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Testy Tuesday – S&P 1,284 Would be a Good Start

SPY 5 MINUTEOne toke over the line, sweet Jesus…  

That's all we need to firm up this bottom, a little action that stays over that 1,284 mark on the S&P.  As noted by Dave Fry, we had enthusiastic selling and lackadaisical buying yesterday – not a healthy combination BUT – it sure beats dropping another 2.5% in a day, doesn't it?

As I said yesterday, we don't have much financial skin in market direction at the moment as we're still very Cashy and Cautious but we don't want the markets to crash as that would be no fun with 30% unemployment and 66% youth unemployment and riots and looting and starvation and disease, etc – but you bears can root for whatever side you want, I guess.  

It's like Donald Trump said on CNBC this morning regarding Obama's citizenship (yep,. still on that).  He actually said: "A lot of people disagree with the facts and that's what America is all about."  That's right Donald, America is all about your God-given right to have an opinion, no matter how asinine, wrong-headed, contrary to all facts and logic or even just plain harmful to others it is.  

America is a country full of people who are very proud to be unread (to use a kind phrase) and who "go with their gut" when looking at facts because they often don't possess the cognitive reasoning ability to process the actual information that is presented to them.  

Amazingly, rather than giving us a new age of enlightenment, where information efficiently flows to the masses and an informed consensus can be achieved – Google has actually polarized our Nation because – no matter how asinine your opinion/interpretation of the facts may be – you can use Google to help you find thousands of other lunatics who agree with you and reinforce your wrong-headed beliefs.  

One habit I try to get our Members into is to go out of our way to read articles that DISAGREE with our opinions.  I like to spend 25% of my time reading people who have the opposite opinion to mine on various subjects so that I can make better-informed decisions as well.  People often ask me why our "Phil's Favorites" section carries articles that say the exact opposite of what I'm saying and my answer is – these are other writers who we respect.  We don't have to agree with someone to respect their opinion.   And THAT is what America is all about, Mr. Trump

While I have plenty of respect for Donald Trump as a businessman, his pandering to the radical right who refuse to accept the FACT that Obama was born in America (as if it should even matter anyway) does make him seem like a bit of an idiot himself.  When Trump wants money for his next building project, I'm going to look at him and think "well, he does have a good reputation as a builder but he can't understand a simple birth certificate along with photos of a baby in Hawaii proves a man was born there – so maybe he's gone senile" and not lend him any money (not to mention his tremendous failure in Atlantic City – WOW!).

Anyway, the stock markets…  Not much to report really.  As we expected, investors generally have bad news fatigue and there's not much reason to sell more but, without actual stimulus, there's no reason to buy either.  The G7 are meeting this morning but not much is expected ahead of next week's G20 meeting as not only does Germany not want to fund more bailouts but Spain is running around saying they don't really WANT (not need) one.  

Spain probably has a good point as the other bailout VICTIMS are in far worse shape after being "helped" than they were before plus, they give up a lot of sovereignty to the EU or Germany and, while countries like Italy and Greece may be used to being taken over by Germany – Spain and France are certainly not enthusiastic about reliving the bad old days of the 1940s.

Europe is in DEEP TROUBLE – the Eurozone PMI hit a 3-year low in May with a 46.0 reading.  The "sector has fallen into a steepening downturn" according to the report, with "further signs of weakness spreading from the non-core to core nations, with even Germany slipping back into contraction." Based on these numbers, "it would not be surprising to see GDP for the region contract by 0.5%" in Q2.  

Even Germany's PMI fell from 52.2 to 51.8, just 1.9 over CONTRACTION.  Eurozone Retail Sales dropped 1% for the month and 2.5% for the year in April, more than double expectations by the usual economorons and a steep drop from March's +0.3% and -0.2% reading.  The ECB has room to further cut interest rates to spur growth, says the IMF's Christine Lagarde. As for Spain, the IMF is "absolutely not" in talks with the country.    

Zero Hedge gives us the Bridgewater chart on the right, which pretty clearly shows that the current EFSF/ESM fund is not enough to cover Spain and Italy's current liabilities – not to mention their future ones (and, if you want to really be scared – check out the "Ultimate Doomsday Presentation" on Spain).  Yawn….  Oh I'm sorry, I got bored worrying about Europe…

This is all OLD news.  On April 29th, 2010, my Thursday post was titled "The Pain in Spain will Hardly Be Contained."  That's right, you can check, I was the first person to make that pun and one of the first people to point out that Spain was in crisis.  Now it's 2 years later and it's getting BORING for us to talk about Spain – especially when China and Japan are going to be so much worse over the next 24 months!

Our call to get into cash and get bearish in April of 2010 was a very good call as the S&P tumbled from 1,219 in April all the way back to 1,010 in late June (down 17%) and our call to get to cash and go bearish at the end of March at 1,422 this year may have seemed a bit early but now we're at 1,274 and that's down 10.4% and we haven't even made a weak bounce yet so it's 1,284 or bust this week.  

Our bullish premise is still that the Global situation is SO BAD that the G20 HAVE TO take action to kick the can down the road and the markets are already anticipating $750Bn in additional stimulus and we need MORE to move over our current level of S&P 1,275 at a cost of $10Bn per point.  All that remains is to see what kind of market the G20 are willing to buy.  

Meanwhile, we're contenting ourselves with some bottom fishing and, of course, some hit and run trading like our very good bullish Futures calls yesterday on the Dow and Oil (/CL topped out at $84, up $2,000 per contract in just one day!) and our AAPL play off the $555 line yielded a very nice $1.75 profit off the $2.50 June $290 calls (70%) on our second attempt to go long on AAPL in yesterday's Member Chat (1:52 – 2:52) – not bad for an hour's work! 

We also added our first 5 trades to our brand new Income Portfolio in my 2:36 Alert to Members - all short put entries - and I'd like to add a few buy/writes on dividend payers but not with the S&P under 1,284 – if we can't take that back, we'll need to worry more about adding hedges than planting trees!  


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  1. Phil: Cold Spring
    My mother grew up in Cold Spring so I'm forwarding your comment along, sure to make her day since like the stores in Cold Spring she too is unique. Her father had a business or two in town as well. :)



  2. Donald Trump is a mean clown who is not even that great as a business person! He piggybacked on his family's name and money and was given many chances by the system that the people he supports would deny the bottom 99% if they could!


  3. Universities/Phil: you forgot the IIT schools in India. Very hard to get in and a lot of those kids are recruited by Silicon Valley


  4. Economic Numbers:

    China HSBC PMI Services / 54.7
    Australia – BoA Rate Decision / 3.5% (3.5% expected)
    Italy PMI Services / 42.8 (42 expected)
    France PMI Services / 45.1 (45.2 expected)
    Germany PMI Services / 51.8 (52.2 expected)
    Euro-Zone PMI Composite / 46 (45.9 expected)
    Euro-Zone PMI Services / 46.7 (46.5 expected)
    Euro-Zone Retail Sales (YoY) / -2.5% (-1.1 expected)
    Euro-Zone Retail Sales (MoM) / -1.0% (-0.1% expected)
    Germany Factory Orders (YoY) / -3.8% (-3.8% expected)
    Germany Factory Orders (MoM) / -1.9% (-1.1% expected)
    Canada Building Permit (MoM) / -5.2% (1.5% expected)

    Not a great set of numbers! Even the "green" ones show contraction again.

    At 9:00 AM we have the rate decision from the Bank of Canada and at 10:00 AM we have the US ISM Non-Manufacturing.



  5. For all of you Game of Thrones fan…

    http://thoughtcatalog.com/2012/what-your-favorite-game-of-thrones-character-says-about-you/

    Pretty accurate if you ask me!


  6. Phil/Puts,
     
    I noticed in your income portfolio that most of your puts are only a few weeks out.  I've been selling 2014's and was wondering what the advantage of the shorter term puts are.
     
    It seems to me that you can really get a bargain buying the Leaps.  For example, the BMY 32's are bringing a premium of over $4.  You have to go pretty far back to see BMY under $28.


  7. I meant selling the Leaps.


  8. I am guessing they will need to add some weekly FAS strikes as we are below the 69 strikes now!


  9. Good Morning!


  10. The Donald is a carnival barker who thrives on attention. I have no respect for the man……


  11. Phil, if you drive the coast from Oceanside to San Diego, you would be hard pressed to find anything that is part of a chain.
     
    You will need to travel to the east side of the "5" to find any of that….. :)





  12. Damn……DMND executed at $2.15 the second the market opened then took off.


  13. DMND/exec – same here.


  14. Let me know if I missed anything as this morning is quite busy!



  15. I can tell how the portfolios are doing based on how many people are logged in to view them! 


  16. RSS From Greg:
    "Our developers were working on this last night… it should now be as simple as copying the daily post's feed URL into RSS Owl. (The feed URL can be found above the beginning of the comments where it says "You can follow any responses to this entry through the RSS 2.0 feed." The "RSS 2.0" is the link.)

    For example: yesterday's was http://www.philstockworld.com/2012/06/04/monday-markets-in-turmoil-according-to-cnbc-must-be-time-to-buy/feed/

    Just plug that in as a new feed for RSS Owl and it will ask you for a user/pass.

    (Just tested it on my machine here and it works fine.)

    Greg"


  17. so st jean…jon snow kills jaime and ultimately the bastard son of e stark sits the iron throne who is his queen mother of dragons or stansa?…


  18. can someone explain all the talk about the rss feed..i am sure i am missing something as it seems as though its soemhting i should be shorting?


  19. Non Sequitur by Wiley Miller


  20. Angelcur –  Always short anything IT or Web guys work on…..and I worked in IT!


  21. China Schools/Phil: Just to comment on the China Study Abroad Infographic
     
    I agree that this follows a common theme of the rich sending their kids to the best colleges world, an interesting statistic was that 65% (so 2 out of 3) planned on sending them for High school and younger.   I don't know about other countries aside from U.S. and Japan, but when you come here as a child or in your teens, you inevitably become a "citizen" of that country whether you get a passport or not.  So my point is that the rich and elite in China are ostensibly sending their kids to the U.S. and U.K. etc.. to become Americans, Canadians and Brits…


  22. We might be in for a rally today…..


  23. i hate to beat a skinless drum but how does one get the blog to auto refresh?


  24. Are you giving up the plot Angel or speculating – Stansa would not make a good queen for Jon Snow, they are half-siblings. Not that it stopped other people before!


  25. Refresh / Angel – If you use Chrome, get one of the auto-refresh extension. Be careful though because if it refreshes while you write your comments, you'll lose them!


  26. st jean it seems that most the other available women will at best have ports of entry named after them so i was thinking jon being naive and stansa being nail hardened might work..but its clear he is being prepped for something and that this tempering of stansa has to have a purpose….


  27. Good morning!  

    CAC is up 1% again but Germany down half a point still.  We have ISM at 10 and Fed speak at 2:15 (Bullard), 7 (Fisher) and 7:30 (Evans) so we drift to 10 probably and then we have the EU close at 11:30 before we get a real handle on our day but I'm optimistic still.  

    ROFL – Sales guy on the phone was trying to convince me to buy bonds in XIDE because they are going to be bought out by JCI (I have no idea if this is true, of course) and he's running through what a fantastic, safe investment this is (BS – it's a $200M company with $1Bn in debt and miniscule earnings) and finally, as it's time to work, I say to him "well why don't I just sell the Dec $2.50 puts for .60 and buy the calls for .45 and net into the stock at the current $2.35, worst case and then I can make much much more than the 10% you're projecting by putting 1/10th of the money at risk?"  He said "are you an options trader?" and I said yes and he hung up on me.  No previous objection I had raised had stopped him from going right back on the attack.  That tells you a lot right there – bonds are a scam and even the pushiest boiler rooms know they aren't going to make a sale to someone who knows how to use options to manage their own risk!  

