

  102. Phil,
    what's your target on IYR ?

  103. Phil / FAS Money
    I don't even really know what to say.  We have 1 day until Ex.  There is terrible news from Greece, and the banking sector.  The last time I DIDN'T get ouf of the FAS money play and it kept on going against us, I lost $15K.  This time I decided to take the loss and NOT let it get out of hand, even though it was still pretty out of hand, and I still did the wrong thing?  
    FAS could collapse at any point depending on a bad news release.  I started playing FAS money when the news was all happy and good and Greece was fixed.  I was actually positive on all FAS positions until we shot from 95 to 80 in a week.  I don't see how scaling into the the positions would have helped.  I'm just playing along as best I can, but no matter what I do I seem to be making the wrong decisions.
    I go long at the tops, and go short at the bottoms and constantly take losses.  I followed the 25K, and reached my max pain point when we were down 25K, then I cashed out and missed the 25K of profits.  Right now, at this time, I feel that whatever I do is actually the opposite of what will make me money.  I'm going surfing to clear my head and try to figure out how to prevent this behavior that is just costing me cash.

  104. FU CHK!!!

  105. WFR – is NO ONE going to buy the actual stock down here? They are now lower than book value. Yes debt has gone up..but at current low rates is probably an ASSET going forward.

  106. PSW Invoice – today is day 1 of year 2 here, and I was making $ on a TZA hedge as my first trade last year as well.

  107. WFR/ Scottmi:  I am so tempted to buy more- I went long yesterday and did buy/ writes for a net entry at .87.

  108. Solars catching a bid…

  109. Burrben:  you can stop playing the short side, even if temporarily. Then, you only have to worry about losses in one direction.
    Losses on shorts are technically infinite and since the market has a natural tendency to trend upwards, so your odds are better on the long side.  Its also easier to catch bottoms than the tops, especially in the age of the Central Bank Put (and to a lesser degree, the Buffett Put).  We've already seen markets go up 100% in recent years, so its not as frightening riding out the crashes than the slow-motion rallies.  I decided a couple of years ago that I was a natural optimist and am ill-suited to short-selling.

  110. kinkistyle – Exactly how I feel.  Well put!  :)

  111. hedged my shorts as it looks like big time dollar manipulation- maybe setting up for the facebook rally

  112. tlt seems to be ticking up while market is doing the same,any thoughts?

  113. jabobeast – at least CMG and PCLN making you happy – any particular epithet to signal that … now that CHK has taken their place … :-)

  114. FB my sense is that it will soar to insane heights in morning or maybe even first day or two…and make multi-year top…..maybe permanent top

    GREECE:i think its very possible greece votes in more moderates next election that could cause a big surge, but that will likely be last surge before another big swoon…things are coming unraveled globally now

    the BRICs are a major problem…people dont realize how big yet

  115. FAS Money/StJ – OK on that roll.  

    Philly Fed – AND building inventories.  That's a total disaster.  

    Bi/Scott – I'm a big fan of that.  

    How is it possible that AAPL May (tomorrow) $535 calls are $4.50?  That is crazy.  The only thing crazier would be selling them short!  I do like the June $550/570 bull call spread at $6.25, selling the $480 puts for $5 for net $1.25 on the $20 spread.  

    Nice job Newbie!  Isn't it so much nicer to be balanced?  

    Lottery/Newbie – I put up with it because they usually pay for education but paying for a stadium with poor people's money so rich people can buy $100 seats and $8 beers is despicable!  

    USPS/Rustle – Because the Reps want them BK and to turn it all over to UPS and FDX and then you'll pay $2.70 to send a letter and then poor people will no longer be able to annoy rich people with letters and such.  That's been the plan for 20 years. 

    TZA/Newbie – Well, you are measuring it after a particularly productive streak of down days where it compounded but that's what you play those for – a nice consecutive move in your favor.  

    GOOG still going up.

    Donna Summer/Rustle – That's sad.  Used to see her all over NY back in the days of disco. 

    USPS/Rain – Well they've kind of been waiting for 2 years.  The Reps have stopped every single bill and backed them into a corner. 

    Gas/Ink – What's the difference if Jerry Brown jacks you up .50 a gallon or speculators do it.  That's the problem – they will charge as much as you can possibly afford no matter what so if Brown lowered taxes to zero – they'd only raise the retail price to compensate.   Initially you may get a bump but, in state after state, over time the prices tend to end up at about the same level no matter what the taxes are (allowing for production and distribution differences, of course, and CA is short on both). 

    WFR/Jrom – sure, work it off over time. 

    Yen/Lionel – I agree, that was very strange and should reverse once the BOJ wakes up (2 am over there). 

    IYR/Smala – Oh yeah, that's a good one!   $60 should probably hold for a bounce but, if that fails, the 200 dma is $57. 

    FAS Money/Burr – I'm saying that if $3K or $15K mean a lot to you, you shouldn't be playing with something that can cost you that much in a single session.  It's gambling, pure and simple – and long-shot gambling at that.  We did this last year and rode out a pretty nasty loss and ended up with huge gains but ONLY because we stuck with it.  The range on FAS is $50 to $110 since November – that means that in any given month, you should not be in the least surprised to see a $15 move and, of course, you should allow for double that when allocating capital.  So if you sell just one contract for $3 ($300), you have to be prepared to lose $30 ($3,000) if you sell 5 shares for $1,500, the chance of you not losing $6 ($3,000) at one point or another is practically zero and most likely you'll go up and down $5-10,000 at various points.  Before you trade anything – look at what the range was over the past 6 months.  Good idea clearing your head and a better idea paper trading when you come back to get used to the ebb and flow and learn what your tolerances are.  

    Happy Anniversary Canuck!

    TLT/Sage – Indicates still plenty of panic but holds up with the theory that there is simply no safe haven for money at the moment so some goes to cash, some goes to US equities and some goes to TBills.  

  116. greecelong term rating  just cut by fitch

  117. Pharm - ouch on ONTY. DD or hold?

  118. TLT Sept $110 puts at $1.08 – $10 in the $25KP

    They were $5 on 4/3!


  119. Danger zone levels right here….

  120. AAPL – Andy Zaky from Bullish Cross has put out a BUY article for Apple.  Apparently, has only done so 4 times in the past 6 years.  Anyone else follow him or vouch for him?  My friend says he knows his stuff.

