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Thursday Thrust – Deja Vu All Over Again

Just like last July, we are off to the races again.  

On the right is our Big Chart from July 26th of last year, when we also made a very impressive run-up over a month despite mixed earnings, worries in Europe and a looming fiscal cliff if the Reps and Dems couldn't manage to agree on a budget plan.  

Sound familiar?  We didn't have a drought but oil was topping out at $100.62 and gold was $1,600 but TLT was only at $92 – indicating far less panic than we have now at $128 because, even in the 2,000-point crash that followed over the next month – TLT never went over $123.  

In this morning's Member Chat, I laid out a list of things I'm still worried about and we may be jumping the gun picking up some short-term bearish positions but they do balance out our long-term, still very-bullish positions in our Income Portfolio.   

The real action in the market has been and continues to be those momentum plays and Lfantheman called us back to almost all cash yesterday in the MoMo Money Portfolio, taking the money and running on the QCOM Aug $55 calls at $2.40 for a 20% gain – removing the biggest open position and leaving just some small, speculative open trades on NFLX, PCLN and AAPL:

We're just two day's shy of two months on MoMo Money this morning and that's a very impressive gain off a virtual $50,000 base (58% in 58 days!) and it's so relaxing to take those quick gains and get the hell back to cash in this crazy market – there is certainly always something else to trade the next day when we have cash on the side.  Our $25,000 Portfolios are also mainly in cash (about 80%) – as is our Income Portfolio, which I'm inclined to cash out if we get it back over $15,000 gained before we give it back again on the next dip.  

SPY 5 MINUTEAs planned, we took advantage of the rocket start out of the gate yesterday to do a bit of shorting as we expected some reality to set in.  As Dave Fry says: "search as one might for bullish news, there was little to be found from a normal perspective" but, like last July, simply beating low expectations is a reason to rally these markets and QE fever is gripping the planet as Uncle Ben said the Fed had "some room" left on their balance sheet.  

Some room?!?  Well, why didn't they say so?  No wonder the indexes are up 2.5% this week – SOME ROOM!  How can we possibly be short when there's SOME ROOM left for the Fed to ease?  

For those of us who actually read the Beige Book yesterday (see yesterday's 2:45 Alert to Members for highlights and full commentary), there was little to be bullish about in the reports from the Fed's 12 Districts BUT, on the other hand, conditions have not really gotten worse enough to justify more easing from the Fed and, the way the market is rallying without actual QE3 – why should the Fed waste the firepower adding fuel to a raging fire?  

TLT is up 30% from last year – Mission Accomplished on the long bonds.  Oil is flat to last year, gold is flat, gasoline is flat, copper is cheaper, lumbar is flat, corn is up only slightly but DBA is overall lower by 10% – as is DBC.  This is a huge success for the Fed and the Dow was 11,500 at the end of last July (down from 12,700 on the 21st)  and is now back at 13,000 – up almost 15% in a year should have Ben heading off to Stockholm to pick up his prize.  What could possibly go wrong (again) and why make changes when things are working so fantastically?

We had similar excitement right after the June 6th Beige Book release and the Dow flew from 12,035 to 12,898 on the 21st before plunging 450 points a week later.  The April 11th release of the BBook ran us up from 12,710 to 13,338 before we fell back to 12,035 over the next 30 days so it's very possible that we do get a few more days of excitement out of this book as well but you'll have to forgive us if we use it as an opportunity to cash out our longs and build up our, so far, losing short-side positions because, while you can't predict when the market will dip, the dips have certainly been predictably nasty when they do come.  

Today we'll be starting a new Long Put list in Member Chat.  We initiated our last one on August 23rd of last year and, despite the fact that we began when the Dow was already down at 11,500 and it went up to 12,284 in October, we were able to roll with it and ended up with massive wins as we plunged back to 11,231 in November.  This time, we have an opportunity to do the same thing with a lower VIX (we're long on the VIX) at Dow 12,961 with the 13,338 high not too far away and that's still 100% over the March 2009 low of 6,469 and still should take more than a light volume move higher to properly break over.  

Clack, clack, clack – like a roller coaster going up in the dark, we don't know when we'll get that big "wheeee" but we do know it's coming!  

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  1. What happened MS….did your pants fall off?

  2. MS/Bur – $6….that is the target.  Keep it hedged, but I have the stock short as well…..The mention a few banks that could fail, MS is #1.

  3. Oil Lines

    R3 – 92.97
    R2 – 91.81
    R1 – 91.22
    PP – 90.06
    S1 – 89.47
    S2 – 88.31
    S3 – 87.72

  4. I'm assuming we aren't doubling down on the USO puts? Which aug strike do you like to roll to here Phil? Thx. 

  5. Phil/USO/SPY – PUTS,
    I had entered into position just before close yesterday and missed you comment to roll them to the next week. Can we do anything with these now? 
    USO – 34 P
    SPY 136P

  6. Good morning! 

    Wow, look at AMZN fly!  A 2.5% pop this morning ahead of earnings – it is definitely time for a Long Put List!  

    USO $34 puts are down to .22 and we don't throw good money after bad on a contract that closes tomorrow but we do take advantage of the cheapness and spend .32 to roll out to the Next Week $34s (now .54) and we'll see how those go.  That puts us in them for about $1 and USO was $5 lower ($29) at the end of June so let's hope the end of July winds up the same. 

    The Dollar is rising back over 83.20 as the Euro plunges back to $1.22 so all is not as well as our positive open suggests.  The same strategy goes for SPY puts or whatever short-term trades – our premise is not blown – just our timing is off.  

  7. Phil – I have DIA 127 and 124 puts – would you suggest rolling them out to next week or Aug?  Thanks…

  8. @Felipe
    Once again, as Nicky Faldo once said, "I want to thank you from the heart of my bottom", for the short put stragetery, applied especially to stocks we would love to own, in this case  IBM.
    Got a bit nervous on the down revs/up Profits report last night but this morning the stock performed like the throoug…thoro….throw…like the champion that it is.
    My Jan 13180 puts, underwater for two months, fully recovered, and increased enough to have just paid for the latest fee and then some.  I wish I had doubled down but percentage wise, I'd take this gain any day.

  9. Morning All – nasty Philly Fed numbers…

  10. Yep, you knew that was coming…..

  11. Existing home sales also down 5.4%…must be because of all of the new homes being built.

  12. I wanna be short! But I don't like buying premium. I know it can work, but I'm constitutionally unable to be long options. That makes me have to be right about direction and time – and I'm not right that much. So… Inverse ETF. I like TZA and FAZ – other ideas?

  13. TLT – I sold a few $129 weekly puts.

  14. Birdman:  TZA.  Trade breaks above 8 day MA on 10 min Heiken Ashli chart. Tight stops. jrw as some good articles saved in the education section for TZa/TNa trading

  15. Birdman – Try thinking about it this way.  You buy put premium when it's cheap, but then you get to sell back even MORE premium to them when the stock drops.  

  16. And Peter's Strangle portfolio with one day left in the OPEX. All going according to plan…

  17. That opening pop laster 14 minutes and now that we are back to yesterdays close with more pink slips than expected. Eventually bad news must be just bad news.

  18. NIce reversal, that was possibly a blow-off top…holding on to July DIA puts for the time being…

  19. rkyroma / premium – I know, I know. I spent 17 years as a broker selling premium for my clients and it's just really hard to go the other way. Old dog, new trick thing I guess. I envy you guys who can do it but when I own an option I immediately get clinically agitated.