    Meanwhile, small sell-off at the open seems to be finding buyers now and AAPL hitting $565 is very encouraging as the Nas goes green.  TLT down to $123.43 and VIX down to 25.35 are both good signs, even with Dollar testing 83 again.  It's OK for the Dollar to be high as long as it's stable…

    If I'm quiet today it's because I don't want to miss good entries on dividend payers for the Income Portfolio, which I'll be going over this morning (feel free to suggest good deals on dividend-paying stocks).  

    The G7 is having a phone conference but most likely just so they can get on the same page ahead of the G20 but we really need something new to make a move up, I think…

    At the open: Dow -0.18% to 12080. S&P -0.33% to 1274. Nasdaq -0.3% to 2752.

    Treasurys: 30-year -0.22%. 10-yr -0.1%. 5-yr +0.02%.

    Commodities: Crude -0.11% to $83.89. Gold +0.25% to $1617.95.

    Currencies: Euro -0.41% vs. dollar. Yen +0.38%. Pound +0.16%.

    10:00 AM On the hour: Dow +0.02%. 10-yr -0.14%. Euro -0.28% vs. dollar. Crude -0.15% to $83.86. Gold +0.34% to $1619.45.

    Market preview: EU shares are higher while U.S. stock futures are mixed and reflecting a lack of major news, with the S&P benchmark flat. "Valuations are extremely attractive and dividend yields compared to Treasuries are at (multi-year) highs," but the global economy may well "create another down step in the short term," says Oliver Pursche of Gary Goldberg Financial Services. Later: ISM Non-Manufacturing Index, Fed speak 

    Upside Surprise!!!   May. ISM Non-Manufacturing Index: 53.7 vs. 53.5 expected and 53.5 prior (>50 denotes expansion). Prices index fell to 49.8 from 53.6. Employment fell 50.8 to from 54.2. New orders rose to 55.5 from 53.5.

    Further monetary ease would not just be "pushing on a string," says Dallas Fed President Fisher, but would make the Fed"an accomplice to the mischief" of D.C. All 50 states have the same monetary conditions, yet growth in Texas and California (to name 2) are different. It's time, he says, for fiscal authorities to put in place measures to incent the private sector to put all this cheap money to work.

    Not dead yet:  Redbook Chain Store Sales: +3.1% Y/Y vs. +3.2% prior week. The increase in sales is attributed to Memorial Day promotions.

    ICSC Retail Store Sales: +0.4% W/W, vs. -0.5% last week.+2.8% Y/Y, vs. +2.9% last week. The increase in sales is attributed to cool weather. There was strength in apparel stores and weakness at discounters. 

    Same target as I have: Housing prices have another 20% downside, Gary Shilling tells Bloomberg, as "people now realize – for the first time since 1937 – that house prices can and do fall." A 4% dividend yield is of little comfort when a stock drops 30%. Likewise, that 3.5% 30-year mortgage isn't so sweet if the home value declines.

    Blackstone (BX -0.7%) is in negotiations to take ownershipof a ~$2B portfolio of 95 industrial properties from Chicago-based Walton Street, Bloomberg reports. Blackstone owns $1B of junior debt on the assets, which are now worth less than the $2.45B in loans that Walton took out to buy them and which mature on Friday.

    China ponies up $60Bn to start the ball rolling!  The sharp lending slowdown in China looks to have reversed, with the big 4 banks loaning ¥253B for May after pumping out just ¥34B through the month's first 20 days. It's especially interesting combined with another story suggesting Beijing is fast-tracking infrastructure projects, whether they're really needed or not.

    Chinese gold imports from Hong Kong in April rose 65% from a month earlier to a record 103.6 metric tons. In the year through the end of April, Chinese gold imports have risen nearly 8-fold from 2011, according to Bloomberg. "We can't rule out the possibility that the central bank is buying gold," says Ag Bank's Wang Xinyou.

    Japan finmin Azumi is the first to hit the wires following theG-7 conference call, and he's talking about how the strong yen is hurting his country's economy. He says the group agreed to work together to cooperate on extreme fx moves. The yen promptly takes a tumble, dollar/yen rising to ¥78.46 from ¥78.25. 

    The Bank of Canada maintains its overnight rate at 1%, jettisoning recent hawkish rhetoric to warn about "a sharp deterioration" in global financial conditions. "The outlook for growth has weakened  in recent weeks," leads the statement. The loonie gives up some its gains vs. the greenback, but its direction is more a function of what risk markets are doing rather than BoC policy.

    "Biblical macroeconomic risks" are balancing out otherwise outstanding conditions for equities, writes JPMorgan's Mike Cembalest. Those expecting Europe to "fix the problem" assume Europe knows how to do this, can afford it, and can garner the political will to do it.

    More from JPM's Cembalest: Drawing on data from Bridgewater, Cembalest dismisses the idea the LTROs have given banks enough cash to put a solid bid under their respective sovereign debt markets. Italian banks, for instance, have already spent more than they received buying government paper and paying down loans.

    A phone call amongst G-7 finance ministers and central bankers is underway, with a source saying Germany is pushing Spainto accept a rescue from the European bailout fund, but Madrid is resisting. Spain, of course, would prefer the bailout funds go straight to its banks, thus bypassing the need for the government to submit itself to Troika pencil-pushers.

    "Nobody wants to throw Greece from EMU," Finland foreign minister Tuomioja tells Die Zeit, saying the exit must be a "voluntary" one. In or out of EMU, Greece needs another bailout package, he says, only this one must include a real cut in its debt, "an orderly bankruptcy."

    Brazil's May services PMI dives to 49.7 from 54.4 previously. It's the lowest level since July 2009 and follows the manufacturing PMI also sliding below the 50 level. "Sluggishness in the industrial sector is spreading to services," says HSBC's Andres Loes - Once again I ask:  Where else can you put your money but US equities?

    Airline stocks could get a lift as more analysts come out with takes that yesterday's selloff was overdone. Following up JPMorgan's note highlighting that it was local competition and not macroeconomic factors behind Delta's May traffic bust, Sterne Agee is also looking fora sector rally. Premarket: DAL +1.0%UAL +1.2%JBLU +1.4%.

    Marriott International (MAR) Chairman Bill Marriott says he has no fear of starting an expansion mode, saying that not only will the company add 150 hotels in the U.S., but that Southeast Asia will also be a major target for the company.

    The tobacco industry is watching California closely today as voters decide whether to increase the cigarette tax by $1 to $1.87 a pack. Californians are also voting in congressional races, while the citizens of San Jose will decide on a pensions revamp for city employees. 

    Officials and private citizens in Birmingham, Alabama, yesterday filed a $1.63B lawsuit on behalf of 130K ratepayers in Jefferson County’s bankruptcy. The claim accused Jefferson's employees, "certain private parties" and others involved in municipal finance of "dishonest, unlawful and sometimes criminal conduct." 

    The salaries of the 50 best-paid CEOs of financial firms rose 20.4% in 2011 despite sharp falls in the earnings and stock prices of most big banks and brokerages, Bloomberg reports. KKR (KKR) co-CEO Henry Kravis was the best paid with $30M, while Warren Buffett (BRK.A) provided the best value.

    Disney (DIS) plans to only allow advertisers that comply with a set of strict nutritional standards to air commercials on its networks with children programming. Though the company acknowledges that it may lose some revenue, only advertisers promoting the very worst types of junk foods are expected to be limited.

    Go CHK!  Natural gas consumption may rise 17% by 2017 from last year as demand surges in Asia and the U.S., with China's use of the fuel doubling while Europe's will remain below the level of 2010, the International Energy Agency reports. Low gas prices will result in gas generating almost as much electricity as coal in the U.S. within five years. 

    Aframaxes, already this year’s worst-performing oil tankers, are poised for the lowest annual rates in 15 years, as the 800-foot vessels struggle to win cargoes on all sides of the Atlantic with European oil demand contracting for a sixth year. The slide is mirrored in other classes of shipping, as capesize vessels and panamaxes each earn more than 90% less than their 2008 peaks.

    Akamai (AKAM -7.7%) and Limelight (LLNW -10%) are tumbling on news of Netflix's (NFLX +0.1%) content delivery network (CDN) plans, though fellow CDN owner Level 3 (LVLT -1.8%) is off more modestly. Jefferies thinks Limelight has the most to lose, given Netflix accounted for 11% of its 2011 revenue. Netflix moved awayfrom Akamai in 2010, though its plans could still hurt Akamai by depressing broader demand (and thus pricing) for commodity CDN services.

    A Chinese site posts an image of what's claimed to be the spec sheet for the next-gen 13.3" MacBook Pro (AAPL). The spec sheet mentions an improved CPU, memory, and graphics, but no retina display or thinner frame, as has been rumored. "A huge letdown" if true, BI suggests. 


  28. Stj / 1020 / Trump:  "Mean clown" is superbly accurate.  While it's been applied to Romney, perhaps unfairly, the notion of being "born on third based and believing you hit a triple" couldn't be more accurate in Trump's case.  The sheer ignorance of the man is breathtaking.  He lectured the Scottish parliament recently, claiming to the assembled representatives, among other absurdities, "….I am an expert at tourism. I have won many awards … If you dot your landscape with these horrible horrible structures [wind turbines], you'll do tremendous damage…. I am considered a world-class expert in tourism. When you say where is the evidence, I am the evidence." Scots being Scots, this  was met with uproarious laughter.   http://www.huffingtonpost.co.uk/2012/04/25/donald-trump-wind-power-scotland-_n_1451281.html    


  29. LoL Phil!  Way to handle that "telemarketer".
     
    I'd bet you look forward to those calls….. :)


  30. Speaking of the portfolios, I did run some stats on the 25KP just for fun and here are the numbers:

    Closed positions – 135
    Winners – 69 (51%)
    Losers – 66 (49%)
    Average win – 2.48% and $19.41
    Closed with over 75% loss – 14 (10%)
    Closed with around 50% loss – 20 (15%)
    Closed with around 25% loss – 20 (15%)
    Closed between -10% and +10% – 24 (18%)
    Closed with around a 20% win – 9 (7%)
    Closed with around a 50% win – 15 (11%)
    Closed with around a 75% win – 20 (15%)
    Closed with around a 100% win -13 (10%)
    Losers that ended up winners – 14 (20% of the winners)
    Winners that ended up losers – 13 (20% of the losers)


  31. Phil / dividend — If you still like FTR and SVU you can get 10.7% and 8% respectively.


  32. Phil – how do you notify all the friends of your mom that you have started the portfolio. Seems if they were golfing yesterday they missed all but BA? (someday i might join their group)


  33. zero/scots  Here is a little clip of those "Scots" after the Donald's comments…. :)
     
    http://www.youtube.com/watch?v=gMOpUebwj8E&feature=related


  34. Are we taking the money on CHK June 15's? (now at 2.5)


  35. Trump / Zero – The guy is not an expert in anything! I would not let him manage my money or even my employees!


  36. Good Quote 
    "No need to be a hero in this market.  You don’t have to be the last one to cover, or the first one to buy! Know your time frame and preserve capital!"