  121. Lol – Andy knows his stuff for intermediate or long term trades, and here he is saying that AAPL is well below it's lower B line and very low RSI as well, he has never seen it so low since the 2008 financial crisis…time to buy!  Short term trades – follow Lflan!

  122. jerconn – do you have membership to his site?

  123. Phil,

    I’ve been fortunate to have made some good money on my EDZ and TZA plays. Now I’m holding on to 10 Jul 10 calls at 2.75 (I already sold half of my 20 yesterday). Thanks! Europe is a mess and I can’t get a handle on which way the market is going though I do think Europe continues to fall a little longer. I agree with your statement that US equities should go up b/c there is no where else to invest. I feel like we’re in a wait and see period but feel a little uneasy that I don’t have many downside plays.

  124. lolobear / AAPL - I ran across an article last night on SA that was doing fundy analysis on AAPL and agreed with Zaky that the sweet entry point will be around 520, if AAPL gets there.  500 would be a real gift but both writers think that's unlikely.

  125. XLF / FAS - FWIW, on 1/30, Kimble posted a chart with a multi-year trendline on PFF and said that when this line is broken, it's bad news for bank stocks.  My alert just triggered, the line has been breached.

  126. Phil, I have a BA May $72.50 puts sold at 4.97. Do you think it's a good idea to get assigned and the write puts & call against it or roll. Either way is fine with me. Please advice. thanks

  127. AAPL / Lolobear – I have a Fib line at 537 and if you look back at the price action early March, $530 seems like a support area. The next one is around $500 and as MrM says, that would be a gift!

  128. BRICs/Angel – I'd say our 2,000% returns on EDZ are a pretty good indicator the BRICs are in trouble!   As to Greece – can this possibly be news to anyone?  I'm shocked every time they pay a bill….

    Buy/Lolo – I don't know who he is but I put up a buy comment on AAPL earlier and no one alerted the media.  8(  

    Congrats Japar!  If you're in cash – what do you care?  Just wait for things to get cheaper.  If you want a nice, new hedge – I love my SQQQ play and then EDZ is always fun while it's under $20:  

    EDZ July $17/23 bull call spread at $1.30, selling 15 puts for $1.25 if you are brave nets you in for .05 ($11.50 was the low) or, of course, offsetting with any of our long put plays for $1 or more and you are .82 in the money to start and a BRIC collapse gives you back (on the .05) 119x on your net nickels!  

  129. Pharm, I'm buying the theory that hedgies are liquidating some holdings to buy FB, ARIA dumped a week's worth of gains in a few minutes today on no news, the FB explanation fits…

  130. Phil said:
    TZA/Newbie – Well, you are measuring it after a particularly productive streak of down days where it compounded but that's what you play those for – a nice consecutive move in your favor
    Yes, I know. That's why I chose that specific time frame. My only point was to point out that the "compounding decay" that most often works against a holder of TZA can actually be a "plus" when you catch a nice linear run in the RUT like we have had. Or, at the very very least, in a case like this, you don't "loose" by having an effective multiplier of less than 3.00.

  131. 2:09 PM Online travel stocks take a beating, with Expedia (EXPE -4.2%), (PCLN -1.9%, Orbitz Worldwide (OWW -8.7%), and Tripadvisor (TRIP -4.4%) all underperforming market indexes. Though shares of (CTRP +8.1%) are downright giddy following a pair of analyst upgrades, the broader theme from the analyst coverage paints a picture of intense competition and shrinking margins in the sector. (Read the comments on this)

  132. IYR puts just turned 100% gain. i'll take it!

  133. "…from hero to zero…"
    I think CNBC will be talking about WFR next…

  134. Lines/MrM – But how can you look at a "multi-year trendline" and consider it breached when it's broken for less than 24 hours?  Or a week, for that matter…

    BA/Jophil – In a panic market, I'm a fan of maintaining maximum flexibility so, rather than tie up cash in BA, I'd roll the May $72.50 puts ($2) down to the Aug $70 puts at $3.70 so you get paid another $1.70 to buy it even cheaper (and for waiting).  That drops your net entry to $63.33, which is 10% below here and then that's rollable too, of course.  In fact, you can roll those Aug $70 puts to the 2014 $50 puts (now $3.90) and, at that point, I bet if BA ends up at $40 you'd be happy to be assigned 1x at $50 and buy another 1x at $40.  Keep in mind you can always get bullish on BA with something like the 2014 $60/80 bull call spread at $10 – you're not going to miss anything as maybe it would run to $11 if BA pops 2 or 3% so there's no need for you to guess a bottom.  When you wish you would have sold more puts – THAT'S the bottom!  

    LOL Jabob – I actually have that knife-holder in my kitchen!  

    TZA/Newbie – As long as you realize that.  

    Travel/Jabob – How come we saw this 3 months ago?  

    IYR/Scott – Very nice.  

    2nd attempt at the bottom – we'd better hold this one!  

  135. TLT/Phil – just to be clear; are you suggesting buying 10 contracts of the Sept $110 puts for the 25K Portfolio?

  136. THat's All?!!

  137. AAPL/Phil – that's hillarious!! Sorry Phil, you're my main squeeze.  But doesn't hurt to look at the menu once in a while even if you already know what you wanna order. 

  138. angelcur wrote:
    FB my sense is that it will soar to insane heights in morning or maybe even first day or two…and make multi-year top…..maybe permanent top
    I agree exactly. It might hit  another "top" sometime in the first year, I can't see how it stays up after that.  Tooooooo…… much hype on this thing, and a lot of Retail investors are going to loose big $$

  139. SPWR up 10% due to reuters report that Apple will be using their panels for Apple's new solar farm….

  140. 1310 is S2 on \ES and it has held so far, but S3 is at 1299 and that would be very bad….

  141. NOK - interesting, the woes of being a very small country (from Reuters): "At its peak, Nokia accounted for 4 percent of Finnish GDP and supported a myriad of companies as suppliers. Today it contributes closer to 1 percent… On Tuesday Finland reported a second straight monthly current account deficit… For the 5.4 million Finns, the message is stark: prepare for tougher times, later retirement or lower pensions."

  142. IYR/phil – and thank you, Phil,  for that from the long put ideas. next time i need to remember to put a trailing stop on it rather than just close it!


    is an excellent reference for seeing gasoline prices in near real time, state by state.
    And this:

    shows the State Tax per Gallon.
    and this:

    shows the total Tax Per Gallon in each State, that INCLUDES the Federal Tax.
    Very interesting information. 