  20. rkyroma/Birdman/premium…. same here. :-)

  21. Without further adieu – the Long Put List:  


    Stocks that have held their value well but may not in a collapse are:  
    • AMZN (was $37 at crash lows, now $222) Oct $180 puts are $2.75 
    • CMG (was $40, now $400) Sept $350 puts are $5
    • DIA (was $66, now $130) Dec $117 puts are $2.50
    • DIS (was $15, now $50) Oct $46 puts are .95  
    • GE (was $7, now $20) Oct $18 puts are .35  
    • HD (was $18, now $51) Nov $46 puts are $1.10
    • IBM (was $70, now $195) Jan $155 puts are $1.60
    • ISRG (was $80, now $550) Jan $350 puts are $1.70
    • JNJ (was $35, now $69) Oct $65 puts are .51
    • KO  (was $40, now $76) Jan $67.50 puts are .83
    • MA (was $120, now $432) Jan $290 puts are $2.85
    • MMM (was $42, now $91) Jan $70 put are .86
    • MO (was $15, now $36) Jan $31 puts are .50
    • MON (was $45, now $86) Oct $75 puts are $1.20 
    • MRK (was $20, now $44) Oct $40 puts are .53
    • PCLN (was $150, then $30, now $666) Oct $510 puts are $5 (bonus on PCLN is they also make good terrorism protection)
    • SPY (was $69, now $137) Oct $120 puts are $1
    • T (was $22, now $35) Jan $33 puts are $.95
    • V (was $42, now $127) Jan $100 puts are $2
    • WMT was $42, now $72) Jan $65 puts are $1.20
    • XRT (was $15, now $60) Jan $53 puts are $2 (also good against terrorism)

    Keep in mind the main reason we like these is because they are overbought, liquid and rollable.  Our goal is to buy the ones that get cheaper, take quick profits and move to the next ones that haven't fallen yet (fresh horses).  In an up market, this is a sell the pops kind of exercise but, if you don't take profits on the dips – it will be a losing strategy. 

    Scale in, scale out.  We'll watch the list and add to it over time but, primarily, this is a good way to guard against a big crash – not a small pullback.

  22. Sold a long position in WAG yesterday after entering on a strong chart pattern. Had a nice single but managed to avoid the home run today. Hate it when that happens.

  23. WAG making a good run today!

  24. Thanks Phil, nice list!

  25. FAS Money looks right on target.  Certainly not going to pay $1.30 of premium for the $90 calls so we'll see what tomorrow brings.  


    • F Aug $10s, now .10 are fine for now.  I'm more worried about a big dip next week so no sense in pressing the bullish bet until we get past it.  
    • EDZ got a very harsh rejection off the 50 dma and the 200 dma is crossing below it now (death cross) but the reality for emerging markets is that they are right on the brink and propped up by stimulus talk – if that fails, they drop hard so let's just buy back the $18 calls at .35 and DD on the $14 calls at $1.40 – both only if we hit our target.  
    • SVU is flat-lining at $2.33 and again I am disinclined to put money into bull plays at the moment.  
    • JRCC is long-term and I like them. 
    • USO I mentioned earlier – good time to buy a week cheaply.  None of our logic has changed and the same will be true if oil goes to $95 or $100 – it would just make the short more attractive.  


    • Same as above for positions that apply.  

    Nat gas was a small build and that spiked them but still a build on record inventories so silly.  $3 is a good spot to short /NG futures and we'll see if /CL can hold $92 but I like the short there as well but with very tight stops over the line.  

  26. Bond, Investment Grade Bond!

    The LQD investment grade corporate bond ETF has traded like a tech bubble stock (during the good times) over the past few weeks.  Investors have been scrambling for yield, and LQD is an attractive option because it's a non-Treasury fixed income product that yields more than 4%.  But is it attractive after going parabolic this month?  

  27. SPY/Pat – We discussed USO but the SPY $136 puts are now .15 with SPY at $137 and the next week $136 puts are .60 so .45 to make that roll and hope we have better luck next week.  

    DIA/Jerconn – As DIA does not have weeklies – I'd go with the Augs…  8-) 

    LOL Flips, you're welcome.  Short puts are generally not things you want to DD on unless they get hopeless.  The logic is we give ourselves a 20% discount on entry and, if the stock drops 20% – we don't care.  If the stock drops 30%, we can roll and see what happens and, if the stock drops 40% – then we are usually screwed on the short puts but then we can roll them to 2x something and now we're buying twice as much stock for half the price and there's nothing wrong with that either.  In fact, when you patiently scale in to stocks you REALLY want to own, then you get EXCITED when one of your stocks crash – as it gives you an excuse to take a bigger bite.  

    Not a good set of 10am data and today, for some reason, they seem to care: 

    10:00 AM On the hour: S&P +0.09%. 10-yr -0.03%. Euro -0.42% vs. dollar. Crude +1.70% to $91.70. Gold +0.79% to $1583.45.

    June Leading Indicators: Leading Index -0.3% to 95.6vs. -0.1% expected, +0.3% prior. Coincident Index +0.2% vs. +0.2% prior. Lagging Index +0.2% vs. +0.3% prior.

    June Existing Home Sales: -5.4% to 4.37M vs. 4.65M expected, 4.55M prior (revised). 

    July Philly Fed Business Outlook: -12.9 vs. an expected -8.0 and June's -16.6. Employment index dives 10 points to -8.4

    This is really silly as the Philly Fed just reported all this in yesterday's BBook but we rallied on that news.  Goes to show people don't actually read these reports…

  28. GOOG reports tonight. Any play on that?  

  29. CMG – finally losing it's confidence?

  30. Short/Bird – Try following the long put list with paper trading until you get comfortable with our system.  You can (and should) offset the short bets with some longs anyway but, at the moment, I'm pretty bearish off this run.  

    You're welcome Jerconn.  Hopefully our timing is good.  

    GOOG/Nicha – A little too in the middle for me at $592 with an easy 10% move in either direction.  I'd rather play them after they get some kind of over-reaction.  Usually, they burn the puts and the calls on both sides and pretty much flatline.  

    AMZN $225!  Gonna cure cancer next week and justify that 189 p/e – I just know it!  

  31. Frustrated with our government? Join this grass roots movement.  I met a big supporter  last night who was a 30 year high ranking alum. of JPM 

  32. AMZN next week $195 puts at .95 should hold up through Monday on earnings premium so a fun way to play for a sell-off over the weekend.  10 in the $25KPA only.  


  33. lflan
    Was wondering if you were around today and if I might pose a GOOG earnings play question?

  34. Phil – earnings for AAPL next Tuesday. AMZN will get affected by it, no?

  35. Which puts from the list are we starting with?  Or does it make sense to buy the "basket" a few contracts each and keep avg'ing down on the losers and let the winners run?

  36. Don't know what the rest of the market is doing but today and this is different than the last 2 weeks IWM tradeing has not backed off as happens by the 1 hour point. The first big drop was most likely one ??? getting out, and I am expecting we will have round 2 soon. Fully loaded with TZA.

  37. Phil / short – Thank you for the personal input. I would like to learn more about your systematic approach, such as sizing, risk control and the like. I understand it from a strategic point of view but I'd like to educate myself on the tactics. Is there somewhere I can go on the site to learn more? I really like the nimble hedged approach.

  38. Burrben / puts – What he said.

  39. VIX vs. VXX
    Thinking about trading a vix BCS, has anyone noticed any issues with trading vix options vs say vxx which has been a horrible instrument from my experience?

  40. Birdman – try teh wiki section.  Thats a great place to start.

  41. Anyone know why you can't trade VIX futures on ToS?

  42. PHil – looks like they're propping the market up with AAPL, like you said…but how does that work with the DOW?  I guess by supporting SPY and NAS big time, indirectly that suports the DOW as well…

  43. Don't know if this is a candidate for the short list, but MLNX got a huge 42% pop today…

  44. I bought Germany [EWG] Jan 13s a week ago, and suffered since then.  Now they're up over 9%.  I also mentioned the possibility of shorting FXI against them, but didn't have the stones.  FXI itself is down over 12% since then.   We'll see.