  37. RSS / Burr – did it work for you? No luck on my side..


  38. Twit of the day:

    https://twitter.com/davidfrum/status/208549618097717249

    Vote Republican, it's too dangerous to have us in opposition


  39. Phil – what do you think of GMCR today?


  40. AGNC pays about 15.5% dividend. It's a REIT. 


  41. stjeanluc/vote   It might be funny if not true….. :(


  42. Good thinking Angel, but Sunday's episode looked like couple's night and it seems that Jon is finding his own port of call! But we'll see. I am going to have to read the books now as I can't wait another year to find out what happens!


  43. stj / trump — He is an expert at trying to baffle people with bull.



  44. Trump / Rainman – And having him every frakin' Tuesday morning on CNBC is just unwatchable… I'll even take Cramer for 10 more minutes. And the way they defer to him, it's so wrong!


  45. And the latest trading range:

    http://www.bespokeinvest.com/thinkbig/2012/6/4/sp-500-sector-trading-range-charts.html

    Not surprisingly, we are on the lower end!

    More sectors at the link!


  46. dpas / RSS  - Nope, didn't work for me.  I forgot to post a sarcastic comment to that effect…  sorry :)


  47. FGP 12.6%


  48. Phil / BX – do u like it here?  at bottom of range and nice dividend. 


  49. Phil, 
    I'm in a position and need help reducing my loss…..or rolling
    TNA  June 12 48/52 BCS net $1.75
    Sold June 42Put for $1.25
    Net entry .50.
    I know I Know about the 20 % rule….Thanks 


  50. Hi Phil:   I downloaded rssowl and it gives: "Error 500: Internal Server Error." 
    Feed validator returning errors for the feed:
    http://www.feedvalidator.org/check.cgi?url=http%3A%2F%2Fwww.philstockworld.com%2F2012%2F06%2F05%2Ftesty-tuesday-sp-1284-would-be-a-good-start%2Ffeed
    Dgging deeper with link above, "Server returned HTTP Error 401: Unauthorized "  Also, there seems to be some error in xml formatting


  51. Lflan, do you expect AAPL to be pumped before the conference?


  52. Pharm – the June 20/25 bull call spread for SGEN, should we roll to the july call spread pretty soon?


  53. Phil / SDS Hedge
    I'd like to use this hedge as downside protection for my portfolio, thinking that the SPX will hit 1245, before it hits 1300+.  But I'm a little confused in your logic.  SDS is the ultrashort S&P etf.  Why would SDS fall 16% if there is a 8% drop in the S&P?  Wouldn't SDS rise approx 16% and increase the value of the overall spread?  If the S&P goes up 8%, then we'd be losing $$ on this.  Right now the spread is priced for a credit of 0.05.  
     
    SDS July $17/21 bull call spread at $1, selling Jan $15 puts for $1.15 is a bet that SDS doesn't fall 16%, which is an 8% drop on the S&P to 1,182 – otherwise it's a free look at a potential net $4.15 gain (if the S&P goes 8% the other way back to 1,387 by July) against $1.50 in margin.  


  54. Oh – Rejected at 1,284 on the button!  


  55. Phil / Dividends — BP 5.35%, CLF 5.5% (I think you don't like them), COP 5.15%, CVX 3.73, DD 3.66,


  56. Morning All -
    Did anyone read about Corning's new Willow glass?  Looks pretty cool.
    With all of this additional stimulus talk, Eurobonds talk, Euro FDIC, what happens if all of this is done and 6-12 months down the road, we are back at the same place? 


  57. stjeanluc/Frumm – the Twit following Frumm is:
    Thanks @davidfrum  for clarifying the scorched Earth Republican message: "Give in to extortion or we'll crater the economy."


  58. Another good summary Rev!


  59. Ink / what happens — We have a printing party!


  60. MCD/Phil – dividend stock for income port? hitting 50% retracement from last consolidation (jan 2011).


  61. SGEN/jro – those were bought with the sale of the June 20 Ps. I am riding them out.   We also have the Sept 20/25s with the sale of teh Sept 17.5s….so, these are bets on buyouts, with no problem owing the stock at a discount from where it is now.  The range is established ($18-21) until it breaks one way or another.  I have been selling slowing on the down moves and buying on the up moves. 


  62. I just watched a CNBC clip from 5/24 with recommendation on how to trade BA with options. First they said that we can expect cuts in defense spending and the trade idea was to buy Aug $75 call for $1.75. BA at the time was at 71.39 in clear downtrend  with 77 being the top of the range. No mention of selling puts.


  63. CSX/Phil – 1/4 entry for income port? bouncing off bottom of trend channel.


  64. And you wonder why the economy is struggling:


  65. StJ/Gov't Spending – I recall that the Federal deficit have pretty much remained level at the $1.1-$1.2T level during Obama's first term.  I also recall that during the Clinton and Bush years, the dficits were multiples lower than what they have been during Obama's term.  I'm not arguing the validity of the graph you just posted but the numbers just don't add up.  Maybe someone smarter than myself here can help.   


  66. Fakebook down again..
    how low will it go??
    I have never seen a worse IPO in my life that was so hyped by the underwriters…


  67. The chart above says to me that stimulus didn't work to correct the structural problems with the economy.  If the economy is struggling because gov't spending has dropped, then gov't is the problem and the policies immplemented didn't help the private sector at all. 


  68. Fakebook/Jabo
     
    The only other IPO I can remember in the last few years that was horrible was Vonage.  That did poorly out of the gate too and never recovered.  But it didn't have 2 years worth of worldwide hype behind it.


  69. GLW / Willow Glass
    Not sure if we still "like" this play, but the trade was:
    Buy GLW Jan13 12.5 Calls at 1.80, now 1.30 (-28%)
    Sell GLW Jan14 12 Puts at 1.80, now 2.41 (-33%)
    Net 0.00 on the trade.  Currently at net -1.11(credit).  GLW trading at 12.33.  


  70. Cold Spring/Lincoln – That's nice, what a great place to live!  

    Trump/StJ – Well you don't have to like everything about Hitler to respect him as a great public speaker.  Same with Trump, he's amoral and ruthless and uses bankruptcy as a recurring business strategy (so did CAL for many years) but that doesn't mean you can't learn from the guy….

    India/Japar – One part of the World I have not traveled yet (Africa and Australia also yet to be explored) so I'm not too familiar with universities out there.  

    Thrones/StJ – I'm a Rob and Ned Stark kind of guy myself…  

    Puts/Exec – Well the Income Portfolio's goal is to generate $4,000 a month in income without drawing down the principal $500K so, while there is and will be a place for longer-term selling, if we have an opportunity to sell and close shorter-term positions (and I thought we had a good bottom yesterday) – then we take it.  

    Drive/1020 – I want to check that out.  

    Nice job on MoMo Money StJ!  

    Thanks Burr!  

    Thrones/Angel – Read the book! 

    LOL Diamond:

    Non Sequitur

    China/Kinki – Can kids just get citizenship by being sent to school in the US?  

    Auto refresh/Angel – Some browsers have that feature but that's what those RSS thingies kind of do – they update comments to an Email-type stream.  I just hit F5 when I get to the bottom of the comments and then there are more comments and I read those and hit F5 when I'm done – not too complicated…

    Trump/ZZ – So he's a Global Warming denier and anti-wind farms too.  I suppose he must have invested in properties in states where he wants the ocean levels to rise – kind of like Lex Luthor's plan in the original Superman movie.  

    Telemarketers/1020 – I just put them on the speaker phone and let them waste as much time as they want to.  I figure I'm saving dozens of other people from being annoyed by them by taking up their time and, while they babble on, I like to deconstruct their logic so the next time they try to bulldoze some poor victim – they don't sound so confident….  

    BBY jumping up.  

    Cool stats StJ.  

    FTR & SVU/Rain – You know they are top of my list.  

    Notify/Morx – I didn't.  I notified you guys in chat and sent out an Alert to subscribers.  My Mom was on a plane to Paris (she took my other niece for graduation) – she has a guy who does her trading for her…  As with the last Income Portfolio – there is work involved in setting it up the first few months but, hopefully, by then we'll have it on auto-pilot again.   Near the end, we went three straight months without making a single trade between updates.  

    CHK/$25KP, Yshen – Yes, that was the plan from yesterday for the June $15 calls – take $2.50 and run!  

    GMCR/Morx – I have been liking them down here (low $20s).  Much as I loathed them at $70, I think they are a bit oversold at $23.  There's a nice business here – just not as nice as the bulls thought. 

    AGNC/Arron – An old favorite.  

    Trading range/StJ – But we're on the lower end of a declining range – not too encouraging.  

    BX/Terra – Big gamble as you never quite know what the hell they are doing but they are a good group and a good buy down here.  I'd just sell the 2014 $10 puts for $1.80 and be happy with the net $8.20 entry (31% off) as TOS says just $1 in net margin on that sale so, with a 180% return on margin – you can afford to skip the 3.4% dividend!  So, rather than hedge $12,000 (1,000 shares) worth of stock by selling 2014 $10 puts ($1.80) and $12 calls ($2.30) for net $7.90/8.95, where your net profit is $4,100 + $600 in expected dividends at $12 for 59% over 18 months, you can sell 2 sets of calls and collect $3,600 up front and tie up just $2,000 in margin and make just $1,100 less over the same time-frame BUT you are break-even almost 10% lower for free.  

    TNA/Jasu – 50%!!!  50% is the lowest you should let a spread get (the vertical portion).  All you have here is .60 left on the $48 calls but the $52 caller is still .20 so the only move you have is to spend $2 to roll to the July $49s ($2.60) and hope that when the caller expires in 2 weeks that you can sell a July caller for $2 or better to pay for your roll.  The short puts are OK as long as you are confident rolling them to July as well (the July $34 puts are $2) so it's just a matter of waiting for the premium to expire on the June puts.  

    RSS/Arivera – I will forward to Matt and Greg

    SDS/Burr – I mentioned later in the post I had it mixed up with SSO but the SDS hedge itself is a good bear hedge (and a terrible bull one!).  


  71. Spending / lnk – The emphasis is on State and local not taken into account in the budget deficit!

    And about the stimulus, go back to charts that I have posted in the past and you will see that all previous presidents have used spending as a form of stimulus – unfortunately not directed where we need it – infrastructure (at least in the US – not Iraq), health care and education! There is no escaping that government is a big part of the economy!


  72. Phil/telemarketers  Thanks Phil!  you're a good man….. :)


  73. On more try at 1,284 I think now that Europe is closed but this one better stick.  

    11:00 AM On the hour: Dow -0.06%. 10-yr -0.15%. Euro -0.28% vs. dollar. Crude -0.07% to $83.92. Gold +0.39% to $1620.25.

    Gallup's Economic Confidence Index in May averaged -17, up from -20 the previous 2 months, and the highest level since the survey began in January 2008. Interestingly, only those making $90K/year or more showed a decline in confidence during May, the near-daily declines in stock prices no doubt playing a part.

    European shares put together a meek rally, with Germany underperforming for the 3rd consecutive day. Should this become a trend, it would surely be news and something for relatively unscathed U.S. markets to keep an eye on (see also). Stoxx 50 +0.3%, Germany-0.2%, France +0.9%, Italy +0.5%, Spain +0.4%. U.K. closed.

    November's election raises the odds of FOMC action at this month's meeting, say Morgan Stanley's Reinhart and Hornbach in a video note to clients. The "bar" for additional stimulus becomes higher and higher as the election nears, they argue. 

    "Where is the VIX (VXX)," asks Robert Sinn, noting its low level now compared to duplicate crisis moments in 2010 and 2011. Is it because the current jittery state of markets has been so well-telegraphed? Or have markets just gotten so used to bailouts, they're pricing in a central bank floor.