  144. Phil – BBY is sitting on and reacting well to it's '08 lows….

  145. TLT/Bolt – Yes, buying 10 puts.   

    V, MA and AXP falling as expected.  Gotta love that fresh horses theory!  

    Menu/Lolo – That's OK, I'm only a little jealous… 8)

    1:00 PM On the hour: Dow -0.6%. 10-yr +0.13%. Euro -0.02% vs. dollar. Crude -0.31% to $92.53. Gold +2.57% to $1576.15

    2:00 PM On the hour: Dow -0.54%. 10-yr +0.17%. Euro +0.04% vs. dollar. Crude -0.33% to $92.5. Gold +2.41% to $1573.65. 

    Moody's downgrades its ratings on four Spanish regions, dropping two of them – Catalunya and Murcia – to beneath investment grade. The reasons are the usual ones: "A significant deterioration in the four regions' debt metrics … considerable uncertainty surrounding (the) capacity to reach the 2012 deficit target." Bank downgrades are expected later.

    Remain underweight Brazil despite easier monetary policy, argues BCA, saying the nation's banks face difficulties on two fronts: Funding difficulties as EU banks delever, and deterioration of credit portfolios as delinquency rates rise even with unemployment at a record low. EWZ -8.8% YTD.

    Indians’ affinity for gold pushing country into debt (Washington Post)

    E-Commerce China Dangdang (DANG -15.1%) plummets after delivering soft revenue guidance to go with mixed Q1 results. The online bookseller says it expects Q2 revenue of RMB1186M ($187.5M), below a consensus of $202.1M. Also, Dangdang's Q1 cost of sales amounted to 85.8% of revenue, up 530 bps Y/Y. A mix shift towards lower-margin general merchandise sales relative to media sales was responsible for the increase. Amazon (AMZN) canprobably sympathize. (PR

    Why China’s RMB exodus IS the story (

    Caterpillar (CAT -4.1%) is the Dow's biggest decliner after announcing slowing global sales growth of construction and mining machinery in the three months ending in April. Asia/Pacific +5%; Europe, Africa and Middle East +14%; Latin America -13%; North America +32%; world +12%.

    China Slowdown to End in Third Quarter, Survey Shows (Bloomberg)

    The U.S. Postal Service intends to close or combine 140 processing plants over the next few months and then close another 89 facilities in 2014, leading to the loss of 13,000 jobs and savings of $1.2B a year. The measures could result in slower delivery for some and come after Congress failed to meet a deadline to pass overhaul legislation. (PR

     H-P (HPQ +0.2%) plans to cut 25K jobs, or a little over 7% of its workforce, Bloomberg reports. A prior report claimed the IT giant is looking to trim its workforce by 10%-15% through layoffs and other means.

    Airliners made a bit less money from baggage fees last year due to the fewer amount of fliers. Leading the pack was Delta Air Line (DAL -6.5%) which raked in $863.6M – a mark that swung the carrier from a loss to a profit. Spirit (SAVE -6.1%) earned $134M with its unique pricing matrix of charging for each service customers use, including carry-on bags – while Bags-Fly-Free holdout Southwest Airlines (LUV +0.1%) piled up a lot of goodwill with customers instead of cold hard cash.

    Several large hedge funds and advisory firms sold large positions in Chesapeake (CHK -3.4%) in Q1, showing CHK was losing some its luster even before its odd financial arrangements became widely followed. SAC Capital sold 91% of its CHK holdings in the quarter, Millenium 86%, Fidelity 59% (but still held $164M at the end of Q1).

    Facebook (FB) will likely price its IPO at $38, the high end of its $34-$38 price range, the WSJ reports. That would translate into a market cap of $104B. However, it's added "discussions are still fluid." Facebook is also expected to sell its entire over-allotment option, which means $18.4B worth of shares will be sold in the offering.

    Spotify is set to raise "hundreds of millions" in a new funding round at a valuation as high as $4B, the NYT reports. Such a valuation would represent a 16x price/sales multiple of Spotify's 2011 revenueof $250M, and give the company a market cap more than twice that of rival Pandora (P -9.5%), which is selling off after rallying over the last week. Spotify, estimated to have ~20M monthly users and ~3.4M paid subs, recently launched an Internet radio service that directly competes with Pandora.

    Is the Facebook IPO hurting Apple (AAPL -1.8%)? As shares fall further below the levels they traded at prior to Apple's strong FQ2 report, one theory making the rounds is that NASDAQ index funds are selling to make room for Facebook and its likely $100B+ market cap. In addition, Bloomberg reports a number of major hedge funds, including SAC Capital and Viking Global, took profits on Apple in Q1, though they collectively still held 37.8M shares at quarter's end.

    SunPower (SPWR +10.6%) spikes higher after Reutersreports Apple (AAPL) will use its solar modules to power its giant Maiden, NC data center, which opened last year. Apple's solar farm, which also uses renewable systems from startup Bloom Energy, will produce 84M kWh of energy annually. 

    Three lunchtime reads:

    1) Making leverage your friend

    2) Money is fleeing China

    3) Seven reasons I don’t mind sitting in cash

  146. RUT
    Rather be Lucky than Right
    On Tuesday at  4:36pm I wrote:
    I think we're going to see 760 within a week"
    :)  :)   :)   :)

  147. NOK/MrM – It's like being a company town.  

    IYR/Scott – You're welcome.  I like to take 1/2 off at 100% and then set a stop on the other half at 80% so you get 90% of max gains in the very least but no limit on additional move (trailing 20% usually does the trick).  

    Gas/Newbie – Nice set of data.  A little hard to line up but Alaska (.16) and NJ (.28) and Wyoming (.27) have very low taxes but they still pay $4.52, $3.60 and $3.60 for gas while Washington charges .75 and pays $4.21, North Carolina charges .77 and pays $3.59, Maine charges .62 and it's $3.77 – so pretty much as I said – there's no real correlation between state taxes and pump prices – no matter what your state takes the speculators will fill the gap to whatever the consumers will pay so why not let the states make $1.50 and the speculators take .60?   At 1,500 gallons per household per year in NJ that would drop $6.75Bn into the state's budget – that's about 25% of my state's total budget!  

    BBY/1020 – I wouldn't know because I'M NOT LOOKING!  8)  

    91M at 3pm on the Dow – about the same as yesterday so far (finished around 140M). 