  45. jerconn
    I have not traded AAPL in a few years but I do know and follow them. The are up on hope only. Last quarter they not only proved they are a $550 stock they didn't project big rest of year. Global sales are down, big compitition for iphone, and nothing new. Therefore they may be holding the market up but after earnings may also be the final nail!

  46. uk border staff may strike during olympics….that whole thing has disaster written on it

  47. Angel … roo true … that and the Bus Drivers, Tube Drivers, Home Office Staff and Taxi Drivers going on strike its a real  fun time.
    Shame really.

  48. JJenings, you cant directly trade the VIX futures with TOS but you can trade the VIX options which are based on the VIX futures.  I have done some research on that if you want to discuss it.

  49. Shadow – you could be right about AAPL.  But that's not what the pundits are saying – analysts like Andy Zaky are expecting blowout earnings, similar to first quarter…AAPL always guides low.  I'm holding on to my AAPL calls til earnings…

  50. TEVA – well aint that a nice little pullback for our calendar.    I don' t know where everyone is on this one, but I am holding until tomorrow's OPEX.  I will then get out with a small loss or gain.  Chart looks bullish, as it is a consolidation pattern, but I think it goes the way of the market.  All the TAers say more up is in store if a pullback to 1360 and then possibly 1345 hold.

  51. VIX/VXX – Sagemm1, both are awful imho, been burned by each and continue to "surprise."  lots of decay, don't like for bcs and certainly not for any time. if you do play them, stay nimble!  i much prefer to watch them as an indicator for buying or selling more rational derivatives such as DIA, SPY, TZA, TNA…

  52. VVUS July 28/27 BPS…just might, maybe? come in….I still hold the Aug 18 puts.  One heart attack away from cratering.

  53. jerconnAAPL – I got some calls too. I am a little scared to hold till next week because of overall top range in the mkt.  But contemplating on getting out tonight ahead of GOOG earnings. 

  54. Oil- R U f#cking kidding me!?!?

  55. Yeah! Oil touching 92.5 with no help (USD) and no news.
    May be when the FT will stop mucking around investigating Libor during 2005 and 2008, they could get some of their journalists to look into the most entertaining market in the world: Crude Oil!
    I am considering flipping short as I dont think it could go to R3 today…

  56. Phil, regarding your reco for the EDZ trade adjustment above, would you recommend doing something similar for the VXX and TZA (income port) BCS spreads you put up last Friday?

  57. oil/jromeha: I second that!  I guess all it takes to lift oil is another Air Craft Carrier being sent to the Persian Gulf.   ;)

  58. VVUS / Pharm – I also still hold the Aug puts.  What exactly is the play you are proposing? Any chance they still tank?

  59. robert – I've traded options on the VIX before, but was looking into going long /ES futures and hedging with long /VX contracts.  The idea being that VIX will bottom out around 15 (maybe down to the lows at 13.50) and if it does the S&P will be significantly higher, but if the S&P starts plummeting the VIX should rachet up by multiples of the drop in the S&P.  Problem with the options is the time decay and I don't want to have any cash outflow upfront.  This would be a post earnings season play assuming we survive end of July/beg Aug and we are going to continue melting up the rest of the year.

  60. jerconn
    I like last time hear big surprises from the same people. The problem is they expect the P/E will go up on news and right now they are priced for big earnings, They have reported iphone sales are off, supply problems is a smoke screen, they have plenty of inventory, and all sales are down X autos. Phil has no faith in anyone right now and niether do I. Don't forget they are up over 10% now!

  61. Nasdaq up more points than the Dow – that's pretty unusual….

    No Labels/Stock – I like those guys.  They are making a worthwhile, serious effort to change things.  Unfortunately, I think the time for peaceful solutions is past and we need to be more radical than that. 

    AMZN/Nica – Sure, AMZN will get thrown around by lots of things – I'm just looking for a quick pullback from $225 for whatever reason. 

    Which long puts/Burr – Whichever ones go the wrong way and still seem like a good idea.  Basket is too committed, best off picking 3 that spike up (get cheaper) and see how they go before doing anything else.  Obviously AMZN, MA, DIA, SPY, V are my favorites at the moment. 

    At the moment, this market seems determined to go up and up and up no matter what happens so no point in trying to fight it. 

    Strategery/Bird – It's worth a discussion over the weekend.  I'll be around.  

    VIX/Sage – I found that VXX was more liquid and, as long as you keep your time-frame short, the decay is not a huge issue. 

    VIX/JJ – You can – just put VIX in the Trade/All Products box and you should get the chain for the ETF that's tied to the futures.  

    Propping/Jerconn – Well once you get one index moving the others are kind of linked so you get a ton of bang for your buck with AAPL, which is also a big part of the S&P 500 (about 3.5%).  Once again today we have a massive move in the SOX (up 2.5%) driving the Nas with Momo's like AMZN making big contributions as well.  AMGN new highs also helpful, LNKD moving well, GOOG up 2.5%, NFLX up 4%, WYNN up 2.5% – even RIMM is up a point today!  

    MLNX/Jerconn – With the fabless Semis, unless you really understand their contracts and product line, it's a total crap shoot.  They had great results and raised guidance – I wouldn't short them. 

    FXI/ZZ – China in a very strange melt-down with just enough pops in between to keep people guessing.  

    AMZN $226! 

    Boarders/Angel – That's a terrorist's dream come true. 

    Oil $92.50 and another good line to short if you took a nickel loss at $92 on /CL.  

    Dollar back to 83.07 is helping but not the reason.  

    TZA/Lucky – I imagine StJ will post up the Income Portfolio tomorrow and we can look over the positions but I'm not too keen on putting more money into the hedges, they were just there to keep us from getting killed on a big sell-off.  VIX is 15.84 and we entered VXX at VIX 16 yesterday so not really anxious to move that one already.  

  62. Just opened 100 put contracts on DIA. Tight stop. 

  63. Correction – 100 calls. Thank you Germany!!!

  64. PHIL,
    There will be 6Treasury Coupon Purchases and 1 Coupon  Sale from 7/23 to 7/31. The net infow will be 12 B. Plus momthly window dressing.  Shall we concern our bear bets? It' seems Buy Program always pair with Coupon Purchase
    this year.

  65. Phil,  the dark pools dumped their Crus on the 10 th. (about-10%), today they are buying it back. How can we play off this, do you think they are closing out options tomorrow or holding through earnings?

  66. VVUS – just waiting.  Will they make it that low.  Probably not, but one never knows. if one compares VVUS and ARNA's market cap for the same drug, it all comes down to sales and forward looking trials.  I think ARNA, if they get past the DEA schedule, has a good chance to be acquired by Eisai.  Couple that with phenteramine, and I think ARNA has a better chance to equal, or overtake VVUS on the weight loss front.  Just takes time on that one.   Everyone talks about VVUS and its takeout potential…I would be very surprised that anyone would pay that premium for two generic drugs in a combo pill.  Watch TEVA break that patent with a few added excipients…..

  67. VIX – just checked with TOS and they don't offer the VIX futures for trading…..just the options on the VIX.

  68. Very impressed and R3 touched on oil.
    Oil has moved almost $5 in two days.
    Short on oil at 92.80 even though dollar index still high at 83 and out above $93

  69. -TWIL – Just in case anyone is wondering where it stands now, here is a snapshot.  I did the same thing with the put list.
    Put List – Phil thanks for picking out a few starters for my real account.  
    In my paper account, I'm going to just buy the basket and see how it performs until Jan, and doing a DD when PnL is -50%.  Just for kicks….
    Birdman – Thanks for the insightful answer.