    Spain is in a situation of "extreme difficulty," says PM Rajoy, speaking to Parliament. Europe must help with the country's liquidity issues, he says, dropping a big hint by mentioning how helpful the ECB's August 2011 bond purchases were. Madrid gives up gains of about 1.5% as he speaks, now +0.3%

    Home builders add to early gains and rebound from a selloff yesterday following the decent ISM service sector print. Lennar (LEN+4.4%, PluteGroup (PHM+3.9%, D.R. Horton (DHI+3.4%, M/I Homs (MHO+4.7%, and the ITB sector ETF +2.33%. - Don't forget HOV – up 4%!

    Utilities continue to be "crisis-proof," the XLU rising 0.6% in May as SPY fell 6%. The sector similarly outperformed during panics in 2010 and 2011 and has more than doubled the return of the S&P since inception in late 1998. Domestically-generated revenues, falling input costs and interest rates, and best of all, the defensive nature of the sector continue to make it look attractive. 

    Plastics. With apologies to Benjamin Braddock, that's the word from Coca-Cola (KO -0.5%), Ford (F +1.0%), Heinz (HNZ-0.1%), Nike (NKE +0.1%), and Procter & Gamble (PG -0.5%) as they form a group to advance the development of a plant-based plastic that could be commercially viable and reduce the dependence on fossil fuels.

    Shares of Diamond Foods (DMND +5.1%) bounce after they etched out a 52-week low yesterday. Though an infusion of capital from Oaktree Capital created a buzz a couple of weeks ago, at least one trader remains skeptical thinking that the move is part of a planned lowball strategy to take over the company.

    Disney's (DIS +0.5%The Avengers clears a pair of Star Wars movies to record the third highest domestic box office total of all-time. With Titanic and Avatar sitting above it with less merchandising and sequel opportunities, an argument can be crafted that one month after its U.S. opening the Marvel Studios flick is nearly unparalleled from the business side of the film industry.

    Chipotle (CMG +1.1%) management is also presenting at the Goldman Sachs Lodging, Gaming, Restaurant & Leisure Conference. According to the team, plans for the company include opening about 155-165 stores this year and 3K U.S. stores total. They also say that international response in new markets has been positive, including in Paris where 80% of customers are locals. (webcast)

    Microsoft (MSFT +0.5%starts a pilot program to offer Xbox subscriptions at Best Buy (BBY +3.8%) stores and select GameStop (GME +0.2%) outlets at the same $99 pricing plan found from its own stores. The move appears to be a bigger commitment from Microsoft to adapt the subscription-based model where it will make up subsidized up-front hardware costs over the long haul.

    Global phone sales are looking "modestly better" in Q2 than they did in a weak Q1, says Canaccord's Mike Walkley after conducting checks. However, U.S. smartphone sales have remained soft due to aging phone lineups (ed: other factors could also be playing a role). Walkley expects the Galaxy S III, next-gen iPhone, and other new hardware to produce a stronger 2H. His checks also indicate Research In Motion (RIMM) and Nokia (NOK) are seeing further weakness due to poor BlackBerry/Symbian sales.

    More from Canaccord: Walkley also says his May checks indicate the iPhone (AAPL -0.3%) remains the top-selling U.S. smartphone, but that "gradual share losses" have occurred due to the iPhone 4S' age. He only expects 27M iPhone sales in the June quarter (down from 35.1M in the March quarter), but declares Apple's well-positioned for future growth due to the next-gen iPhone, new iPad, upcoming MacBook refreshes, and an expected iTV in 2013. (previous


  74. MoMO Money / Phil – It's all lflan's pick… Just the scribe here!


  75. Stats/ Phil – An additional telling stats – of all the picks that ended with a 100% win (13 of them), 8 were premium we sold that expired worthless.

    It's also telling that only 20% of one time losers became winners… My own conclusion would be to cut losers quickly given the fact that there is only 1 out 5 chances that they will ever make money. But as you know, I am a more conservative trader!


  76. Interesting article about how the mind works and solves system1 vs system2 problems
    http://www.businessinsider.com/nobel-prize-winner-this-is-the-difference-between-thinking-fast-and-slow-2012-6



  77. Green Card/Phil: You can buy a green card with a clean $1 million dollars, although it can be as low as $500,000 in some areas.
     
    Although there are many clandestine ways people get into this country like bribery and family/business connections that I sometimes here about from my Chinese friends here in NYC, I am not sure of specifics.  Taking a trip down to the base of Manhattan Bridge in Manhattan; Flushing, Queens; or certain parts of Brooklyn and you'd swear you were in a Chinese side-street.  Where theres a will…


  78. Phil/
    I have a question regarding your last TNA play in the $25k
    We bought the July Call Spread 42/49 and sold the 47 June calls
    We are betting that RUT stays below 750 for the next 10 days.
    So why dont we salvage the 52s and take what we can now?
    Or do you expect a bounce tomorrow or on Thursday that you want to sell into before a panic sell off on the week before Greece elections?


  79. Phil / Dividends — ETN 3.88, JNJ 3.9, MT 5.44%, PG 3.66, RDSA 5.44, RIO 4.33, SCCO 7, SI 3.5, SWY 3.8, T 5.5, VALE 6.5, RIG 7.9,


  80. 11:50 EDT – After a nearly 40% drop the past 2 months, Sandisk (SNDK:$33.25,00$1.59,005.02%) gets a lift as Pacific Crest starts coverage of the memory maker at outperform and sets a $47 price target, a bit above Wall Street's mean, according to FactSet. "SNDK trades at a 70% discount to its asset value," says Pacific Crest. "We believe flash memory has hit a key inflection point in the cost/performance curve," with it now being just 10 times more expensive that hard disk drives of similar memory size "while its cost is falling 30%/year." As such, it says SNDK "stands to benefit significantly from rapid adoption of [solid-state drives]" saying they could be 1/4 of SNDK's 2014 revenue, versus 3% in 2011. SNDK leads the S&P 500 with its 5.1% rise to $33.27.


  81. Dividends: TOT 7%


  82. Can anyone tell me what is the atom RSS feed for PSW?
    And what RSS readers do people use?
    Thanks.


  83. COP/Rain – That's a good one.  BP too.  

    Willow/Ink – Very cool and new Gorilla Glass should be on next IPhones and IPads as well.  As to Euro stuff- yes, kicking the can is the best we can hope for.  2 more rounds I think, maybe through mid 2013 and then, without massive stimulus – we will likely be in an unfixable position.  

    And what Rain said.  To me, it's like looking at a chess board.  We're getting to the end game and soon there will only be that one move left – either hyperinflation to dilute the debts or knock over the king (default).  

    MCD/Scott – I like them but not cheap.  

    BA/MsF – That Options Action show of theirs gives terrible, terrible advice.  It's like Shaeffer's – a popular site that gives options a bad name because they suck so badly.  

    CSX/Scott – Are they at $9.53 (the 2009 low)?  How interested do you think I am at $20 when there are dozens of blue-chip stocks that are at the decade lows?  

    Government spending/StJ – This is how the party that controls Congress can wreck the economy at will by cutting spending.  Interesting chart here showing the cycle that doesn't seem to matter much what the macros are in the Senate – they just move up and down in waves:

    Spending/Ink – That chart has nothing to do with the deficit – it's just the change in Federal Spending.  

    FB/Jabob – $15 is still my target but too dangerous to short.  

    Stimulus/Ink – Well that's like saying an accident victim comes into the hospital needing 4 pints of blood and you give him one pint and then declare the experiment was a failure because the one pint didn't work and therefore, from now on, when people come in with blood loss – you will never again give them blood because we tried it and it didn't help.  That's essentially the Conservative argument – it's ridiculous.  If you have to drive a car 200 miles up hill to get to the flats and your tank is empty and you put in one 2 gallons and it goes 50 miles and then runs out and starts going backwards – do you blame the people who thought putting gas in the tank was a good idea or the idiots who decided that 2 gallons would do the job when CLEARLY – to any rational person looking at the situation – it was just a pointless drop in the bucket that would, in fact, be a waste of two gallons of gas when 8 gallons just as clearly, would have accomplished our goal.  

    This is not complicated stuff – it's just made to seem complicated by the Conservative PR machine that has the sole goal of making sure Obama is a one-term President.  Nothing besides that matters – certainly not the facts…

    GLW/Burr – I still like them but need to rethink if Q2 earnings/outlook don't perk them up.  

    MoMo Money/StJ – That's right, I meant and IFlan.  Not used to non AAPL picks from him…

    Cutting losers/StJ – Good idea, would make a huge difference.  

    $1M/Kinki – Well, that's true in any country.  How does China feel about people getting US Citizenship.  US is nasty about it if you want to be citizen of another country – can't have dual and must renounce US and then they want to tax your outgoing assets, etc..  

    TNA/Lionel – The $52s will cover us for a nasty pop in TNA and take out some of the sting.  The main reason for selling the short calls was in lieu of cashing the $52s as we collected more money for them than if we cashed the $52s.  Essentially, the long July vertical is a brand new stand-alone play and our method for cashing in the $52s was to short sell the $47s but that only works knowing we do have some protection from our spread.  

    Dividends/Rain – Thanks. 

    Come on S&P – You can do it!


  84. Dividends: BP 5.26%


  85. Thanks Phil


  86. And there's the pitch!  CNBC asking if the US should bail out europe. 


  87. ? A Possible reason for AAPL flatness:
    Apple fanboy websites saying upcoming Mac product line refresh will be a dud, especially MacBook Pros *not* getting a redesign a-la- MB Airs.


  88. Whee, made some money on the first /CL contract yesterday, enough for 6 months worth of gas.  It's quite volatile, no wonder the traders are loving it.  At least, it's something that doesn't go to zero, but it did go to $40ish in 2008.  I'm more comfortable with selling OTM options, but the /CL, /ES and /TF are very liquid and good hedges if used properly.  For instance, if the portfolio Delta is too positive, selling /ES can help balance the portfolio, or vice versa.  Someone here did ask the same question a couple of days ago.  Very different trading mentality between the Futures trading and options premium selling.


  89. Too funny the way the whole market waits for that rip higher this afternoon


  90. Futures / Peter – I recall someone on the board that used to sell ratios against oil futures. Maybe something to look into!


  91. WATCH/Action List for Income Portfolio:  

    CSCO – 10 2014 $13/18 bull call spread at $2.60 ($2,600) selling 2014 $13 puts for $1.52 ($1,520 + $1,315 in margin) for net $1,080 on the $5,000 spread. – Eventually we may want to sell calls but too cheap now.  

    Selling 10 EXC ($37.37) Jan $35 puts for $1.60 ($1,600), using $5,000 in margin for net 32% in 6 months.  

    FTR at $3.54, selling 2014 $3 puts and calls for $1.40 for net $2.14/2.57 with a .10 quarterly dividend so 5,000 shares nets $500 a quarter in dividends and ties up $10,700 of cash and $2,750 in margin so we have a quarterly return of 3.7% against cash and margin (14.8% annual).  - Keep in mind this is while we wait to see if we hit our $3 target and cash out a $4,300 profit, which is another 32% against cash and margin or 21% annualized on top of the 14.8% dividend

    HCBK – 50 Jan $5 calls at $1.20 ($6,000), selling 50 Jan $5 puts for .40 ($2,000 + $2,625 in margin) and selling 50 July $6 calls for .30 ($1,500, covered) for net $2,500 + $2,625 in margin with an expected return (below $6) of 29% in 45 days.  

    MT at $13.83, selling 2014 $10 puts and calls for $7.10 is net $6.73/8.37 with a .16 quarterly dividend so 2,000 shares nets $320 a quarter in dividends and ties up $13,460 of cash and $2,100 in margin so we have a quarterly return of 2% against cash and margin (8% annual)

    Selling 10 NLY 2014 $15 puts for $2.50 ($2,500), using $1,800 in margin for net 138% in 18 months.  