    Dollar 81.54 so don't blame the buck today.  Oil hugging $92.50, TLT $123.97, gold $1,573, Euro $1.2712, Pound $1.5815 – Yen failing to recover at 79.26 but EUR/CHF, you will be relieved to know, is trading at 1.2009. 

    I mean, seriously, how can you participate in the Forex market when there is such blatant manipulation every day.  How could you even begin to delude yourself that charts or news or anything else matter when you KNOW a currency can be manipulated with that kind of precision?  

    Nat gas picking back up sharply – $2.62.  Gasoline is a good poke at the Futures at $2.878 for a bullish play (/RB). 

  148. RUT (/TF) a nice play off the 760 line with tight stops and, of course, good old Dow (/YM) 12,500 also good for a bullish play – especially with S&P (/ES) over 1,310.  

  149. Phil/BBY    :)  

  150. Good Afternoon
    Phil—what do you think of going long /RB into the weekend and memorial day? also would like your thoughts on silver right now

  151. QQQ -  this week $63 calls -, is that 99k contracts traded today?


  152. $5KP – TNA $47s now $1.25 and we spent about $2 to be in them so $375 down the tubes but silly to hold it overnight and risk losing another $600 – hopefully we'll get them next time.  

    $25KP – As we have more firepower here, we can spend $1 to roll to the June $52 calls and play our hunch that this is a bottom.  

    AMZN now just greedy not to take the $5 for the $195 puts so we're done with those.  

  153. CanuckQQQ 63
    sure looks that way to me and about 16 % more in the 63 puts

  154. Ugly day to trade!
    Been waiting for a sign of rebound but running out of time. Hope all are chashy tonight FB may be the biggest bust ever.

  155. RB/Savi – See above, I just called that one.  As to silver – I don't like it at all.  ABX I love, gold or silver, not so much.  

    QQQ/Canuck, Sage – That's a lot of calls!  I don't like that because it means someone has 10M reasons to keep the Nas down tomorrow.  

    Stick/Jabob – Why would they stick now.  They dumped all their shares on the retail bagholders and now the media is busy giving you 100 reasons to panic every day and, when all the suckers have cleared out and driven prices back down – THEN the funds will come back in and Mr. Stick will make sure that GS's next 100 trading days are as perfect as their last 100….

  156. good point Phil ;-)

  157. phil/5kp – TNA – I am not sure if i understand, are you saying close out the spread?  

  158. Jabo- he must have booked a trip on PCLN and is down eating burritos at CMG :)

  159. You guys thinking what im thinking…. 12,200 here we come….

  160. QQQ – or they have 10M reasons to stick it to 64 tomorrow if they own those calls…

  161. the exact opposite of the slow climb of 1st quarter- no panic- but noone brave enough to buy!

  162. Phil/TNA – It's falling fast and expires tomorrow, closed out at 55% loss, sucks but better than 100% :)  

  163. Alright so I was as bearish as can be the whole year, the very morning this thing turned 10 days ago I capitulated…needless to say I got killed and right about now I would be up on the year…that graph Phil always shows well it was me personally that turned the market…absolutely crazy…if you see someone running around with a barrel for clothing that'd be me:)

  164. jthom-- well you know he isn't shopping at BBY!!!
    Maybe he is hanging out with Boone?

  165. TNA/$5KP, Jabob – Yes, we bought back to the caller earlier (or if you didn't then same thing) and now we're done before it gets worse. 

    Transports down 3%!  

    VIX getting to 24, TLT $124 but the Dollar not moving at 81.62 that's something different today. 

    Oil just failed $92.50 and now $92.20 and I'm very surprised gold (/YG) is holding up at $1,574 – makes a good short below $1,575. 

  166. kustom / thinking — Close, I'm thinking a pause at 12,300.

  167. Wow, BA < 70.

  168. If you guys are playing /RB, I have:

    S1 – 2.8937
    S2 – 2.8723

    And we have been bouncing between the 2 this afternoon.

    S3 is at 2.8416 just in case!

  169. Mid-way between S2 and S3 on the /ES futures, could get ugly and they better fix Europe overnight because FB won't fix that mess….

  170. Phil,
    Capitulation, blow -off bottom in the making?

  171. And XLF down a full 2% today… right through $14! TLT at 124.


  172. wynn down 37 points in th elast week
    tvix block selling

  173. worst start to may for spx since may 1970

  174. I am NOT long AAPL

  175. Now I at least don't feel as dumb as I did this morning.  78 on FAS.  I didn't sell any June rolls, I don't think we are done falling yet…

  176. Hey look, TBT is at 16.40 now… How selling some puts now?

  177. TNA/Scot – Right you are on better than nothing.  

    Barrel/Sage – The trick is to be 1/2 cash when fully committed.  Then, rather than "capitulate", you just add positions in the other direction as things go against you.  While it's a little frustrating to be neutral when the market makes a good move – if you sell more premium than you buy, it's a nice, steady build that will keep you in barrels.  

    1.72% on the 10-year – THAT'S PANIC! 

    Capitulation/8800 – Not really enough volume.  

    May/Angel – Gee, people should probably sell in May and go away….

    TQQQ June $55 calls at .50 were $2.20 a week ago – fun way to play bullish FB tomorrow (craps roll).  

  178. I need some TBT help.  Been rolling puts since I bought back a busted bull call spread .  Have 2 short Jan $23, which are $7.00.  I'm sure they'll get back there one day it's just a margin intensive position to hold.  Don't really want to double down again.  Originally sold the $30 put for $1.20.  Any suggestions?  Just a bad trade from pre-PSW that I am paying for now.

  179. Made the most money today shorting AAPL.  Tomorrow will really be interesting.  Players seem scared.  Could we perhaps get some AAPL tomorrow for less than $520?  

  180. rain sticking with my call, take a look at the Dow chart. Blow off top in Nov was 12,200. The run up into Dec through May of 2012 was BS thanks to global CB's.

  181. Wow, saved by the bell (sort of)! 

    That was a terrible, terrible day for the market.  A fantastic day for our short plays but a terrible, terrible day for the market.  Massive technical damage has now been done and Asia will likely freak out tomorrow morning and Europe is already freaked out BUT that's a good time for us to turn things around as we can whipsaw the drop and Asia and Europe will be closed so the Funds who buy at this bottom – if they can push a 1%+ close, can pretty much count on Asia and Europe popping the Futures on Monday to catch up.