  70. 11:00 AM On the hour: S&P +0.25%. 10-yr -0.01%. Euro -0.22% vs. dollar. Crude +2.13% to $92.10. Gold +1.06% to $1587.15.

    11:42 AM European shares close higher again as the news flow from from the Continent dries up (though peripheral bond yields are back on the rise). Stoxx 50 +0.8%, Germany +1.1%, France +0.9%, Italy+0.6%, Spain +0.5%, U.K. +0.5%. The euro -0.2% to $1.2261.

    12:00 PM On the hour: Dow +0.21%. 10-yr +0.01%. Euro -0.21%vs. dollar. Crude +2.74% to $92.64. Gold +1.03% to $1587.05.

    Rally fuel after the EU close:  The Bundestag approves by a wide margin Germany's participation in the €100B bailout of the Spanish banking sector. Lawmakers are now quickly headed back to their summer vacations.

    The euro graph of doom (Telegraph)

    Nobody likes this rally, the percentage of bulls falling to their lowest level since August 2010 in the AAII Investor Sentiment Survey - down 8 points to 22.2%. Bears rose 7.1 points to 41.8%. The long term bullish average is 39%, bearish 30%. Chart via tradefast.

    If there's a theme to Q2 tech earnings reports so far, it's "good enough." Just as several large-caps have rallied on so-so results, beaten-down telecom equipment and optical component names are rallying on Verizon's guidance for "flat to down" 2012 capex – some feared worse guidance in light of recent warningsCIEN+5%ALU +6.9%JDSU +2%FNSR +3%JNPR +2.8%Nomurasees Verizon's comments about 40G/100G optical investments as a positive for Juniper and Ciena.

    More on Philly Fed: In response to special questions, 36.9% say business has weakened over the past 2 months, with 30.1% seeing improvement. Increased economic uncertainty and concern about future tax rates/regulation are given as the top 2 reasons for the slowdown. 46.6% expect further slowing in Q3, with 35.5% expecting improvement.

    Wall Street is ruining America (MSN Money)

    Nearly 3 weeks after the quarter ended, Goldman continues to tweak lower its Q2 GDP estimate. The "much" weaker-than-expected Existing Home Sales print necessitates a change to 1.1% anticipated growth from 1.2% previously.

    Record low mortgage rates continue to stir the housing market, as Freddie Mac reports the average 30-year fixed-rate mortgage hit 3.53% and the 15-year rate slid to 2.83% in the last week. A week ago, the rates were 3.56% and 2.86%, respectively; a year ago, 4.52% and 3.66%. 

    Equities are looking past it for now, but Spain's "soggy" bond auction – seeing middling demand for €2.98B of paper of varying maturities - points to trouble ahead, writes Richard Barley. The yields demanded at auction were well above secondary yields, which have risen since, the 2-year jumping 18 bps to 5.19%. 

    While many are counting on Congress to avert the "fiscal cliff" in January, it also needs to get its act together by Aug. 1 to avoid a "postal cliff." That's when the Postal Service is due to pay $5.5B into a health-benefits fund for future retirees. Without Congressional action, the service will default for the first time ever.

    Deutsche Bank (DB) plans to slash 1,000 investment-banking positions, Reuters reports, due to a slowdown in capital markets activity as a result of the eurozone crisis. The move would come despite Deutsche Bank saying in April that it didn't see the need to lower headcount in the department, and would add to a trend of banks reducing their i-bank staff. 

    Morgan Stanley (MS) plans to cut another 700 jobs by year's end to try and "rightsize" the bank, according to CFO Ruth Porat. The bank has already cut more than 3K positions this year. Shares -4.2%premarket (earnings miss earlier

    Citigroup (C) plans another 350 jobs cuts from its investment banking and trading division this year, according to a source. The reductions amount to about 2% of the unit's staff and come on top of 1,200 cuts already announced

    TD Securities anticipates a “kitchen sink” Q2 earnings report from Barrick Gold (ABX +1.8%) next week, watching guidance on the major Pascua-Lama project, whether ABX maintains its long-term production target of 9M oz. by 2016, and a first look at new CEOJamie Sokalsky. TD prefers Goldcorp (GG +3%) because of its stronger growth profile.

    The National Retail Federation estimates back-to-school spending will increase 14% this year, a mark that would represent the best pace since the survey began in 2003. Nearly 60% of parents will invest in some sort of electronics, up considerably from last year's level of electronics spending. On watch for a boost: WMTTGTBBY,ODPOMXSPLSRSH

    The strong results from AutoNation (AN) could be enough to edge forecasts from analysts on industry-wide vehicle sales even higher. The consensus forecast currently calls for 14M-14.5M vehicles, but automakers have been trimming their summer shutdowns in the U.S. as demand stays strong.

    GM (GM) has reached a deal to sell the illiquid P-E assets in its underfunded pension plan to the Chinese government for $1.5B-2B, according to an FT report. GE's pension plan has $109B in assets and $134B in obligations, making its funding liability one of the largest risks to the company.

    A123 Systems (AONE +3.4%signs a deal to supply lithium ion battery packs for BAE Systems' hybridrive propulsion system for use in city buses. The agreement expands a relationship the companies already have, with A123's packs deployed in HybriDrive systems on nearly 3,000 buses globally. (PR)

    Flying:  Teen-focused retailer Five Below priced its IPO of 9.6M shares at $17 each, the top of its expected range, according to sources. Shares start trading on the Nasdaq today under the symbol FIVE.

    A modest Q2 beat and in-line guidance are enough to send eBay (EBAY +8.5%) to 6-year highs. PayPal's performance is in focus, as is eBay's growing mobile presence: The company predicts both PayPal and Marketplaces will handle $10B in mobile transactions this year, above prior estimates of $7B and $8B.Needham is pleased with eBay's rising margins and strong merchandise volumes, and thinks guidance could be conservative.AMZN +3.1%OSTK +2.3%MELI +1.5%. (transcript

    Beat of the day:  Nokia (NOK): Q2 EPS of -€0.08 beats by €0.01. Revenue of €14.8B (-24% Y/Y) in-line. Shares +5.8% premarket. (PR)

    IBM gains 3.6% after rising margins and huge stock buybacks allow it to post a Q2 EPS beat in spite of a sales miss. For now, the Street is willing to look past a nearly across-the-board slowdown in hardware, software, and services (affected some by forex). During its earnings call, IBM partly attributed its margin improvement to better spending discipline for services, and a mix shift towards software. Italy and France are blamed for Europe's poor performance.

    Google (GOOG +2.9%) is rallying ahead of this afternoon's Q2 report - eBay's results could be helping, given much of Google's search ad revenue is tied to e-commerce activity. Search ad prices will be in focus, following two quarters of significant declines. Two wild cards that could work in Google' favor: mobile queries are soaring(even if ad prices are low), and ad clicks are surging as a % of total search clicks, thanks to Google's efforts to promote them. (previous)

  71. Only 20M-25M iPhones will be produced in the September quarter, sources tell Digitimes. The next-gen iPhone will account for a large chunk of these shipments. The report comes as Apple (AAPL+0.7%) trades higher in spite of Verizon's soft iPhone sales figure - a Q2 U.S. slowdown seems to be priced in. iPhone component suppliers are also moving higher, thanks to Qualcomm and Skyworks' reports. Avian recently estimated Q2 iPhone builds may have fallen to ~20M

    Verizon (VZ -2.1%) slips following its Q2 report. Big Red says it sold 2.7M iPhones (AAPL) in the quarter, down from Q1's 3.2M and Q4's 4.3M, albeit while adding 25% of sales are to new customers. Android sales came in at 2.9M. Deutsche is disappointed by Verizon's FiOS net adds, but is pleased with ARPUs and wireless margins. Moreover, 2012 capex is now expected to be "flat to down," – good for VZ's cash flow, but not for struggling telecom equipment firmsT -1.4%S +1.4%.