    RIG at $40.41, selling 2014 $40 puts and calls for $18 for net $22.41/31.21 with a .79 quarterly dividend so 1,000 shares nets $790 a quarter in dividends and ties up $22,410 in cash and $7,780 in margin so we have a quarterly return of 2.6% against cash and margin (10.4% annual) but a whopping 78% additional profit if called away. 

    SVU at $4.45, selling 2014 $5 puts and calls for $3 for net $1.45/3.23 with a .085 quarterly dividend so 5,000 shares nets $425 a quarter in dividends and ties up $7,250 of cash and $4,825 in margin so we have a quarterly return of 3.5% against cash and margin (14% annual).  

    TOT at $42.77, selling 2014 $40 calls for $6.50 and $35 puts for $4.70 for net $31.57/33.29 with a .65 quarterly dividend so 1,000 shares nets $650 a quarter in dividends and ties up $31,570 of cash and $3,800 in margin so we have a quarterly return of 1.8% against cash and margin (7.2% annual).  

    At the moment I'd like to pull the trigger on CSCO, EXC, NLY, RIG and SVU on the expectation we stick over 1,284 later.  I'm leaving for a meeting at 2:30 but I do want to fill out 10 positions and then we'll hedge if we have to but, for now, tons of room to roll or DD on our initial entries and PLENTY to make our first month's picks.  


  92.  
    Phil/TQQQ – Any recommended plays  for a rebound. TQQQ's or other. My only concern with the TQQQ is the low OI on most strikes.


  93. ksone88/TQQQ
     
    I believe Phil was buying the Jun 50's yesterday around $0.15 in either the $5k or $25k port.


  94. Phil
    Is this hedge good today at 24.00 for 1.40  
    SDOW is 3x Ultra-Short on Dow.  July $23/28 bull call spread is $1.30 
    Thanks


  95. Phil,
    quick question regarding you CSCO play:
    CSCO – 10 2014 $13/18 bull call spread at $2.60 ($2,600) selling 2014 $13 puts for $1.52 ($1,520 + $1,315 in margin) for net $1,080 on the $5,000 spread. – Eventually we may want to sell calls but too cheap now.
    Isn't this identical with selling the 2014 18 puts?


  96. Wow that took a long time.  I have to run to a meeting but, barring a failure of 1,284 (again) it's looking like another constructive day.  

    12:00 PM On the hour: Dow -0.2%. 10-yr +0.01%. Euro -0.49% vs. dollar. Crude -0.16% to $83.84. Gold +0.2% to $1617.05.

    1:00 PM On the hour: Dow +0.09%. 10-yr -0.06%. Euro -0.47% vs. dollar. Crude +0.04% to $84.02. Gold +0.39% to $1620.25.

    The Trulia Price Monitor (tracking home asking prices) is flat in May following 3 consecutive months of increases. Nationally, 41 out of 100 of the largest metro areas had Y/Y price increases, and 86 out of 100 Q/Q price increases. Rents continue to charge higher, +6% Y/Y vs. 5.4% in April.

    CoreLogic reports U.S. home prices, including distressed sales, increased 1.1% Y/Y in April, the first back-to-back Y/Y increase since June 2010. Prices rose 2.2% M/M, the second consecutive M/M gain this year. “Home prices are responding to a restricted supply that will likely exist for some time to come – an optimistic sign for the future of our industry."

    "The LTRO3 trade is on," writes Tim Backshall, posting a chart of the divergence of European financial credit spreads (rising) from  Spanish/Italian credit spreads (falling). The moves suggest the banks may be about to add a lot of sovereign paper to their books.

    Coordinated central bank action is "a lock," says Brown Brothers' Andrew Hofer. A better idea than QE, posits Larry McDonald, would be an expansion of the dollar swap program from November. The LTROs, he says, have masked the level of funding stress for EU banks, making typical indicators like 90 day Euribor – currently near a 3-year low – no longer a decent gauge.

    Expected ratings cuts from Moody's of up to two notches for U.K. banks – including Barclays (BCS), RBS, and HSBC (HBC) – could cost them billions in higher funding costs and higher collateral requirements from counterparties. The good news is the ratings action has been well-telegraphed – it's hard to believe this all isn't priced into the stocks.

    The EFSF is preparing a line of credit for Spain, if necessary, reports a German newspaper. The rumor makes little sense as the EFSF itself has found it difficult to raise money, and Spain is a 12% contributor of the fund's capital. Spain does have a bond auction coming on Thursday, so whatever gets you through the night.

    Italian prosecutors probe S&P's NYC headquarters for alleged market-manipulation concerning its downgrades of Italy. The prosecutors are from the small town of Trani, where the legal complaints now reside after courts in Milan and Rome threw them out.

    A Cypriot government spokesman says there is a "serious possibility" that the country will apply for a loan from the EU's rescue fund to support its banking system, which is heavily exposed to Greece. That's despite the European Commission yesterday downplaying the possibility.

    While the 100s of firms that claim to be emerging-growth companies under the new JOBS Act are small biotech, technology, retail and energy companies, 17 are blank-check firms or trusts. Ie, shell companies that can be used in reverse mergers – the kind that dodgy Chinese firms like – are using the new law to avoid heavy disclosure requirements. 

    Tobacco names trade lower, as voters in California decide on a potential $1-a-pack tax on cigarettes (Previous: III). Though a new tax would hit firms in much different ways, the high-profile battle is considered a trend-setting event in the overall war against Big Tobacco that affects all players. The industry spent $47M to try and defeat the bill, while supporters raised $12M – including $500K from NYC Mayor Michael Bloomberg. MO -0.6%RAI -1.0%LO -0.7%PM-0.3%.

    Jim Albaugh, the head of Boeing's (BA) commercial aircraft ops, hopes the company will have received ~1,000 orders for its 737 Max jets by the end of the year. Albaugh accused Airbus (EADSF.PK) of using aggressive tactics to steal Boeing's customers and pledged to "respond in kind."

    It seems so easy. The combined population of BRIC nations is close to 3B and they all love American fast food, so explosive growth is a certainty. But not so fast, according to the reports from global players such as Yum Brands (YUM +0.3%), Arcos Dorados (ARCO +3.5%), McDonald's (MCD +0.5%), and Wendy's (WEN-0.5%). The global economy has wreaked havoc on the rosy estimates for revenue, while local tastes in Brazil, India, Russia, and China don't always mesh with U.S. fast food staples. 

    NAND flash prices fell nearly 15% in early May and another 5%-10% at month's end, Digitimes reports, as mobile device and solid-state drive demand fail to offset a surge in supply and a toughpricing environment for memory cards. NAND makers such as SanDisk (SNDK) and Micron (MU) continue to hope 2H product launches will boost demand. The declines could provide a margin boost to Apple (AAPL), and to enterprise flash vendors such as FIO,OCZ, and STEC. (previous

    Three lunchtime reads:

    1) Bad news piles up for China's economy

    2) AdvisorShares Active Bear ETF: A different kind of market hedge

    3) Good news about the looming global meltdown? Cheap oil! 


  97. Phil income I help my mom manage her income sounds similar to yours but a little less at about 350k, my biggest problem is that she has it in an IRA that does NOT allow put sales!!! drives me nuts but she refuses to move…I know I should be able to cinvince but as of the last year will not budge. Any suggestions for income without selling puts!!!…drives me nuts 


  98. sage / puts — Where is the account?


  99. TQQQ/Ksone – Why don't you ask when it's down?  I hate to chase but the July $48 calls at $2 are a nice entry and you can sell the $38 puts for $2.50 if you are brave and get a net .50 credit.  The trick would be to take a $2.25 loss off the table (1/2 of each) and roll the short calls to a lower, longer strike, like the Sept $27.50 puts, now $2 and if you're not that bullish on the Nas – why would you even touch this thing?  

    SDOW/QC – Sure, I still like them for a dime more.  

    Good list, StJ.  

    CSCO/Obur – Yes, it does work out the same in this case but, longer term, we want to own CSCO and sell short calls against it and the bull call spread gives us upside protection for that – although you can argue that so does $4 cash on the short put sale so it's a matter of preference.  

    No puts/Sage – Well it's just a different take.  I guess she'd have to stick with covered calls and maybe you can run them parallel for 6 months and demonstrate to her the difference but we're essentially just picking stocks we like – that would be the same no matter how you buy them.  


  100. Phil, I believe in the US you can have dual citizenship, no problem – unless it changed lately.


  101. Zzzzz….


  102. stjeanluc, selling ratios against the futures may work.  My initial concern is the trading volume for /CL options, which is decent, but doesn't seem enough.  The other is the high commission.  TOS still charges me $2.5-$3.5 per /CL or /ES option contract, versus less than $0.9 for stock options.  May be /CL option play is just naked sell or bull put verticals.


  103. @jomptien,
    Yes and no, depends on the country of origin and if US has a dual citizenship treaty with your country.


  104. Spain says they're shut out of the credit markets, and the market yawns:
    http://on.wsj.com/M8IZxp


  105. Repeating my q, since it got lost in a wave of comments that came at the time:
    Can anyone tell me what is the atom RSS feed for PSW?
    And what RSS readers do people use?
    Thanks.


  106. Phil
     
    Nice call on BA and DMND. 
     
    My others didn't execute. I hate it when I get greedy and burned over a penny or two.


  107. Phil, of the following financialish stocks, which do you like the best, from a fundamentals standpoint.

    KEY

    BCS

    HIG

    MET

    JPM

    FITB

    BK

    PRU


  108. Obur / RSS  -   RSS isn't working.  Greg said it's working, it's not. He forwarded it to Matt, and I haven't heard anything so far.  I wouldn't count on it for a while.  Most people use RSSOwl.  The Atom (previously working) feed was turned off because too many people were using it, so we're back to refreshing the page every 2min.


  109. Dual/Jomp – Maybe it's just a taxes thing but I was told it's almost like you die and they want estate taxes before you leave.  

    You're welcome Exec.  5% leeway is usually my max to chase.  

    Financials/Craig – JPM, AFL, HCBK and XLF, of course.  

    Well, I've got to go.  Wish we were looking stronger but seems like a wait and see kind of thing into the G20 maybe.  

    Later all.  


  110. What ever happened to that member who used to post those cool charts of SPX that he came up with?… was it Kwan?   It was a forward looking indicator… 


  111. @Burrben
    ty for the info. Can you give me de feed url, I know it's not working but I want to set it up when it will be working.



  112. Phil / TASR
    I'm thinking of getting out of TASR and moving the trade to cash.  Although it's been pretty good to me.  
    -Long 2000 TASR at $4.95, now $5.16 up 4%
    -Short 20 Jun 5 straddles at $1.30, now $0.40 
     
    Would you sell another straddle and keep the stock, or just close it down and move the capital to cash, or invest in the Income Port?  


  113. FAKEBOOK going to hold 26?
    Wow.


  114. FB — Someone defending $26


  115. jabo / dude — I hit Like! 8)


  116. Phil/ Dual – I have held dual Aussie /US citizenship for 20 years…


  117. PeterD / CL:  Peter, I'm just curious why you decided to look at options on /CL?  I'm assuming you are looking at selling OTM strangles, similar to your SPX and RUT plays?  My personal opinion is that if you really want to get involved with crude as an underlying, you should use USO (ETF). There are a few reasons:  commissions on the options is cheaper, the options are more liquid, AND you can get an edge knowing that the ETF decays over time (roll yield). So you can sell more calls than puts for example.  Overall, I decided to stop using USO as an underlying as I don't like the gap risk in the oil market (war, Iran, etc).