    So we could be in for another fun day tomorrow or, this could be the abyss and we're now in it…

    Have I mentioned how much I like cash lately?  

    TBT/Rperi – The problem with TBT is they decay over time so it's hard to play them for a long-term recovery.  Now $16, you need a 50% gain and I'm looking back on TBT 3 years and I don't see ANY 50% gains.  I'd ditch them and establish the TLT puts.  TLT might go to $130 but that would be insane panic and not likely to be sustained.  That's why we went for the Sept $110 puts, now $1.15, in the $25KP as we're happy to DD or roll if TLT goes higher and, like our long put list – a little patience goes a very long way.  You have a net $1,400 obligation plus margin, and about $1,200 is a loss.  Don't you think it's more realistic that you'll double up on 10 Sept $110 puts ($1,150 and no margin) since the $115 puts are $2.25, which means you need a $5 drop in TLT to get over $1,000 back (assuming it happens in the near future) vs a $5 drop in TLT taking you back to where TBT was last Friday at $17.75 – that's not very helpful, is it?  

  182. Long Put List Exit
    Not that he needs any help with it, but I'm going to blow Phil's horn for a second……….
    I haven't seen this calculation here today (I might have missed it), so…..
    IF I did my arithmetic right on the list as posted here earlier today, and IGNORING any subsequent changes, updates, rolls, DD, etc that were published AFTER the date of the first publishing in March, it looks to me like the Net Average of the 18 picks comes out to about 35%.  In TWO months. Annualizes to about 210%.
    Heck, that's nothin'. I do that all the time………. (Not)

  183.  ms increases its cap on fb shares to 5,000 per client, up from 500….that is bad sign i think

  184. In the Futures we have Dow (/YM) 12,400, S&P (/ES) 1,300, Nas (/NQ) 2,500 and RUT (/TF) 750 all being tested at the same time – a failure of those levels will take catastrophic to a whole new level!  

  185. FB / Listed Options
    Listed Options Contracts on FB are scheduled to begin trading May 29 through OCC

  186. Phil, Shadow, STJ or anyone.  There was a HUGE vix drop about 4:05 – 4:10 that only lasted a couple of minutes.  Can any of you tell if selling or any transactions were happening at that time?  I have some SPX long Puts that were up $1,000 / contract that went to -$500 loss / contract at that time which was why i noticed it.  At the same time TLT had a huge drop to 123.5 at that time.  The dollar didnt move. 
    Could that be a huge seller that flooding the market which drops the price, in response to lower price the vix drops.  Maybe "they" are  dumping their position in anticipation of a large move up tomorrow.  I wish i would have been fast enough to offer to buy at those prices to see if they were valid.  The strange prices, vix and TLT levels only lasted a couple of minutes.  Or, was it a computer error?  …..  I don't know how the market makers pricing models work.  If there was a flood on the market it would have dropped the price as the sellers overwhelmed the buyers.  I don't know if the implied volatility would have automatically dropped to compensated to make the price fit the market price.  Does anyone know about that stuff. 

  187. FB prices at $38? Isn't that towards the bottom of the range?

  188. Actually on close look it looks like the Dollar jumped up at that time also.  It was closer to 4:03-4:05.

  189. Ugly…..

  190. It's tough to remain bullish looking at the levels… We have breached the Must Hold and the 5% lines in about 2 weeks now! And not timidly either, big 1 or 2% moves! Testing the 10% line before we bounce is a definite possibility as they are also psychological lines line Dow 12,000 for example. 

  191. stj--thx for the /RB levels

  192. These numbers are getting unreal… AAPL has lost $104 Bn in market cap since its peak. That more than the market cap of all companies in the US but for 21 of them!

    That's a lot of money!

  193. /RB / Savi – I should post them in the morning. It's no sweat of my back…

  194. stj—that would be great--merci

  195. Phil – Where do you see a realistic upper range and lower range for XLF over the next 60 days? Thanks!

  196. Interesting After Hour Trading -  Last 3 minutes had anxious TZA (RUT 3x short) sellers but not very interested DIA buyers.  (net long DIA & net long TZA).

  197. Karl, how can you tell that about TZA / DIA?  TIA.

  198. rob – I was buying TZA and selling DIA.

  199. Phil
    Only a few weeks ago, I bought some May QQQ 67 puts at 2 and have cashed out. You were correct about the likely pullback.
    Now I see that the June QQQ 67 calls are trading at .11—that's right--    .11  So I am thinking bottomish--at least for a bit.
    And the VIX is up a lot since late April.
    So I will buy those 67 calls hand over fist tomorrow afternoon so long as the Facebook is not a Faceplant IPO by close of Europe tomorrow.
    Otherwise, I'll be cashy and cautious.

  200. stjeanluc 
    Can you please post a link to the portfolio google spreadsheet?

  201. yshenhar  - Here is the LINK to PSW Portfolios (tabs at bottom).

  202. Karl Thanks

  203. TOS mobile app users – do not update to version 12.1. My TOS on the iPhone crashes during load process. The mobile app is now useless!!

  204. Looks like a big wheeeee in Asia with some indices down over 2%. Tomorrow should really be fun as Europe will play catch up and the downgrade of the Spanish banks should grease the skids. Either we grab a life saver quickly or it could turn nasty very fast.

  205. you have to assume there is something in the works using this FB timing as a crutch i am tempted to be a buyer…its taken me months to get into the black on my shorts so i am a but equivocal about believing this is a bottom of any durabilty..someone remind me about how to post a chart and i will or st jean i can send it to you..metals look very interesting as well..oil has to be watched as if there is a whiff of QE then we go parabolic..and with JPM looking a little soiled ben may be thinking hey its g 20 week end..lets partay!!!
    oh and

  206. Thanks Newbie! 

    FB/Angel – My brother first gets 1,500 shares and then calls me and asks what to do with them – unbelievable!  He says he knows it's overpriced but he'll just make a quick $25,000 and get out.  What a scam IPOs are.  Even if he's right – it's just a game about who gets there first and who dumps it at the best price.  I said to him I wouldn't touch them for $38 because there's no way they're worth $100Bn and he says it doesn't matter because people are excited.  To some extent he's right but what a BS little system we have here for shuffling money around and adding zero actual value.

    FB options/Newbie – I can't wait.  I only hope it manages to stay up that long so we can short them!  

    VIX/Robert – If they all moved together it was probably a bot running some program it shouldn't be running after hours in thin trading.  