    British Judge Colin Birss has ordered Apple (AAPL) to put a notice on its Web site for six months and in U.K. newspapers saying that Samsung (SSNLF.PK) didn't copy the design for the iPad. Birss is the same judge who ruled last week that Samsung couldn't have committed such sins, as its tablet is "not as cool" as the iPad. 


    Words of Wisdom by the late Barton Biggs

    By Barry Ritholtz – July 19th, 2012, 8:54AM

    I only recall meeting Barton Biggs once (via a Green room somewhere), but his legend preceded him.

    This list of quotes (Thanks J!) should give you a solid basis as to his thought process and investment philosophy:

    * “Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge of the historic interaction between companies, sectors, countries, and asset classes under similar circumstances in the past are all important ingredients in getting the legendary ‘it’ right that we all strive so desperately for.”

    * “[T]here are no relationships or equations that always work. Quantitatively based solutions and asset-allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma. The successful macro investor must be some magical mixture of an acute analyst, an investment scholar, a listener, a historian, a river boat gambler, and be a voracious reader.Reading is crucial. Charlie Munger, a great investor and a very sagacious old guy, said it best: ‘I have said that in my whole life, I have known no wise person, over a broad subject matter who didn’t read all the time — none, zero. Now I know all kinds of shrewd people who by staying within a narrow area do very well without reading. But investment is a broad area. So if you think you’re going to be good at it and not read all the time you have a different idea than I do.’”

    * “[T]he investment process is only half the battle. The other weighty component is struggling with yourself, and immunizing yourself from the psychological effects of the swings of markets, career risk, the pressure of benchmarks, competition, and the loneliness of the long distance runner.”

    * “I’ve come to believe a personal investment diary is a step in the right direction in coping with these pressures, in getting to know yourself and improving your investment behavior.”

    * “As I reflect on this crisis period so stuffed with opportunity but also so full of pain and terror, I am struck with how hard it is to be an investor and a fiduciary.”

    * “The history of the world is one of progress, and as a congenital optimist, I believe in equities. Fundamentally, in the long run, you want to be an owner, not a lender. However, you always have to bear in mind that this time truly may be different as Reinhart and Rogoff so eloquently preach. Remember the 1930s, Japan in the late 1990s, and then, of course, as Rogoff said once with a sly smile, there is that period of human history known as ‘The Dark Ages and it lasted three hundred years.’”

    * “Mr. Market is a manic depressive with huge mood swings, and you should bet against him, not with him, particularly when he is raving.”

    * “As investors, we also always have to be aware of our innate and very human tendency to be fighting the last war. We forget that Mr. Market is an ingenious sadist, and that he delights in torturing us in different ways.”

    * “Buffett, a man, like me, who believes in America and the Tooth Fairy, presents the dilemma best. It’s as though you are in business with a partner who has a bi-polar personality. When your partner is deeply distressed, depressed, and in a dark mood and offers to sell his share of the business at a huge discount, you should buy it. When he is ebullient and optimistic and wants to buy your share from you at an exorbitant premium, you should oblige him. As usual, Buffett makes it sound easier than it is because measuring the level of intensity of the mood swings of your bipolar partner is far from an exact science.”

    * “Fifty some years ago, Sir Alec Cairncross doodled it best:

    A trend is a trend is a trend
    But the question is, will it bend?
    Will it alter its course
    Through some unforeseen force
    And come to a premature end?

    * “Nations, institutions, and individuals always have had and still have a powerful tendency to prepare themselves to fight the last war.”

    * “[W]hat’s the moral of this story? Know thyself and know thy foibles. Study the history of your emotions and your actions.”

    * “At the extreme moments of fear and greed, the power of the daily price momentum and the mood and passions of ‘the crowd’ are tremendously important psychological influences on you. It takes a strong, self-confident, emotionally mature person to stand firm against disdain, mockery, and repudiation when the market itself seems to be absolutely confirming that you are both mad and wrong.”

    * “Also, be obsessive in making sure your facts are right and that you haven’t missed or misunderstood something. Beware of committing to mechanistic investing rules such as stop-loss limits or other formulas. Work very hard to better understand how you as an investor react to both prosperity and adversity, and particularly to the market’s manic swings, both euphoric and traumatic. Keep an investment diary and re-read it from time to time but particularly at moments when there is tremendous exuberance and also panic. We are in a very emotional business, and any wisdom we can extract from our own experience is very valuable.”

    * “Understanding the effect of emotion on your actions has never been more important than it is now. In the midst of this great financial and economic crisis that grips the world, Central Banks are printing money in one form or another. This makes our investment world even more prone to bubbles and panics than it has been in the past. Either plague can kill you.”

  73. Burrben – When I wrote "What he said" I meant that I was asking the same question you were. Sounds like we might be able to have a dialogue over the weekend. Maybe we could set something up with Phil so a number of us could participate.

  74. Concern/Neet – Keep in mind I advocate CASH!  This market is very hard to call so you should be worried about everything.  While we're bored and sitting in cash, I prefer to go with my gut and my gut says same as last year on this BS rally.  

    Playing/Rms – I'm still advocating waiting until next week to see what happens.  You can't play a program because you never know what program they are going to run so you have to let them make the first move – THEN you can design your strategy against a known opponent.  

    Taking a 2 nickel loss on oil (/CL) and back in again at $93, again with tight stops and, of course, looking for a dime now to get 1/2 out even. 

    TWIL List/Burr – Thanks.  Still some good deals there means the market has certainly not gotten away yet.  

  75. USO puts – Good morning, Phil.  Just wondering why you target the next weeklies instead of, say August.   You don't usually seem like a weekly kind of guy. 

  76. Phil / Nasdaq up more than Dow: Might be because Tech was the only sector that wasn't overbought per Stjeanluc sector chart above…

  77. XLF didn't bite on that Germany news.  Hitting new day lows…canary in the coal mine?

  78. Phil / ISRG   –  I think the price on the put list might be wrong.  I see it as 2.55×4.70, mid : 3.62.  I checked the charts and don't see it anywhere near the $1.70 price listed.  Time for a edit :)
    Long Put List


  80. BAC really going off the deep end the last few days. 

  81. FWIW – A friend of mind who is a high ranking Marine general in the Middle East makes a trip to my town every summer and speaks to the members at my club and has a private dinner with some of us. It's a highly anticipated event as he is absolutely candid and honest (no media is allowed). I just received an email that he is cancelling his trip this year due to developments in the Middle East.
    FWIW. Anecdotal, but there appears to be more trouble brewing there than normal. Very unusual for my friend to have this kind of schedule change. Might account for the moves in oil as there might something behind the rumors.

  82. Cody Willard – I have not tracked results of his trading calls, but somewhere along the line I started reading his free articles….which is how I got into our Phil; in both cases, their socio-political commentary made me like them.  
    Does anyone here follow Willard's trades, and does he know what he's doing?

  83. JJennings, i have studied a similar trade.  I was using short SPX / SPY puts hedging with VIX options.  The only problem is that it looks like to my study that all options on the VIX will experience probably around a 2 point decay factor.  There is about a 2 point difference between front month vix futures and the next month.  As long as the VIX itself stays low (big if but that is what it has been doing lately) any option or future will experience that decay.  Even deep in the money options are not immune to this effect. 
    For what it is worth, if i was going to trade the vix options (i do) i would buy the ATM call (not the spot vix price, the front month vix future price) as it will "fix" your decay factor at what you pay for the option.  Then, you have to make sure you have a long that should make up for that decay.  The leverage factor you are looking for in the VIX ATM options is there for sure.  I have seen the ATM call double on a move up of 4 points on the vix future.  This is why i would pair the vix ATM call with a short put.  You have offsetting decays and if you set it up right, you can get the decay of the SPX / SPY to be greater than the decay of the VIX call.  Hope this helps, let me know if you have more questions.