  118. /CL Options/ Neverwork – Actually, Peter and I were just speculating on some plays. I agree, the oil market is a bit volatile for long time plays, but you could always structure a play like a ratio where there is little or no upside risk since this is the most likely breakout direction.


  119. Stupid question, what does the 3.23 (net $1.45/3.23) represent on the SVU Income Portfolio trade? I get the 1.45 is the cost of the stock minus the sale of the options but I'm not connecting on the 3.23. Thanks


  120. rain I beleive its Schwab…no puts selling in IRA


  121. jrod/svu
     
    I had the same question a year ago – it would be the average cost after having it put to you at the put strike


  122. To the extent it's of interest, I've started accumulating FCX based on its historically low price combined with my suspicion that China is going to dump cheap credit into more fiscal policy-inspired construction projects to buck up GDP.  And I would guess there's some chance the U.S. might take that tack at some point, simply because it's an election year and the candidates will likely be casting around for something useful to say. 


  123. WTR – yikes, that is taking off!


  124. Just so I understand, on the income portfolio trades such as:
    MT at $13.83, selling 2014 $10 puts and calls for $7.10 is net $6.73/8.37 with a .16 quarterly dividend so 2,000 shares nets $320 a quarter in dividends and ties up $13,460 of cash and $2,100 in margin so we have a quarterly return of 2% against cash and margin (8% annual)
    Are we talking about selling 20 puts and calls? (as well as the 2000 shares outright purchase)


  125. never & stjean,
    I'm always looking to diversify from the SPX and RUT positions that I have.  Bonds (TLT), oil (/CL, USO, OSX, etc.) and gold (GLD, /CG, etc.) suppose to have some decoupling from stocks, and thus can make up a more diversified portfolios.  Yes, I used to trade USO, but its options are kinda small (less than $0.5 for OTM puts), so it takes quite a bit of volume to make up the dollar amount, i.e. it harder to roll and make adjustments.  I like OSX, but the low options volume there is a killer, taking days to fill.  The /CL is a good alternative that is liquid.  To reduce the volatility, we are looking at OTM options instead selling the futures contracts directly, turning it into some kind of income play.  The July /CL 75 puts at $1.14 makes it an interesting play.  If oil dips further, that 75 puts can get to $2.5 or more, which is a good premium sell to me.


  126. sage/selling puts in IRA,
    I would sell put verticals in those accounts.  It reduces the premium sold, but also reduce risks.


  127. Peter D, I have been studying the /dx future options a bit instead of working the future directly.   Do you think they could be worked like the short strangles on SPX?  It would be great to start a dialogue on futures options.


  128. Hi there! 

    Doesn't look like I missed much, pretty much dullsville this afternoon on crap volume (108M on Dow).  

    Cool charts/Burr – That was Springheel Jack and he hasn't been on much lately but he has his own website where he posts things and sometimes they are also in Chart School. 

    RSS Feeds – At the bottom of each day's posts and before the comment section, there is the RSS feed for that day.  It does change every day with the title of the post.  

    TASR/Burr – Getting out of my stock of the decade only 2.5 years into the decade???  Oh wait, $5.50 – when did that happen?  I'd take that and run!  You have $10,000+ in TASR and, annoyingly they don't have long-term options so I'd be happy to get out and just sell Dec $5 puts for .65 and be happy to re-enter at net $4.35 if put back and otherwise take the profits and run. 

    FB in the $25s!  

    ROFL Jabob!  Also a picture of the average CMG customer…

    Classy caption for this photo:  "A Hit, a Very Palpable Hit!"

    Dual/Aussie – Maybe different if you start from the other side.  Anyway, I'll have to check into it as I check out my beloved Jersey… 

    Wassup with gold?  Super-flatline under that $1,620 line all day. 

    FCX/ZZ – I like them but I am worried China may still dump mega-tons on the open market at some point so just keep a bit of dry powder on hand – just in case. 

    WTR/Scott – The new oil.  

    MT/Wave – Yes, unless specified otherwise, we're talking full coverage of the stock (so 20 for 2,000 shares).  

    S&P 1,285.50 and Nas 2,778 are good and now Dow needs 12,257 (200 dma), NYSE 7,622 (5% away) and RUT 756 (10 points off) but 1,284 was, as we wanted – a good start…


  129. /CL Options / Peter – $75 seems like a nice floor for oil so that put does sound attractive! Like I said before, I would be leery to have any plays where there is upside risk with oil (as opposite to the stock market) as any kind of sparkle in the Middle-East can get $20 of oil premium!


  130. robert,
    I went and looked at /DX options and they don't have much volume nor open interests, so not quite a good trading vehicle.


  131. phil,
    tks for the oxy/rig.  was able to keep rig and use in the income port.
    ran across this and it looks like they used your "markets are rigged" for this 90 second video.
    http://www.youtube.com/watch?v=UjZSCi2MSc4&feature=youtu.be

    mc


  132. Dual / Phil – I have US citizenship by birth, then became an Aussie. 


  133. stjeanluc,
    You're right on the upside risk and let's be cautious in selling /CL calls.  Looking at the option chain, the upside risk seems to be priced in to the calls, which have higher value than puts, but still not enough for a $20-$30 spike IMHO.


  134. Hey aussie,
    My understanding is that dual citizenship is neither legal nor illegal.  Yup, it's the gray line in between.  When you have a US citizen, you have to renounce all other citizenships.  However, other countries like Australia don't accept your annulment, so you get to keep both.  In getting passports, you'd have to be careful in un-checking certain items to not commit fraud on either side.  There are instructions that is over 50 pages long from lawyer offices, available on the Web, on how to do it.  Too complicated for me!


  135. 2:00 PM On the hour: Dow +0.18%. 10-yr -0.1%. Euro -0.45% vs. dollar. Crude +0.18% to $84.14. Gold +0.29% to $1618.65.

    3:00 PM On the hour: Dow +0.21%. 10-yr -0.12%. Euro -0.42% vs. dollar. Crude +0.27% to $84.21. Gold +0.26% to $1618.05

    At the close: Dow +0.22% to 12129. S&P +0.57% to 1285. Nasdaq +0.67% to 2778.

    Treasurys: 30-year -0.62%. 10-yr -0.2%. 5-yr +0.02%.

    Commodities: Crude +0.33% to $84.26. Gold +0.36% to $1619.75.

    Currencies: Euro -0.36% vs. dollar. Yen +0.54%. Pound +0.02%.

    Market recap: Stocks logged modest gains in thin trading after a better-than-expected services sector report. Hopes rise for a globally coordinated bazooka, but enthusiasm is tempered as Spain's budget minister said his country has effectively lost access to capital markets because of steep risk premiums demanded by bond investors. NYSE advancers led decliners two to one. 

    Hulbert: The Correction is close to being over (Market Watch)

    About $580M pulled out of the largest VIX ETF (VXX) since the market began heading down in late March gives strength to the idea the fund is less about speculation, more about hedging. "If history is any guide, a spike in VIX would result in significant redemptions of VIX products," said Barclays' Maneesh Deshpande back in April. Correct. 

    Recent poor U.S. economic data, including Friday's jobs number, isn't enough to "substantially alter the contours of the U.S. outlook," says the St. Louis Fed's James Bullard. "One possible FOMC strategy is simply to pocket the lower yields and continue to wait-and-see on the U.S. … a change in U.S. monetary policy at this juncture will not alter the situation in Europe."

    Save Us, Ben Bernanke, You’re Our Only Hope (The Atlantic)

    Austerity has never worked (Guardian)

     Interesting stuff – the TIPS curve has inverted, the 1-year yield moving from -2.5% to zero in 4 months, meaning the market is now pricing in 0% inflation over the next year vs. 2.5% just weeks ago. Inflation expectations haven't collapsed like this since 2009. Might this chart be making the rounds with the Fed staff?

    Lock In Low Rates for the Long Haul (The Street)

    The Canary in the Economic Coal Mine (WSJ)

    The U.K.'s top 5 banks - RBSBCS,LYGHBCSCBFF.PK - have £40B in undeclared losses, according to PIRC, which says the accounts have been flattered by a 2005 change in accounting standards. The result is dividends and bonuses being paid out on profits that aren't there. Worst is RBS, which could potentially need another bailout if the losses were declared.

    MasterCard (MA) declares a $0.30 per share dividend, and announces a new $1.5B stock buyback program, effective at the completion of its existing $2B buyback program currently underway. As of May 31, 2012, the Company had approximately $270M remaining for repurchase. Shares +0.6% AH.

    WTF? U.S. Multinationals Lobby to Alter Tax Rules They Sought (Bloomberg)

    Rich Nontaxpayers (Economix)

    The new Petrobras (PBR +0.8%) five-year investment planwill be ready in the coming weeks, investments will remain "high," and Brazil's state-run oil company is on track to produce 6M bbl/day of crude oil by 2020, CEO Maria das Gracas Foster says, adding there is no discussion over changing rules requiring suppliers to produce a certain amount of services and equipment in Brazil. 

    "What are a [former] senator and governor doing on Chesapeake's (CHK) board?" Doug McIntyre asks, citing a lack of credentials to serve as public company directors as reasons why they should be sacked. But CHK's “issues with debt, liquidity, cash flow and low commodity prices aren’t going to go away just because they’re changing the board," Argus' Philip Weiss reminds.

    Baker Hughes (BHI +0.6%) is maintained at Overweight by Barclays analysts after a meeting with BHI's CFO, who says product lines are performing well in North America except pressure pumping, sees some price improvements in the Permian with pricing bottoming in the gas plays, and international markets are growing.

    Free cash flows for refiners will be "reasonable," and the companies will be able to use the cash as they choose rather than being forced to invest in mandated improvements to operations, Fitch Ratings says. Crude spreads likely will persist but should weaken as more logistical solutions – pipeline, trucking, rail – "come online to move shut-in crude to end markets.”

    Desperation is in the air, says Brent Cook of the downturn in the junior mining sector. It's a very capital intensive business, it's tough to raise money, and it's about to get tougher. The good news is this will whittle down the companies to the best ones. We're getting near a fantastic time to be investing if you know what you're doing.

    Hmmm, tasty….  Shares of Shuffle Master (SHFL -16.1%) slump on the heels of the company's FQ2 report. Though results were in-line, investors had bid up the stock in the expectation of a more powerful quarter. - Let's watch these.

    Coinstar (CSTR+3.7% AH on reports of an agreement with Starbucks (SBUX) for thousands of Seattle's Best coffee kiosks.

    Facebook (FB -4%) heads into the close below $26, as the company's high multiples continue giving investors pause. The decline comes even though S&P's Scott Kessler is upgrading shares to Hold on valuation grounds. While still having concerns related tomonetizationcapex, IP, and governance, Kessler argues Facebook's forward PEG ratio has fallen to 1.1, making it reasonably priced relative to peers (ed: but that PEG will rise if Facebook's growthdecelerates further). (earlier)

    34% of respondents to a U.S. Reuters survey say they're spending less time on Facebook (FB -2.1%) than they did 6 months ago, whereas only 20% say they're spending more time (ed: perhaps Facebook's incredible usage rate left little room for upside). In addition, 80% say they've never bought a product or service as a result of a Facebook ad, a figure that drives home recent monetization worries. The L.A. Times recently discussed declining Facebook use among some U.S. teens.

