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Saturday, September 24, 2022

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TGIF – Hail to the Cash!

SPY DAILYWheeeeee – that was fun!

A bit more violent than we expected but now you can see why we went to cash on Wednesday.  We even took a bullish bet on the Qs at the end of the day as we were hoping for a bounce this morning and we had really cleaned up with DIA July $124 puts from the morning Alert to Members, which came in at .95 and ran all the way to $1.85 but we took the money and ran at $1.40 for a nice 47% gain on the day

We also picked up AAPL weekly $570 puts for .50 and those made a quick 40% as well, closing at .70 at the day's end.  

In the afternoon, we took our winnings and played the QQQ next weekly $63s for .75 and they dropped a dime to .65 but we're playing with house money and a stop at .50 on the hopes there will be a rumor of stimulus that spikes the market back up.  

We were too scared to play the Financials bullish with the Moody's downgrade looming but we will be restarting our FAS Money Portfolio today in the hopes that this will be a bottom for the Financials (about $14 on XLF) that we can begin to makes some bets on.  Fas Money was, by far, our most profitable portfolio in the first half of the year, cashing in Wednesday with a virtual $12,175 profit with almost no cash in play (but using margin to sell FAS puts and calls on a regular basis).  

There are still rumors that MS will suffer heavy margin calls.  I say rumors because The Street reports $6.8Bn as a fact but, since Cramer is behind it, I don't believe a word they say.  

Moody's lowered its long-term senior unsecured debt rating for Morgan Stanley to Baa1 from A2, with a negative outlook, while cutting its short-term rating for the firm to P-2 from P-1 but this move was a long time coming and MS stock has already plunged from $21.13 in March to $12.26 in early June and that's very close to the $10 line they hit in 2009 – which they tripled off by June.  

We don't trust MS enough to bet on them directly but, if they DON'T blow up, XLF should do quite well and, even if they do fall apart, we think XLF has enough strong players to weather the storm.   Our previous favorite, JPM, seems to be doing just fun and, with an A2 rating – is still the star of the group!  If you want to be aggressive, MS can be played to hold $12.50 by selling the 2014 $13 puts for $3.15 and buying the $10/15 bull call spread for $2.50 for a net .65 credit on the $5 spread that's $4 in the money to start.  

Your worst case is you own MS at net $12.35 and Think or Swim tells me that you hold aside just $1.80 of net margin on this trade and that margin requirement will reduce if MS takes off and, if it doesn't, then your premise is blown and you should probably get out.  If all goes well, this trade will return $5.65 against the .65 credit an over 8x return on cash and a 3x return on margin if MS is at $15 come the Jan 2014 expirations.  

See how much fun we can have with our cash!   There are tons of great opportunities out there – so no hurry, we're not rushing into these trades because, with 800% returns, we don't mind missing the first 200% if they "fix" Europe next week because THEN we will feel nice and confident playing for that next 600% of upside.  Still, deploying a little bit of cash on a greed play is fun, right?

Speaking of fun plays.  Some of our Members had trouble filling LQMT on Tuesday and BNN rushed me off the air before I could mention them as my fun trade of the month.  Today they are back to .30 and we still like them.  AAPL just extended their licensing deal with the company for 2 more years and we're just looking for another rumor that LQMT's alloys will be used in the IPhone 5 to spike them up again (we caught a ride from .15 to .55 in April) but it's a craps roll kind of bet, so we're thrilled to take a dime and run when it comes.  

We'll be going back to the well on our Twice in a Lifetime List (Members Only) as we begin to re-establish some of our long positions but only tentatively ahead of the weekend.  We HOPE (not a valid investing strategy) that the EU gets it together and drops another Trillion on the PIGGS – that should be enough to take us to the end of the year at S&P 1,350 or higher but, until we get the ACTUAL stimulus – Cash remains KING!  

Have a great weekend, 

– Phil

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Pharm

What's you opinion on PLX in light of today's announcement?

Economic Numbers

Germany IFO Business Climate / 105.3 (105.6 expected)
Germany IFO Current Assessment / 113.9 (112 expected)
Germany IFO Expectations / 97.3 (99.8 expected)
Italy Consumer Confidence / 85.3 (86 expected)
Canada CPI Core (YoY) / 1.8% (1.9% expected)
Canada CPI (YoY) / 1.2% (1.5% expected)

For the Germany IFO numbers, anything below 100 is a negative outlook. Still no inflation on the horizon!

At 10:00 AM we have the American Petroleum Institute Monthly Report – this could affect oil prices.

Good Morning!

PLX/lol – well, whomever bought those 100 $6 Ps is in the know…..that's what I think.  As for the EMU's ruling, that is complete crap.  Sanofi/Genzyme were there first, and desingating Shire (an EU company no doubt – well English, but close enough) is utterly irresponsible.  Regardless, PLX/PFE have the world, they can still undercut the others on price, AND PLX owns Israel themselves, which is where the highest group of patients are.  I would buy more.  Selling the Nov $5 or 6 puts.  Oy vey….