  84. …in particular, I'm wondering what his recent LIBOR/bear trade was for financials.

  85. Hi everyone,
    I saw a really interesting movie earlier in the week, and I wanted to encourage everyone to see it.  Not only was it an enjoyable movie to watch, it really presented the inequalities between the haves and the have nots in a very unique and interesting way.
    The movie is 'In Time' staring Justin Timberlake and Amanda Seyfried and is currently playing on HBO this month (available on demand as well).  



  87. Oil – 'they' sure are working us (the consuming public) over..  a real BOHICA day.

  88. MSB buying AAPL shares??


  90. bolt/Cody – see yesterday's post. Somebody mentioned short MS and BAC. 

  91. bolt/Cody – see yesterday's post. Somebody mentioned short MS and JPM. 

  92. MS is cratering…..OH MY!

  93. Thanks, Stjeanluc, for the strangles portfolio update.  Looks like the Julys will be expired OTM tomorrow morning.  That is very cool for this portfolio.  At this point in time, we are left with minimal premium from the August spreads and thus stumbling on the same decision point, i.e. should we sell more or should we wait.  If we sell now, we'll get crushed on a big crash or big surge.  If we don't sell, we may miss an opportunity for making a tidy profit.   No right or wrong decision here.
    If we can't make up our mind, then sell something small.  Burrben suggested selling some bear call spreads earlier in the week.  With the market being up a little, it could be an OK time today to sell some.  So let's sell 10 RUT Aug 860 calls ($1.175) and buy 11 RUT Aug 870 calls ($0.65).  There is a risk that the market can steam roll over this spread.  We'll deal with it when it comes.

  94. Good Afternoon!   Thanks Phil for highlighting the MoMo portfolio this morning.   As you know, we are using a couple of trading techniques for these trades which seem to fit this up and down market to a T.   One of them is just to sell premium, as you have taught us all so well.  And specifically, in the MoMo, we just sell premium on the weeklies and roll each week until it comes in.  So PCLN came in today.  We sold 645 weekly puts on them last week for 4.00, had to buy them back later for 6.50, then rolled them to the 635 weekly for 8.00.  I just bought them back today for 10 cents!   As the account builds we will be doing more and more of such trades, which I call "sucking the premium out of the MoMos".  The other technique we've been using is to watch the MoMo list and try to catch them doing their momentum thing up or down, then catch the wave with long calls or puts a month or more out for a 10 or 20% gain.   We don't really care which way they want to go; we just want to ride awhile, then cash out.  Now our AAPL trade is slightly different.  We hold long-term bull call spreads   That should be a double by January and we won't even have to mess with the trade. 

  95. boltdude/Cody – I follow his trades. He's short on MS and JPM. MS is way down today on earnings release.

  96. Oil beating up the airlines.

  97. Why the sudden drop?  Did some good economic news come out??

  98. rkyroma / drop — Why were we up in the first place?

  99. VVUS looks like it took topiramate:
    Side-effects reported by > 10% of subjects in at least one clinical study[29] (listed by prevalence):
    • paresthesia (numbness & tingling) (23.7%)
    • upper respiratory tract infection (17.5%)
    • diarrhea (16.8%)
    • nausea (15.4%)
    • anorexia (loss of appetite) (13.3%)
    • memory problems (11.2%)
    Side-effects most frequently leading to discontinuation of therapy with topiramate:
    • psychomotor slowing (4.1%)
    • memory problems (3.3%)
    • fatigue (3.3%)
    • confusion (3.2%)
    • somnolence (3.2%)
    Thanks for the free puts Pharm!

  100. ANGI – I am looking at Angie's List as a possible short before earnings.  As a small business owner, I hate being bombarded by all these companies that try to make you feel like you need to spend money with them to prove that you are reputable.  I think my hatred for them is backed up by bad numbers and a bad business model.  I'll post my summary this weekend.  Any other opinions on them are appreciated.

  101. XLF / Phil -- Along with the market being overbought, it looks like XLF has failed to set a higher high.  Not that it should be the only decision factor, but do you like a bearish play at this point?

  102. Lflan- How about AMZN?

  103. deano….ur welcome.  Glad you held on to the hedge.

  104. Put aside my aversion to buying premium and bought some USO calls. The airlines, which have been pretty good of late, are getting pummeled, absolutely pummeled.

  105. pharm, what is your target on the MS sept puts, now .88

  106. VVUS – me happy too, I was out for a day but when they surged yesterday I couldn't resist buying some 29 puts at .70 for a crazy play, up very nicely today.

  107. rainman – that was sarchasm, and I wish I had an answer!

  108. Shhh, remember TRGT….Well, I have been waiting for this data:

    EnVivo's strategy of targeting a nicotine receptor as a way of improving the thinking ability of patients with Alzheimer's produced some promising results in a closely-watched mid-stage study. Investigators for the biotech say that the Phase IIb trial hit a pair of primary endpoints, with the highest dose of the therapy improving cognition and patient function compared to the placebo arm.

    Investigators enrolled about 400 patients with mild to moderate cases of the memory-wasting ailment for the study. One arm was offered a 2 mg dose of EVP-6124 over 23 weeks. The positive data for that group lays the foundation for a Phase III study in 2013 and is also likely to improve the biotech's shot at a partnership as it pursues a plan to transition to commercialization--provided it can win approvals in one of the toughest fields in drug development.

    EnVivo is not public, but TRGT is.  TRGT has a molecule that is similar and is entering the same trial  At $4, seems to me it is worthwhile to try and see what we can get for the stock. How about selling some Jan13 $5 puts for 1.20 or better.

  109. MS/Lunar – $5.  Really.

  110. Bird – you bought calls at this level?  If you don't mind me asking, what is your premise?

  111. This has been a headline driven market for a while now. I'm getting worried that we may be seeing "Middle East" headlines pretty soon. Even though I'm long oil I sure hope not.

  112. VVUS/mrm – send Savi my Vegas registration via paypal … Thanks. :)

  113. Bolt….OH resistance on USO…not a bad bet if they get through, $36 is next.

  114. lflantheman
    I plan to take a page from your book from last earning season and play the GOOG earnings by using a double calendar spread combo. Using short puts & calls that expire tomorrow covered with same price long positions that expire in four (4) weeks. Do you have any thoughts on this and the price range of the options that would likely contain the price movement so that the one day short positions would expire worthless?
    Thanks for your help

  115. Fun thing is happening, pump and dump isn't working like it used to, seems there are no more suckers, they are either burnt out or broke. The big seller today gets no follow through like a little liquidity trap being the only buyer also. Should have started early this week so now hopefully they drink the cool aid!

  116. this is too funny…..msb in aapl on another xlf swoon…that stock is propping the entire market up so much its crazy..never seen anything like it
     howard dean on cnbc saying he hopes we go over fiscal cliff..(NEVER TRUST A MAN WHO SHOULD CARRY HIS NOSE IN A HOLSTER)

  117. boltdude/oil – Interesting question. I'm not a Momo guy and I'm not a premium buyer. I just smell something. I could be dead wrong – and I hope that I am. I don't play pure gut calls very often.

  118. shadowfax / pump — looks like they've been pumping and dumping all day!

  119. Hi Phil,
    Greetings from my vacation spots in Europe presently in Passau at the German Austrian border crossing over to Austria on Saturday. Sitting put to close or roll my last open ends for tomorrow. FAS got up to a nice credit having the Jul 91 caller and the 75 putter. I trust we can look here for a new play in Aug. any suggestions? TIA

  120. USO calls, Aug 35s, with a sale of 1/2 the July4 weekly calls for 60 c.  Not a bad risk rewards, and the shorts are rollable.