    More on Facebook: The Reuters survey comes on a day when the company is introducing a major overhaul of its Sponsored Stories ad product, which allows marketers to promote products liked by a user's "friends." Sponsored Stories will now appear directly in a user's news feed, rather than in right-hand columns. In addition, in an effort to boost Facebook's limited mobile ad business, Sponsored Stories can now be purchased specifically for mobile devices.

    Is Facebook still cool? (Market Watch)

    There are now over 100K Windows Phone (MSFT) apps available – that's up from barely 50K at the end of 2011, and less than 25K a year ago. About 2/3 of all apps are free. Though Windows Phone's app library is still much smaller than iOS and Android's, its growth shows the willingness of app developers to spread their bets, especially as WP gains a bit of momentum thanks to Nokia's (NOK) Lumia launches. (previous)

    Virgin Mobile (VMED +0.1%) will begin offering the iPhone (AAPL) to its prepaid subscribers as soon as July 1, sources tell theWSJ. Virgin relies on Sprint's (S) network, and its purchases could help the latter make good on its $15.5B, 4-year iPhone purchase commitment without getting saddled with millions of unsold iPhones. Fellow prepaid carrier Leap Wireless (LEAP) recently struck an iPhone deal of its own.

    For now at least, the iPad (AAPL) is maintaining an iPod-like grip on the U.S. tablet market. ChangeWave's latest survey of North American consumers finds 73% of tablet buyers saying they plan to buy an iPad. A mere 8% say they're getting a Kindle Fire (AMZN), and just 6% say they'll buy a Samsung (SSNLF.PK) Galaxy Tab. 81% of new iPad owners say they're very satisfied with their device, compared with 71% of iPad 2 owners, 46% of Galaxy Tab owners, and 41% of Kindle Fire owners. (previous)

    What Cool Things Can I Do with All This Free Cloud Storage Space? (LifeHacker)

    How to Backtest Your Trading Strategy Correctly (Trading Markets)


  136. From Barry:  

     

    Last week, Scott Bell posted this hilarious 2010 rant by Howard Stern — NSFW audio after the jump — it is a stream of a profanities about the casino that is the stock market, brokers who never sell, and all sorts of other fascinating commentary.

    Howard Stern may have more dough than you, but his rant is instructive in what most individuals — not just HNW, but anyone — needs to learn to protect themselves from the wolves of Wall Street.

    Most of these apply to anyone, a few are specific to Howard.

     

    Advice for Working with Financial Advisors (for both HNW or not)

    1. Societies, Economies and Markets Move in Long Cycles: Investors have to understand long cycles — and that half of them are not good:

    Think about the post WW2 era — GI Bill sent millions of returning soldiers to school, the building out of suburbia, rise of the car culture, construction interstate highway system, civilian air service, broad electronics development — its no coincidence that 1946-66 was a long term secular bull market (good) for stocks. This investors paradise was followed by an ugly period: 1966-82 had VietNam, Watergate, Oil Embargo, Inflation, etc. In 1966 the Dow was 1000 and in 1982 it was still 1000 — 16 years, no gains (not good). The next good run was the 1982-2000 period that saw the rise of the PC, chips, software, internet, mobile, networks, storage etc. Another golden era for investing. (good). Do I need to explain 2000-2012 and counting? (not good).

    If you don’t understand these cycles, you will not be a successful investor.

    2. Long term doesn’t matter if you are in the middle of a bear market: Like we are today. I cannot tell you when it will end, but history suggests sometime before the next 5 years are over.

    During these secular bear markets, your job is to reduce risk, carry more cash and bonds, and wait for better times. Tactical adjustments are what get you through these periods — not sitting fully invested in equities and getting shellacked. (See number 1 above)

    3. Ignore pretty charts in Marketing Materials: Whatever you are shown in glossy brochures is nonsense sales bullshit. Never make any decision based on the old couple walking down the path, or a picture of boats. Its junk advertising — and amazingly, it is an effective way to capture the suckers.

    Howard called it “bullshit” in the audio — and it still ensnared him. That’s how effective it is.

    4. Your advisor should help you to Educate you.. More than just managing your money, your advisor should help you understand what is occurring financially in the world.

    They should have a working knowledge about valuation, trends, economy, sentiment and market internals. They should be able to tell you what is working and what is not and why. A good advisor can contextualize the headlines, not merely read them to you. They should be able to answer all of your questions, and when they cannot, they should honestly tell you so — and then go find the answer for you.

    5. Buy & Hold is for Secular Bull, Not Bear Markets. Buy & Hold is folly during secular bear markets like 1966-82 or 2000-to-today. Simply stated, it is against human nature and therefor will not work. People get tired, annoyed and angry. Human nature is such that no one wants to lose money for 15 years. This ultimately leads to frustration and bad decision making.

    Secular bear markets like the one we are in right now is not when you want to work with a buy & hold advisor (like Howard’s).

    6. Caution When Too Much Wealth is Tied Up in One Stock: You would think that this lesson would have been learned after Worldcom, Enron, Lucent, Lehman Brothers and soon Facebook, but apparently not.

    Anyone with a substantial amount of their personal net worth tied up in a single company needs to diversify that holding as soon as possible. We can argue if 40% or 75% is too much, but the short answer is if you are even debating it, you need to diversify your risk away from that one holding. PERIOD.

    7. Build a Bond Ladder 7-15 Years Out: Ladders are bond portfolios of differing maturities (rungs) designed to capitalize on falling or rising yields. Higher yields means you build a longer ladder (15-20 years); low rates like today means you keep it shorter duration. HNW investors should have a substantial income stream from a diversified portfolio of Treasuries, A-rated Munis and investment-grade Corporates. With rates this low, the bond ladder should be no longer than 7 years.

    8.  Rising Bond Prices = Lock in Yield: This has been a 30 year bull market for bonds. Anyone who is HNW should have been advised to ladder a portfolio decades ago, up to as recently as 2005-06.

    You can still build  a bond ladder today — just don’t expect too much in way of returns. Expect higher or more normalized rates in the future.

    9. Collars (XM Sirius):  There are occasions when great concentrations of stock wealth cannot be sold immediately. These are what the costless stock collar was invented for. It uses stock options to lock in a range of prices, and dramatically reduce the downside risk.

    Let’s say hypothetically, if you owned 400 million worth of Apple, and were getting nervous. They could sell the January 2014 600 calls for $92, use the proceeds to buy January 2014 535 puts for $89. Upside is limited to $600, but the downside is capped at $535.

    This is what should have been done for Howard back when SIRI stock had some value.

    10. Covered Calls: Lacking a collar, the SIRI stock is now under $2. Depending on the stock holding, income can be generated writing covered calls — selling out of the money options to pick up revenue. This is only done if the writer is happy to sell and does not believe the stock has much upside.

     

    That’s my 10 suggestions. Each one should make you money — or at least keep you out of trouble.

    As for Howard . . . He needs to get himself educated, and find some better advice — quickly.


  137. You're welcome Mill!  

    Thanks Peter – that explains the conflicting advice I keep getting.  


  138. I am really impressed with Barry's list. There's a lot of wisdom in there. Some, I wished I had followed.
     
    To Peter: here's what I have learned: I made a lot strangling the SPX. I have made, net, NOTHING doing anything else. Stick to what you understand.
    You can make a steady 12-15% a year with a portfolio invested in bonds generating margin for your SPX strangles. Although I am fascinated by Phil's insight into the market (and continue to pay for), I have not made any net money playing them. Maybe I'm not good enough, but Phil, you are so value oriented you want us to buy something our grandchildren will be amazed to own, provided our kids don't dump it first.


  139. Thanks, barf.  Points taken, and I too don't do much else besides the short strangles, but I need to expand my horizons.  As the portfolio grows, I'll definitely need to use the buy/write due to the large size, and directional bets (sell put, buy call or buy call verticals, or vice versa) in the future.  Front month SPX and RUT options may not be able to support a $50M portfolios (I'm dreaming up that number for now).


  140. PeterD/Aussie/Dual Citizenship — the US is not as strict about dual citizenship anymore. You don't have to renounce your US citizenship to get another. My wife got her Spanish citizenship last year (family origin), and the US consulate was very clear that she does not have to give up her US citizenship. My mom had to renounce her German citizenship when she got her US citizenship, but that was some time ago. I do think it's easier to start as an American and then get another. 


  141. My RSS feed is now working. It also loaded comments on the old threads for the past few days that I added, though only the last 50… this is an annoying problem for archiving comments, anyone figure out a solution to that?


  142. Peter: if i had a $50M portfolio, i could make 6% a year strangling weeklies at ridiculous strikes, provided I negotiated a commission rate with the broker. In fact, I proposed the same to someone in that range of wealth (a bit short). If I had that, I would do that and die happy.
     
    I have learned one thing for sure on this site: with PM, you have to be careful, but it is the best retirement investment I can imagine.


  143. Oh, and if you have a $50M portfolio, why would you screw around with this?
     
    my reference was to my EMPLOYMENT doing something for a supermodel.


  144. barf, very funny, hihihi!  Agreed that PM is great, but need to be careful with leverages.  With $50M, we still have to get 12-15% a year, especially if we want to run the strategy for a hedge fund or non-profit, or a collection of investors.  At that time, it's not about us, it's about how many other lives the profit can help them with their lives.


  145. sage—I did the vertical puts on EXC in the IRA today—-instead of 1.60 cr I got 1.45 cr—- gave up .15 cr and also cut the margin requirement from 35,000 to 15,000 on 10 short puts


  146. Peter D/   STJ—does TOS have futures options



  147. Savi,
    Yes, TOS has futures options.  It works with /CL and /ES.  But /DX options is not available, may be due to the exchange rather than TOS.


  148. Peter D—Thx—-always wanted to look into the futures options


  149. Peter D or any short SPX strangler
    Quick question on how you manage the risk while you aren't at a computer.  I've read through the Wiki, and I've been paper trading the SS on the SPX and RUT for a few months.  Just read through the comments again.  I'm familiar with trading IronC's on SPX and RUT and did that for a while until my job wouldn't let me.  Anyway, in this uncertain market with Europe/US and news headlines, how do you protect against a "black swan" or "flash crash" event where the sold puts radically increase in value?  Do you use Alert triggers to automatically buy put protection in a crash, or stop out at a certain % loss, or execute a roll?  Many time's I'm in front of my PC, but there will be days where I'll be gone from 6am  - 6pm.  Just wondering.
     
    Also, if you wouldn't mind, what strikes are you strangling now?


  150. Peter D—-TOS just told me they do not trade futures options but hope to start by end of summer—are they for only select clients?


  151. Phil / TNA & Adjustment to Income Portfolio – As always… appreciate the education.  Your methodology for selecting the strike/expiration month concerning TNA was spot on!


  152. Phil,
     When you rolled the TLT 10 Sept $110's to $115 I was in the $110's at $.74 so I just kept them and added 5 of the $115's at $1.20. Would you sell the $110's if you were in them at that price, or wait and see if you could get out at a profit.


  153. Savi,
    I traded /ES options with TOS before and they executed fine.  I can enter options orders for /CL now, but not sure if /CL options would execute.  The order entry certainly works fine.


  154. Peter D—maybe they misunderstood me- I will check again —thx


  155. RSS – Matt got the ATOM RSS feed working again.  So to use today's feed use:
    http://www.philstockworld.com/2012/06/05/testy-tuesday-sp-1284-would-be-a-good-start/feed/atom
     
    I don't think there is a way to get more than 50 old comments, so our RSS archives will show a break.