    $38/3putt – No, that's right about $104Bn, which has been the whisper for months.  

    Hang Seng and Nikkei both opening down 2%, by the way.  Shanghai down just 1% and waiting on India.  

    Big Chart – About as ugly as we've ever seen it.  This is going to really suck if they can't pull out a bounce tomorrow.  

    AAPL/StJ – Yes but FB is gaining $100-150Bn tomorrow so it all works out, right?  

    XLF/Diamond – Figure no Fed and they could hit $12.50 in a Euro melt-down but intervention from EU and Fed should blast us back to $15-16 easy.  

    QQQ/Streth – I like that idea.  Worth a shot and your attitude on it is right.   Faceplant very catchy!  

    At the close: Dow -1.2% to 12448. S&P -1.46% to 1305. Nasdaq -2.1% to 2814.

    Treasurys: 30-year +1.06%. 10-yr +0.23%. 5-yr +0.02%.

    Commodities: Crude -0.31% to $92.53. Gold +2.43% to $1573.95.

    Currencies: Euro -0.09% vs. dollar. Yen -1.35%. Pound +0.68%.

    Market recap: Stock losses piled up in the final hour, succumbing to concerns about Spain's banks and the potential for a run on southern European banks that outweighed Wal-Mart's upbeat earnings. Yields on 10-year Treasurys slid to 1.7%, with the next target the all-time intraday low of 1.672%, set last September. NYSE decliners topped advancers more than four to one.

    A contrarian buy indicator? The AAII's latest investor sentiment survey shows bullish sentiment falling to a mere 23.6% (down 180 bps) for the week ending 5/16. Bearish sentiment is nearly twice that at 46% (up 390 bps), and Neutral sentiment is at 30.4% (down 210 bps). (previous)

    A contrarian signal if you ask Bill Lubby, over 1M put contracts have already been traded on the S&P today – nearly 2.5X the average and following 913K yesterday. Over the past couple of years the "rare instances" when put volume reached 1M typically coincided with bottoms in stocks. 

    For the past three years, traders have made a killing buying the dips. Not today, says CNBC's Bob Pisani. After days of trying,buyers have now stepped away, staging a sort of "buyers strike" and leaving stocks to drift lower. That can be dangerous, Pisani warns, because spikes in the VIX, like what we saw today, leave the markets extremely vulnerable to big moves down over the coming days.

    Citi technician Tom Fitzpatrick sees stocks sinking as much as 28% in the coming weeks, citing a "very significant break" above the 21 resistance level on the VIX. In gold, the next trending move is higher and ultimately will send the metal to new all-time highs. On the 10-year T-note, get this: he's looking at a "long-term channel" at ~1.15%.

    As expected, Moody's cuts its ratings on 17 Spanish banks by one to three notches. The song remains the same: "Adverse operating conditions … Reduced creditworthiness of the Spanish sovereign … Rapid asset-quality deterioration." Santander (STD) andBBVA receive cuts but remain the most credit-worthy of the nation's lenders.

    Big U.S. multinationals are holding at least 60% of their cash offshore - ~$588B – with some keeping nearly all of their corporate cash balances in foreign accounts, according to a J.P. Morgan study. Apple (AAPL) had the most at $74B, or 67% of its total cash holdings; as a percentage of total cash, MSFTCSCO and HPQ held 89% or more of their cash overseas.

    "The real story," says Eddy Elfenbein, "isn't the Greek exit or the JPM hedge debacle, it's that they're connected." Jamie Dimon hasconsistently played down the bank's exposure to Europe, claiming the large gross figures don't include hedging, which the bank does a lot of. "That (used) to put investors at ease," writes David Reilly, "Not so much today."

    Gold prices clawed their way out of bear market territorytoday, as gold futures spiked over $40 to more than $1575 an ounce, posting the biggest one-day gain of the year. Whats behind the move? Beyond just a dismal U.S. manufacturing report, there appears to be a fundamental shift in investor sentiment. Individuals, as well as governments, have started pricing in the potential for prolonged global economic weakness going forward.

  207. Nicha/TOS — my iPhone app is fine, but the iPad app crashes whenever I click on a news story.  Other than that, I really like the TOS software…

  208. BSE opened -1.3%.

  209. Levels/Phil: 
    "In the Futures we have Dow (/YM) 12,400, S&P (/ES) 1,300, Nas (/NQ) 2,500 and RUT (/TF) 750 all being tested at the same time – a failure of those levels will take catastrophic to a whole new level!"
    Uh oh…12,361  1,295  2,494  748  Here we go?!?

  210. Phil/PCLN + general BCS adjustments
    Advice appreciated, as this current market situation appears to offer many possibilities to those who heeded the call to go to cash and keep selling premium. I have continued to sell premium throughout the first 5 months, so my cash position has increased month by month, and I also have a broad range of long BCS – which now find themselves far out of the money due to the drop in the underlying.
    But first to PCLN. Background on positions here: but to summarize, the long term position is PCLN 2014 750/800 BCS, against which I have sold 2X Jul 780 Calls. The only concern on this position was that if PCLN were to drop significantly, then I am selling calls against a far OTM spread. Is the antidote to this to roll the 2014 650/700 BCS and pay the 4.70 premium, and then financing it with further short term call selling. Or is there a more preferred adjustment?
    Similar dilemmas in:
    GS Jan 13 115/130 BCS can be rolled to Jan 13 100/115 BCS for 2.73
    AAPL Jan 113 600/700 BCS can be rolled to Jan 13 525/625 BCS for 14.41
    It is interesting to note (at first disquieting, but I moved on from that mood) while the YTD returns of my portfolio have crumbled in the last two weeks – the cash position has increased as I continue to sell premium. My thinking was that as long as I adjust on a regular basis to be closer to ATM spreads, at some point the market will turn. Yes, I will be buying premium, but as long as I can find premium sales to provide a zero cost offset – what do I have to lose?
    I am sure many other members must be in the same situation – so I could have a common issue.
    Fortunately I did start to layer on EDZ and TZA hedges as well as short term short calls on SPY, so they should provide further cash to fund the rolling strategy. Of course, I have the other problem with the hedges, for the longer term (EDZ Jan 13, 10/20 BCS have moved up fast, so nearly completely in the money but the short calls are holding their premium.