  121. Pharm - seriously, I'm happy to, have you not already registered?  Wish I could go this time, but also happy to be flush with client work…

  122. CMG Crazy Play - bot 1 380/360 bear put spread for 1.90 for earnings.  No safety net on this, you're very likely to lose it all.

  123. cslanson/GOOG…..If you use the following:  sell one this weekly 550 put and one 650 call, and buy one of each of the next week's at same strike, then that trade only loses if GOOG is above 650 or below 550 tomorrow.   Between those strikes it could return as much as 100% by tomorow.  That's a fun trade.  GOOG has jumped more than 10% post eanings, but it's not the norm.  Yes, for fun ( a few hundred bucks) I might do that trade.  But, in fact, I won't.   I'd rather sit on the cash and watch GOOG move around.  I've found it a hassle to try and do complex spreads around earnings.  To make it work you have to be all over it, so to speak, adjusting etc., not to mention commissions. 

  124. cslanson2/GOOG trade, look interesting, TOS ask about $10.00.  Let's see what happen tomorrow.

  125. Iflan – what do u see for AAPL?

  126. VVUS - nice mellow IRA play is the AUG 24/20 bear put spread for .90, decent risk/reward.

  127. LOL mrm…U So Crazy…I think you and I have been on here the longest, no? that Cap is galavanting around NYC….

  128. Oh, I forgot about Phil being here, but he doesn't count now, does he?  ;)

  129. Pharm – do u like mrm' VVUS play for IRA?

  130. Pharm / TRGT – funny coincidence, I was just researching that one last night, started with this SA article then bounced around, the note I made to self was "watch this one, if insiders start buying then pick some up".  But will likely follow you in now instead 8) .
    The other one I came off research watching was our old friend SQNM, we made some nice coin on that one once.  I put in an order to sell some JAN 4 puts at $1 to get back on this horse…

  131. USO/Bolt – Because, this particular week, we are looking for a big, sudden sell-off as they scramble to close out the front-month contracts.  Unfortunately, this Mid-East activity has let them dump a ton of barrels and we may end up eating this month's attempt:


    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Aug'12 90.08 92.94 89.86 92.47 14:07
    Jul 19


    2.60 64067 89.87 49864 Call Put
    Sep'12 90.35 93.25 90.16 92.77 14:07
    Jul 19


    2.60 223748 90.17 294152 Call Put
    Oct'12 90.70 93.50 90.47 93.08 14:07
    Jul 19


    2.61 31123 90.47 89035 Call Put
    Nov'12 91.00 93.72 90.88 93.36 14:07
    Jul 19


    2.54 21654 90.82 71090 Call Put

    Notice the total barrel count, 504M is 10M LOWER than yesterday's 514M so they managed to dump 10M barrels completely off the front three months while shifting 19M barrels out of Aug delivery entirely.  In theory, they need to knock another 30M off by Monday so we'll see how they do for the day today. 

    XLF moving towards that $14.50 line.  RUT to 800 in futures (803 on index).  

    ISRG/Long Put List, Burr – I see $3.60 currently for the Jan $350 puts.  Let's make that the official price and I'll amend the list later.  Hard to tell what the mid was earlier as ISRG was up at $553 this morning with a lower VIX.  Of course, with 21 stocks to choose from, it's not like we're buying any that aren't CHEAPER than our original target anyway.  

    BAC/Ink – $7.50 is key for them to hold after this little ride down. 

    Middle East/Bird – That would suck but Syria is boiling over, that's for sure.  

    Cody/Bolt – He has his own subscription site at and went more private recently. 

    In Time/Soctt – Yeah, I meant to see that one. 

    Power/Rain – A nice, national emergency we are ignoring. 

    AAPL $615 covering a lot of selling in the Nasdaq – very clever!  

    Strangles/Peter – Amazing performance there as well.  So cool that we can do well on very hedged as well as unhedged positions in the more aggressive portfolios – talk about something for everyone…  

    Momos/Lflan – Fantastic job on those!  

    PCLN not at all bothered by airline drop.   I will say though, that I have not seen more than a few empty seats on any of the many planes I've been on this whole year.  

    Side effects/Deano – So if you take it you are almost certain to have at least one of those things?  I don't know why people bother…

    ANGI/Rkyro – Yes but they do have good top-line growth and very little debt so, at some point, they will stop spending and pop income so be careful. 

    XLF/Bolt – Too much fear of QE to short XLF.  I just like our FAS Money trades to take advantage of the volatility. 

    TRGT/Pharm – That sounds very interesting.  

    Dollar back under 83.  

    FAS/Yodi – Hope you are having fun out there.  That FAS play was great to hold but it was constructed by selling puts when we were much lower so you have to leg into a new one.  I think the goal should be about the same, selling $80 or lower puts when FAS drops down below $85 and selling $100 calls when FAS tests $95 or better.  The trick is to patiently wait for either leg and the range in May was $108 to $67 so I wouldn't go getting impatient just to fill around $88, which is dead center!  

    USO/Pharm – Good ratio spread.  

  132. CELG – if anyone is in the Oct/Jul 65 calendar spread, I am also holding these into tomorrow.  The stock price is at the top of its channel, and IF there is a sell off tomorrow, we should be albe to capture the premium in these and roll it out.  Watch the Aug 67.5 calls for a net credit.

  133. IMAX seems to have peaked – as expected.  

    GDX is a gold basket and I do like ABX better for a serious play but you can sell GDX Jan $37 puts for a very silly $2.05 (GDX has not been below $39 since the middle of 2009, when gold was $1,000 per ounce) and you can buy Sept $34/40 bull call spreads for $3.75 for net $1.70 on the $6 spread that's currently $7.58 in the money at $41.58 so a simple bet that gold holds $1,500 through Sept is a good hedge against QE and inflation with a very nice return and worst case is you own GDX at multi-year lows.  

  134. CHK taking a tumble  - how low does it go?

  135. From Barry:  


    The Housing Recovery is awesome — until you actually look at the sales data.

    Then, not so much.

    The NAR notes that “Distressed homes – foreclosures and short sales sold at deep discounts – accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011.

    Hence, a huge drop in distressed sales pressuring prices (which would have caused even more distressed sales) is an artificial benefit of the voluntary foreclosure abatements — which have now ended.

    The present RRE situation can be best described as massive Fed stimulus + government induced foreclosure abatements = some stabilization.

    Anything beyond that statement falls between wishful thinking and a guess. . .

  136. V and MA moving down nicely today.  

    HOV took a 5% hit.  CHK too. 

    WMT got freaked out by something but recovering a bit.  VZ hit hard.  

  137. Pharm – TGRT
    I just noticed that the Nov 5 Puts are .95×1.20, Mid : 1.08  and the Jan 5 puts are 1×1.15, mid : 1.08.  
    I'm going to shoot for the Nov's and see what they'll fill me at.  Weird the the mid prices are so close.

  138. Pharm / old timers - yes, I think you and I are the crotchety old timers around here…

  139. CHK – $18.25

  140. Old timers
    What happened to colors 3 green and Phil blue? What happened to pink and yellow?

  141. Someone pointed out to me that if you look at today's charts for KO, IBM and MCD, the price movements are just about identical for all three.  I assume the algos are hard at work on these.

  142. nicha/AAPL….I see AAPL pushing up, maybe even with an earnings pop.  But I'm playing it over 3 earnings sessions using Jan 600/650 bcspreads.    After this present earnings report  we will be better able to develop some short-term plays.  

  143. You can add Apple and Ge too and the price movements look eerily similar.

  144. USO / Pharm – not sure I follow what you did.  Are you selling next-week's 35 calls, and buying twice as many of the Aug 35 calls?  Sorry if I am being dense, but further detail would be appreciated.