Friday afternoon expiration trading – My new schedule gives me Fridays off, so I am looking at trading weekly expiring options in the afternoon.  I'm going to be looking for pinning stocks, and selling credit spreads at the strike to take advantage of time decay.  Much like trading futures, the idea is to keep losses small with tight stops.  If anyone has good systems for selecting pinning strike prices I'm all ears.  I'm going to watch just a few big names like AAPL, GOOG, AMZN, and PCLN, since I want enough premium to make the spreads worthwhile as well as strong volume to get in and out of the trade.  Let me know if you are interested and we can chat as we go.

revtodd – Iflan does something similar by selling strangles (momo  portfolio) on Thursday/Friday expiring next week. In the past he has done this with PCLN.

IFLAN- Any MoMo plays for this morning?

Hi Phil

 
I'm glad to hear you're doing well with your picks.  Have you done anything with DMND lately?
 
I sold some Sep 19 puts for $3.50 a week or so ago and wondered what your take on the position is.

Pretty cool charts – not useful for day trading though:

http://www.economist.com/blogs/graphicdetail/2012/06/mis-charting-economic-history

Not sure how we are up on this crap news out of Europe – 

FAS Money and the MoMo portfolio are in cash now.

I'll update the Income portfolio and the Peter's Strangle portfolio after the close today.

Good morning.

wappler/tradestation — thanks for the write-up early this am…very helpful…will move to TOS instead!

ecb collaterol rules going from liberal to including the kitchen sink

that trumps crap news

J&J's Xarelto could miss out on $1B market after FDA decision. The FDA has blocked Johnson & Johnson's (JNJ) application to widen the use of its Xarelto blood thinner to prevent heart attacks and strokes in people with acute coronary syndrome, a market estimated at $1B. J&J said it will work with the FDA to address its questions, indicating that the company hasn't given up hope of eventually getting the authorization.  BMY  – buy buy buy….they will own this market.

Pharm – I had a decent amount of PLX $5 Nov calls. What do you recommend? Hold, roll to a later date? You mentioned earlier you can see them getting bought out b/c of the technology, has anything changed that premise?

Thanks Nicha – I'm a dedicated fan of lflan's posts.  I often play his recommendations, especially for late Friday strike pins.

PLX sold 12-Nov puts for $.60

dollar seems to be active, japan?

SWW – CELG Jan 13 $50/55 BCS, selling $50 Ps for 1.40 debit.  Not a bad way for making >200% on a spread that is 100% ITM and 10% down from here.

credit gauges better today, but germany/france/UK equities weak

Seems like not that much reflexive short-covering this morning after yesterday's big drop.   Are the big boys waiting to cover this afternoon, or hold short into next week?

PLX/jro – my premise does not change.  I hope you have been selling premium against those calls.   Nice pstas.

MoMo Buy to Open 10  July 580  AAPL calls at 15.44

AAPL Volatility / Iflan
Great move on the July 580 Call.  Except for Jan 25-Feb1, AAPL volatility is nearly at its 1 year low.  Plot VXAPL in TOS.  Great chance of vol expansion into earnings to further goose the 580 Call as pre news excites the stock.  I even did 1/2 position on the 580 Put.

IFLAN- i have to leave for the day and can't watch the mkt- you plan on holding this position through Monday?

ccs aapl vol
 
how do you get vol in a comparison chrt in TOS?

CMG up, NFLX up, buying a few PCLN 660/665 spreads here for just over a buck for fun!

MoMo AAPL July 580 calls …..I plan to hold unless I make more than 20% on the position today.  

Flan- Thanks.

monti is setting up markets for huge disappointment next week i think…i dont hear germany talking like they are about to cave on everything…and that is what he is saying is necessary or eurozone collapses.

Someone asked " How do we know where AAPL will pin?".   We don't, but I look at the call volume on Friday for this weeklies, to get an idea.  The 580s are by far the most active right now.  So 580 most likely, but it's never a fail-safe prediction.  

MoMo trade:   BTO  10  AMZN July 230 puts @ 12.60 for balance.

bullard saying qe3 faces 'high hurdle'

Phil – I did not get fills on the FAS money trades at the pricing you posed.  Should I leave the limit orders in, or chase a little to get in?  ie- when you post the trades, is that current pricing at time of post, or what we set orders at?

Short Strangle virtual portfolio,
This little bounce is dropping VIX and thus dropping the OTM Put value for both July and August, and I'm getting on a plane in a couple of hours, so there no new August spread today.  Meanwhile, we are still milking the July spread, and for some excitement in this portfolio, let's roll 4 (out of 7) SPX July 1125 short Put to 1170 short Put for $1.15 credit or more, getting and additional $460 credit.  1170 is still 12% down, and we still have plenty of margin for additional adjustments.  We are leaving the long put vertical alone for now.

BMY – no, I don't.  There is no one else in the space now, and BMY has the best in class.  If the drug can take over Plavixx (also BMYs drug), then they will be raking in the money.  BMY/PFE are co-marketing the drug, and remember, PFE needs it VERY badly, so you can be that sales will be good.  Drug is Eloquis.

Sage/Compare
In Studies, add the "Comparison" study, change the ticker, example VXAPL, and apply.  Uncheck "On upper subgraph" so that it goes to the lower studies and gets its own y-axis scale.  I wish TOS would allow a comparison graph on the upper to have its own scale on the left.  But because not, I move it to the lower section.

AAPL dropping…
 
where will they pin it?  575?

Thanks for the update Peter! I'll post a recap after hours today!

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