  211. Facebook Faceplant Friday?
    Highly doubtful! 
    There are 11 lead investment banks and at least another 20 investment banks (see list) that will get a piece of the action of the Facebook IPO.
    How would they look if the IPO is a failure?

  212. Some big losses in Asia – Japan down about 3%, Korea down the same, HK down about 2%. Europe just opened and it is a see of red…. Stop, we want to get out now! Considering, futures here don’t look so bad at the moment.

  213. For what it's worth – those who were asking what Andy Zaky is saying about AAPL – as StJ pointed out, the $537 level that AAPL breached yesterday is the 38.2 Fibonacci retracement of the recent rally, and Zaky says that was expected cause it happens after 90% of all of AAPL's rallies…and in 70% of  AAPL rallies, it undergoes a 50% retracement, which would take it all the way down to $503.  From here, he expects it to rally massively, which would follow the patterns of recent AAPL history and that is why he issued a BUY signal yesterday…plus many other signals such as RSI, MacLelean oscillator, etc also pointing to the same thing not only for AAPL but for the Nas and S&P.  He sent an article to SA but they refused to publish cause they said his "oversold thesis does not jive with a buy recommendation."  IMHO, Zaky has a good enough record on AAPL to follow what he is saying for intermediate and long term buys, but his short term (day to week) prognostications are not so good…Lflan's and Phil's much better…(not sure how much of his research I'm allowed to publish but since his list is anyway closed to new members and he wanted to post this on SA so I'm assuming this much is okay…)

  214. China’s Car Dealerships Struggle as Stockpiles Increase

    "China’s total vehicle sales declined 1.3 percent in the January-to-April period, the worst showing since 1998 when deliveries fell 1.6 percent, according to data compiled by the China Association of Automobile Manufacturers, as slowing economic growth and rising fuel prices dented consumer demand

    The monthly NDRC survey of 36 major Chinese cities showed average car prices fell 1.9 percent in April from a year earlier, a fourth straight decline this year."
    Well, at least they don't have to worry about inflation now.

  215. Good morning!

    Levels/Aussie – I'm glad I slept through that! 

    Looks like we had a blow-off bottom on Asia's crappy session – The Nikkei finished down 3%!  Hang Seng down 1.3%, Shanghai down 1.44%, BSE shot up from 15,800 to 16,152 (up 0.5%) for a big save.

    Europe is off their lows but still down half a point.  Greece is now threatening Europe, which I like: 

    Alexis Tsipras, head of Greece's radical left party, said in an interview with the Journal that there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts.

    Fitch cut Greece's rating to Double-Plus Ungood or whatever – who the hell cares?  Moody's downgraded the Spanish banks and that's somethings we talked about 24 hours ago and sure wasn't a shocker either.  I think we have a bit of bad news fatigue at this point and – hey look – FACEBOOK!  

    The Euro came back from $1.2641 and the Dollar hit 81.93 at 2:30 (before the EU open) and now the Euro is being rejected at $1.27 while the Dollar is 81.65 and the Pound is $1.58 with 79.35 Yen to the Dollar but, don't worry – EUR/CHF is 1.2009 so everything must be working just great.  

    Oil touched $92 when the markets crashed (1:30) but then made a straight shot back to $93.  Gasoline (/RB) is still playable bullish at the $2.87 line.  Nat gas is at $2.666 so Lloyd must be around – gold is $1,591, silver $28.44 is up insanely from $26.73 on Tuesday (6.3%) – and that's against a strong Dollar – and copper made a power move from $3.45 back to $3.508 this morning.  

    6:00 AM Overseas: Japan -3.0%. Hong Kong -1.3%. China -1.4%. India +0.8%. London -1.0%. Paris -0.2%. Frankfurt -0.3%.

    6:29 AM U.S. stock futures point up in front of Facebook's highly-anticipated debut. S&P +0.4%, Dow +0.3%

    Maybe more free money?  G8 leaders are due to meet this weekend at Camp David, where the main topic is most likely to be how to solve the eurozone debt crisis, although no economic policy decisions are expected. Angela Merkel could find herself under pressure from those, like Presidents Obama and Hollande, who want more focus on growth. 

    The European Commission and the ECB are working on "emergency scenarios" in case Greece leaves the euro, Trade Commissioner Karel De Gucht tells Belgium's De Standaard newspaper. This appears to be the first time that an EU official has publicly confirmed that such work is being carried out.

    Are The Germans Destined To Save The Euro? It is an article of faith in Berlin that the single currency must survive, whatever the cost.

    Spanish stocks rebound from a sharp opening loss after rumors start to circulate about a possible ban on short selling of banks. IBEX 35 now -0.2%. In Spain, BBVA +3.8%. In U.S. premarket, Santander (STD+4.5%. - Because, if you can't short them, they must be fixed!

    No shocker, but Fitch cut Greece's credit rating to CCC from B- on concerns the country won't be able to find the political support to sustain eurozone membership. With a second national vote in six weeks, failure to form a government willing to implement the bailout terms would mean a "probable" exit from the currency union.

    Poll du jour:  A new poll puts the right-wing New Democracy party back in the lead in Greece with 26.1%, ahead of the anti-austerity SYRIZA, which had been well out in front last week. Crucially, New Democracy and the Socialist PASOK party would have enough seats to form a pro-bailout government.

    Greece: when the drugs run out (

    Japan Bond Risk Surges To Seven-Month High, Default Swaps Show. The cost of insuring Japanese corporate debt from default surged to the highest in more than seven months, according to traders of credit-default swaps. Asian and Australian bond risk gauges also climbed. 

    Shoppers Skipping Pomegranates Show India Rate Dilemma: Economy. Surging food costs offer the most visible sign of India’s inability to contain price pressures, threatening spending in the world’s second-most populous nation. Even as the nation’s benchmark wholesale-price inflation has eased to below 9 percent after breaching that level most of last year, a recently introduced consumer-price gauge shows how little room the central bank has cut to cut interest rates and spur growth. India’s consumer-price index climbed 9.47 percent from a year earlier in March as the cost of egg, vegetables, fish and meat products rose, after an 8.83 percent advance in February. Wholesale-price inflation in April was 7.23 percent, with food prices jumping 10.5 percent.

    BRIC Bear Market Not Cheap Enough for de Vaulx Finding Zero BuysThe MSCI BRIC (MXBRIC) Index’s slide into a bear market has left equities in the biggest emerging economies trading at the lowest levels since 2009 versus global shares. That’s still not cheap enough for Charles de Vaulx to add a single stock from Brazil, Russia, India or China to his $9.7 billion IVA Worldwide Fund, which beatMSCI’s global gauge by 29 percentage points since its inception in 2008. He’s waiting for further declines of 10 percent to 20 percent before buying.