  156. There is not much that gets me more emotional than stories about our "Greatest Generation". 
    Unfortunately, this is a sad story about an MIA that as it turns out, was not so…..
     
    http://www.cbsnews.com/8301-18563_162-57447896/for-wwii-soldiers-widow-a-60-year-mystery-finally-solved/
     
    ….and to hell with Congressmen like Mac Thornberry of Texas-(R) for not doing a damn thing…… :(


  157. kurtww – Do you mind if I ask how your wife was able to gain Spanish citizenship?
     
    Did she simply work with an immigration attorney?  Was it costly?
     
    Thanks!


  158. Burrben/managing risk,
    If I'm not at a computer, I manage risk by position sizing.  I used TOS Analyze tab to see if I'm OK with 10% to 15% drop or not.  If the test is good, then I don't need to worry about the positions.  If I'm on vacation, I would test for 20% down.  With naked short strangles, the margin will accelerate to the downside, so I would buy some long puts to make it like an iron condor.  A few cheap puts will lock down the margin and we can sleep easier.
     
    Flash crash is a lot tougher to protect.  From historical data, when VIX goes up to 48, puts can go up 10-12 times, while a vertical goes up by 6-8 times.  So if the short puts add up to 5% of the portfolios, we'll be looking at a 45%-55% paper loss in a flash crash.  With vertical, it's a bit less paper loss at 30%.  That's a real black swan.  Having more long puts (lower strikes) than short puts will help greatly with a flash crash scenario.  So money spent on those long put insurance is well spent.  The other method is to cut the loss manually the next day, either buying back the short puts, or "flip" them to short calls.
     
    Unfortunately, with the Bid/Ask spread and lower volume, automated methods may not work well to stop out the puts as stop can be blown through easily.  We'll get it to work eventually, but not in current situation.
     
    As for short strikes, we have 8-10% for June short puts.  It was 15-20%, and with a 10% drop they are now 8-10% OTM.  July are 20%+ OTM.  Calls are 7% OTM for June and 12% for July.


  159. Dual citizenship

    http://travel.state.gov/travel/cis_pa_tw/cis/cis_1753.html

    It has been a few years ago now, but I seem to remember when I dealt with the US Consulate in Australia on the matter of dual holding citizenship, it came down to not committing an act of treason against the US . The link above is to the State Dept position on the matter.


  160. 1020 – she went through a program that the Spanish government had for a certain time period, I don't remember the name, but basically she had to show that her grandparents were of Spanish origin. I think she also showed that they emigrated to Cuba during Franco, or something like that, so that there was a good reason for leaving. It also helped that her parents moved back to Spain and she was born there (but moved to the US at 9 months). Ironically my German ancestry is closer, but wasn't good enough the last time I checked. Go figure. I can get Spanish citizenship now by just living there 1 year, but would have to live in Germany 7 years. 


  161. Burr/SPX strangles/iron condors — One interesting variation to look at is a back ratio on the put and call side. This acts a lot like an iron condor. It has a lower profit percentage, but has the really nice benefit of being negative vega (it goes up in value if the volatility goes up, where an iron condor does the opposite). If you look at a risk graph, the trade will make money like an IC if the market stays within the range, but if there is a flash crash it has the potential to make a LOT of money. It doesn't do as well on a slow steady grind up like we had at the beginning of the year, but otherwise it is a very safe trade. If you have PM the margin requirements are quite modest. It's a great trade to enter when the VIX is fairly low. For example, analyze this trade: JUL RUT +100 620 P, – 70 640 P, -60 830 C, +100 850 C. Brings in a credit of $2750 against a margin of $15k, or 18% in 44 days. A flash crash of 10% to 671 shows a profit of $10,500. If the volatility also goes up 5 points TOS shows the profit at $18k, and $70k at -20%. If nothing else it's a great insurance trade against short strangles. Generally a 100 contract trade brings in closer to $7k/mo in my experience. If you don't have PM, the margin on this trade is $140k, ouch. I want to try combining this with short strangles. 


  162. Savi – I use Interactive Brokers to trade futures options. TOS has said they would support them on gold and silver since last summer, but they still don't. I have traded options on /ES before no problem. It is a separate approval step. 


  163. 1020 – she didn't use an attorney, but it would have made things a lot easier. It involved several in-person visits, and took about 2 weeks of actually being in Madrid doing leg work. 


  164. Pharm – your take on AZN? Sitting at 52 week lows and 9.7% dividend.


  165. CHINA!!
     
    "Despite the scary headlines coming out of the world's second-biggest economy, U.S. fund managers have invested $2.5 billion in Chinese stocks this year, following outflows of $2.6 billion in 2011, reports research firm EPFR Global. Meanwhile, international and global equity funds bumped their stakes in China and Hong Kong to 4.4% in the first quarter, on average, from 4% a year earlier, according to data from Lipper Inc.  
     
    Fund managers and financial advisers who increased their exposure even higher concede that China's period of double-digit growth may be over. But, they add, the country's long-term growth prospects—estimated at more than 8% by the World Bank—still trump many other markets and should continue to boost profits and eventually share prices."  http://online.wsj.com/article/SB10001424052702303918204577446341472036750.html


  166. kurtww,
    That's what some of us has been discussing and doing. I think you got some strikes mixed up.  -70 RUT July 640 put and +100 July 620 Put is a Debit spread, not a credit spread.  You'd need to go to +100 610 puts instead for a credit spread. If the market drop to past the short strike, the margin would get closer to $70k.  There is a dead spot at the short strike, so adjustments would be needed in those rare cases.


  167. PeterD / Kurtww / Short strangles:  After playing with short strangles as a part of my portfolio for a few years, which included the 2010 Flash Crash and 2011 August melt-down, I have continued to evolve my strategy to increase the safety (and my own ability to sleep at night).  I think what I have come up with could be called a flexible double diagonal. My current positioning is long Jan 2013 $1350 puts and $1400 calls, both bought when the SPX was around $1380. The net investment I have paid for that is around $45k.  Then every week I sell around $3k of weeklies and had 39 months of premium to sell (from back when I put the trade on). I am getting ready to roll the longs now to reposition for the market move we have had.
     
    So assuming I lose all the $45k on the longs, the return would still be around 20% annualised on a portfolio of around $500k.  If the longs can be rolled up and down with the market to generate a bit of extra return, that is a bonus. The position is vega positive (longs go up more than shorts with increasing VIX) and I play the weeklies aggressively rolling and swapping between putters and callers, given the ease-of-mind that I have the long protection.  I think the reason this works so well for me is the ability to sell weeklies. If you do it with monthlies, it is too difficult to try and take advantage of the ebbs and flows in the market.
     
    I have found that when the market actually does crash, I don't like to see the huge paper losses that short strangles produce. As well, I don't like having to roll losing positions months out, only to see the market spike higher. I track the profile of my payoff curves using IB's Risk Navigator which allows me to see what sort of paper loss will be given at different declines in the market.  I think everyone has a different mindset. If you can take the huge paper losses, then short strangles can give higher returns than the double diagonals.


  168. Peter – true, if you split up the put and call side it is a debit, but as one trade the whole thing brings in a credit ($2750 minus commissions). You can tweak the spreads to get a bigger volatility smile (and less credit), or a flatter smile and more credit. The dead spot can be an issue if you get too close to it, but since it's a ratio it stays manageable until very late in the trade. The trade seems to perform better with a ratio on the call side in addition to the put side. Right now the credit available is not that great because of the increased RVX driving up the cost of both options, in prior months this same trade would have brought in closer to $6-7k of credit. You can do a wider spread with less contracts and get similar results, especially if you close it out ~2 weeks early the wider spread isn't a problem. It's only during the last couple weeks that it really gets ugly if you are stuck in that dead spot.


  169. RSS / Burr  - Thanks for that! Now Atom works for me too! Cheers


  170. Rumor/leak/hope –  #1 – The Fed - http://on.wsj.com/MaEFNT - Disappointing U.S. economic data, new strains in markets and deepening worries about Europe's fiscal crisis have prompted a shift at the Fed, putting back on the table the possibility of action to spur the recovery.
     
    Rumor/leak/hope –  #2 – The ECB - http://on.wsj.com/Mcr74D - Financial markets were in a buoyant mood early Wednesday with the euro rising strongly against the dollar, stocks strongly up in positive territory and euro-zone “peripheral” yields steady ahead of the European Central Bank’s rate setting meeting later in the day.
    Investors are hoping for some action from the central bank after the crisis in the euro zone has worsened in recent weeks.


  171. Spain makes explicit plea for bank aid (FT)

    Spain has made its most explicit call to date for European institutions to recapitalise the country’s banks as concerns increase about its…
    The full article can be found at: http://www.ft.com/cms/s/0/6af5912e-af02-11e1-a4e0-00144feabdc0.html


  172. I short strangled the SPX in September, 2001, during the fall of 2008, and on the flash crash day. And yes, losing sleep is part of the program, I'm afraid. When the market opened after 9/11, I saw my little handful of short puts go from $4 to $81. That hurt a lot, and circumstances gave me a full week to stew in the juice, so to speak. Then, there was the associated actual tragedy to stew about. Life gives you plenty of worry. After a few decades, you sort come to expect it.
     
    Position sizing is absolutely essential. I am winding down most of my other positions because my hedges are never adequate and my longs are mostly bad choices. The SPX strangle provides most of my income after all is done. Nothing is more infuriating that using advanced option techniques to turn a healthy loss into a killer. WFR comes to mind. I realize that rolling and the buy/write are useful techniques, but I have to admit, I really wanted to own WFR at $11 as I remember, and now I own 4x of a penny stock that could die a horrible death any day now.
     
    In a flash crash, your margin requirement goes up, but I discovered to my horror that your portfolio value sinks at the same time. You get caught in a real squeeze. Yeah, you are gonna worry.
     
    I have no real protection against euphoria and the market soaring, but I maintain a bigger position of SPX Dec 14 long 700 puts. Those are paying off fairly seriously now and nothing awful has happened yet to my strangles. If the VIX gets into the teens again, I will add more far out long puts.


  173. Good morning!  
    Getting a late start but things seem to be in order with a 1% pre-market pop, matching EU action and Draghi speaks at 8:30 and maybe a bigger pop then or maybe back to disappointment if no new action.  
    At the moment, we're shrugging off poor German Industrial Output but, essentially, this is all stimulus rumors but we're very primed for actual stimulus to give us a big free money day.  
    I have to get to the morning post – feel free to re-ask anything I missed over there.  


  174. Squeeze/Barf  -   " Nothing is more infuriating that using advanced option techniques to turn a healthy loss into a killer….In a flash crash, your margin requirement goes up, but I discovered to my horror that your portfolio value sinks at the same time."
     
    You are so right about this, especially about the margin requirement dramatically increasing due to volatility just at the time your advanced option techniques (ie. 2X and 4X rolling) have put your position into a significant exposure.  I don't yet know how to model a margin requirement increase at the point of maximum pain when planning a position strategy.
     
    In my case, which I'm still recovering from I shorted Jan12 CMG 350 calls at the wrong time (12/11) and rolled, doubled, rolled, etc. into a full position June12 CMG 400 calls sold short.  Then in mid-April after a relentless climb, CMG hit a blow-off top at 440 in anticipation of earnings, and my broker doubled the margin requirement at the point of my greatest unrealized loss, causing a massive margin squeeze and ultimately my capitulation of the position.   Of course, the position, short Jun 400 calls would be showing a nice profit today (which was planned..lol) if I decided to fund the huge margin call and held the position open.
     
    I guess the moral of the story is that you can manage a position when you pick the wrong stock at the wrong time and be right with your strategy and plan, and still suffer a margin squeeze due to volatility and margin requirement changes at the worst time.


  175. kurtww/aussie260   Thank you.  :)