    New home prices fell in most major Chinese cities in April, while the three cities that saw month-on-month gains averaged just 0.2% increases.

    China's Q2 GDP could slow to 7.5% because of property sector curbs and dampened external demand, according to the State Information Center, a Chinese government think-tank. That would be in-line with China's official target of 7.5% for the year, but would raise concerns about the sustainability of China's job creation.

    Sotheby's Hong Kong Sales See Fewer China Buyers. Sotheby's Hong Kong spring auction sales fell 30% to $317 million from a year earlier because there were fewer mainland Chinese buyers, citing Kevin Ching, chief executive officer of Sotheby's Asia.

    What is this, The Bank of the Ozarks?  JPMorgan (JPM) didn't have a treasurer in place during the five months when its CIO was making its now-notorious trades, and the CIO risk manager appointed in February had little relevant experience and is the brother-in-law of another JPM exec. Sources say the staffing decisions may have made it easier for the trades to backfire.

    JPMorgan's (JPM) Chief Investment Office has built up over $100B of positions in complex, risky bonds and structured products, according to the Financial Times, with the CIO's "non-vanilla" portfolio now over $150B.

    Investigating JPMorgan Chase (Economix)

    71% Say Government Should Let Big Troubled Banks Fail (Rasmussen Report)

    Facebook's 33 underwriters, led by Morgan Stanley, JPMorgan and Goldman, could collect around $176M for managing Facebook's IPO after accepting a below-average 1.1% fee, sources say.

    Finra is reportedly investigating trading in Groupon (GRPN) after the firm's share price spiked hours before a positive earnings announcement on Monday. Groupon shares climbed 18.5% on Monday on 4x average volume, and then continued to climb AH after earnings were released.

    Timing is a major consideration for the proposed spinoff of Sears Canada by Sears Holdings (SHLD) because the distribution of shares will be a taxable event even though no cash passes hands. At issue, a current dividend tax rate of 15% that is slated to jump to 43.4% next year unless Congress jumps in.

    Lampert Skeptics Could Get Seared on Sears (WSJ)

    Facebook MBA: Behind the IPO Everyone's Talking About

  216. PCLN/Winston – That's exactly the right way to adjust it, make your callers pay for the roll but I will say that I wouldn't be long on PCLN at $650 or $550 and I'm not even sure if $450 is reasonable…  GS and AAPL, of course, I am on board with.  You are right, if we play the market properly AND IF THE RANGE HOLDS UP, then we do go through this cycle on a sell-off where we plow our cash into bigger, cheaper positions so that we are loaded up long (and taking some losses) right at the bottom of a rally.  

    The key is to protect your gains at the top – disaster hedges are always nice to have but you also must have levels at which you either pull the plug on your longs or hedge yourself to neutral.   Like the 4 index levels we hit at the close in the Futures – if they failed (for more than the overnight) we really would have had to move to some aggressive bearish covers.  As you can see in the above post – we did a lot of aggressive shorting yesterday even though we thought we were going to rally today because we've been bullish and we failed to hold 1,320 and we don't HOPE (not a valid investing strategy) that it's the bottom – we start making bearish bets in case it isn't because we have a very clear line where we're happy to stop them back out (1,320).  

    EDZ/Winston – The long-term hedges do not provide short-term protection.  Never get that mixed up.  Those protect you from protracted downturns but, if you have Jan buy/writes to protect, then you do so with a Jan hedge, right?  Shorter-term hedges are really for gambling or balancing out your portfolio.  Ideally, the market does well and you get confident enough to cancel the long-term hedges with little damage at some point.  Keep in mind that EDZ, for example, is at $18 now so, no matter what your broker tells you, that spread is worth $8 if we hold $18.  If EDZ doesn't hold $18, then your long stocks should recover and PRESTO! you didn't need the hedge, did you?  

    FB/Diamond – Super doubtful with 900M users that there aren't enough suckers to create a frenzy over 400M shares.  Would be an epic fail if they don't.  

    In fact, if FB fails today, I think the QQQ July $45 puts at .10 will be a nice 10-bagger!  But I don't think it will happen. 

      AAPL/Jerconn- It's always interesting for me to read those reports.  I have a much simpler outlook.  AAPL is worth at least $555 so $555 is where I start to like buying.  Of course it can go lower, that doesn't change it's value and I don't buy for the short-term (and that's 3 months, not 3 minutes people!).  

    I may INTEND to make a trade at $555 but, once they go lower, I'm now looking to make an investment and my time-frame stretches and my allocation gets raised.  Of course the key there is to make those 1x entries and, when they pay off – you take your money and move on.  

    It's when they don't pay off – when you find yourself owning 1x of a stock/option that suddenly got cheaper – that you now have to look seriously at what you are going to do with that other 75% (and, if you are following the 20% action rule on the 1x entry, then you actually have 95% of your original allocation still in play).  

    So, in AAPL's case, they didn't hold $555, so I lost interest but yesterday they hit $530 and I wanted to take another poke (1:34 bull call spread).  If that drops out, I'll kill it and wait for $500 to be tested but these trades pay $20 on $1.25 in cash – I can afford to lose $2.50 3 times on trades like this before I begin to worry about being in for $8.75 (3 $2.50 losses and another $1.25 on the new spread) on the $20 spread and, since I'm only re-entering on $25 gaps lower – AAPL would have to be down around $450 at the point where I'm in for $8.75 on a $450/470 bull call spread.  By then, don't you think I'll be more than happy to up my allocation and probably take a more bullish – longer-term spread.  

    Scaling into positions and having stopping/repositioning disciplines is the real key to trading – not getting things right!  I was chatting with Gareth (OptionsSage, who co-wrote many of our Education articles as well as our options guidebook) yesterday and we were talking about how pissed we both were that AMZN went our way on the 1x entry and we "only" made 40% on the dip (we killed it in the $25KP yesterday).  That's how we trade – we LIKE to be wrong on our initial entry because we're Fundamental investors and, when the PRICE goes against us, if our VALUE doesn't change – then it's an OPPORTUNITY, not a problem!  

  217. Super low volume in the oil market this morning.  Up to 93.25 and back down to 93.