  145. Pharm, if you have some VVUS profits to roll with for a crazy play, they let me buy tomorrow's 24/23 bear put spread for six cents…

  146. Anyone Have the AAPL earnings date?


  148. shadowfax / AAPL reports July 24th ATC

  149. shadowfax – AAPL: Q3 FY12 Earnings Release

  150. AAPL earnings are 7/24 after close



    Quick and easy site for checking earnings releases- dates and times.

  153. Wow, did we really need a stick on top of this day?  

    Dow volume just 100M at 3:50 so easy to push.  

    Identical/Ink – It goes further than that – even Pisani noticed the bot trading on CNBC a few minutes ago but not one of the wimps staring at the evidence dared say it looked like a Bot.  Bob says "I asked around about who could be buying in this pattern and no one seemed to know so I'll ask some more…"  What idiots!  

    Yields on U.S. corporate bonds fell to an average 3.98%, according to BAML, the first time ever breaking the 4% barrier. "The bond market is more focused on trying to find secure assets that offer some value," says an analyst. The spread between corporate debt and Treasurys has fallen to 285 basis points – low, but not yet a record. 

    I will gladly pay you Tuesday to take $15Bn from me today:  The Treasury sells $15B in 10-year TIPS at a record-low yield of -0.637% with a bid-to-cover ratio of 2.62:1. The tepid demand (can you blame the buyers) causes TIPS yields to rise a hair post-auction. TIP +3.7% YTD.

    It's early days yet but MarketBeat's Paul Vigna is not impressed "by the quarterly chorus of a 'better than expected' earnings season." He adds: "Sure, if your expectation was for an unmitigated disaster, then yes, what you’re getting looks pretty good." What there doesn't seem to be is anything "to build a stock rally around." 

    Interesting action in the Chicago pits today, where old crop (Sept) corn soared another $0.18 to a record $8.13, but new crop (Dec, March) fell, the spread between the two shooting higher late in the session. The divergence suggests at least some optimism for a reasonable crop to come in, no? CORN -2.3% as the action in the new crop months overwhelmed the record price move.

    Oil rises for a 7th straight day, jumping 3.1% to $92.69, the highest level since mid-May. Tensions across the Middle East are as good an excuse as any, with Israeli authorities blaming Iran for the deadly bombing of a tour bus in Bulgaria. There's also Syria spiraling downward. 

    Italy's credit rating is confirmed at A- with Negative Outlook by Fitch, the agency citing "recent and prospective structural reforms that would enhance the growth potential of the economy … (and) the demonstrated commitment of the government to reducing the budget deficit."

  154. GDX  -  Anyone get filled at $3.75 on this spread?  Just wondering.  
    Sept $34/40 bull call spreads for $3.75 

  155. Well that was fun.  Now GOOG and MSFT will be funner!  

  156. CMG getting pummeled :)

  157. cmg hit 365!

  158. PHil – woah, GOOG after hours up twenty bucks!  Will be fun to sell that 590 call tomorrow!

  159. CMG get killed.

  160. GOOG $10 per share.  They'd better earn $10 a share for $600.  Not that impressive but they jumped to $624 and now back to $610.  If they don't do better than this they will drift towards MSFT valuations with a p/e closer to 10.  

    MSFT being taken well at $31 meanwhile.  

    CMG not so much at $375 but no surprise there either.  Going to be great for Sept $350 puts!

    AMZN liking GOOG's numbers or MSFT's.   SNDK also excited about their own earnings.  

  161. Well, PHil, looks like we can take CMG off the long put list…that was fast….I must admit that I said on this board a week ago that CMG looks like a good short…

  162. CMG / mrm – wow – nice call.  That might have made my day.  Let's see how they spin things in the CC.  This stock has a way of healing faster than Wolverine on bad earnings, but looking good right now.

  163. Thanks to all for the AAPL day of reconing!

  164. ok, perspective on cmg…at 380, it has only given up the gain from the last 6 trading sessions!

  165. Cody / Angelcur – Thanks!  You say he "ran money" for you; what did that entail?  

  166. Interesting tweet i read today, didn't validate it though: 
    WORDS OF CAUTION: Market topped last year 7/22 from Summer rally, July Options Expiration – tomorrow is July OpEx -

  167. Phil / Is it possible (wise) to chase GOOG on market open tomorrow with naked calls and tight stops?

  168. MCD/IBM/KO – I bet the guys running these Algos just have a great time laughing it up watching everyone on TV and in blogs trying to figure out what's going on in the market.


  170. The march is on but the Russell is not playing along today!

  171. jjennings – If you look at DIA and SPY, the patterns are the same today.

  172. IBM accounted for 53.6 of the Dow's 35 points today according to ZH

  173. Ken Block Drifting Video
    i have a buddy works/lives in SF.   Runs for the Olympic Club cross country team 3 mornings per week ( 5-6:30am )
    Says to the best of his and 20 others guys knowledge, this never happened.   Someone would have seen or heard of it.
    if fake, pretty amazing computer work.   Maybe done elsewhere and SF dubbed in.   Still cool.  

  174. It's interesting how the details seemed to escape attention today.  Yes, while thousands of Spaniards took to the streets, Germany's parliament approved their share of the Spanish bailout (er, band-aid).   So, why then such a poor auction today?  Why is "demand for Spanish paper collapsing"?  Well…
    Madrid had thought the EU bailout terms would be “light” and that the ESM would inject money directly into Spain’s banks in order to break the dangerous nexus between banks and sovereign states, as sketched out at the summit deal in late June.
    It has obtained neither. The terms are draconian, with sweeping intervention across the gamut of fiscal policy as well as demands for a `bad bank’ and the closure of crippled lenders.
    The legislation passed by the Bundestag today made it clear that the government is entirely responsible for the cost of the bank package. “Spain made the request. The Spanish state will guarantee the money,” said finance minister Wolfgang Schäuble.

  175. I really don't think the Ken Block drifting video is fake.  Take a look at all these videos shot by people as they were staging it.

  176. stj – the other day when I said there was an error in the MOMO portfolio regarding Iflan selling AAPL 620's. That was my error. I went back and looked. Sorry.

  177. Good Evening
    just going thru the posts
    mrm—incredible call on CMG—wish I had seen it
    Pharm—how would you handle the TEVA  aug/july 40 calendar spread—-thanks
    Phil—I did see /NG over 3 and did go short and I see you had posted that earlier—-100 hrs and 9900 more to go   ;-)
    Vegas Update—-please note deadline for registration is July 31st—--aproximately 14 spaces left

  178. Momo Portfolio / Nicha – No problem. I checked and didn't see anything myself so I didn't mention anything else. But I appreciate when people follow up as I will make mistakes!

  179. So I never thought I'd say this, but I need CMG to rally a little bit tomorrow – preferably to exactly $375.  I bought a lottery ticket in the form of a 370/375/380 put butterfly spread for pennies that has a max payout of $2500.  Talk about bringing a scalpel to a bazooka fight!  Never in my wildest dreams did I think it would go below the 200 dma.  If it doesn't rally, I  think this could  be the next NFLX or GMCR.

  180. rdn—-will keep my fingers crossed for you—-hope it pays off—good luck

  181. Thx Savi, that's why I called it a lottery ticket.  Mrm's play is better, but I didn't even want to spend the $180.

  182. GOOG/Phil
    I got into what turned out to be a sweet little position you mentioned some weeks ago — sell July 575 puts against 2 (and at one time I got three) bull call spreads at 580/605 and 580/610. As of now, all good so far and being a diligent student – you never lose by taking a profit — I even took some spreads and puts off the table before yesterday's close.
    So this A.M. I not that worried about the expiring short puts, but I'm wondering if I can play the spreads a little more.
    Expiration is today, but I was thinking of rolling the short calls out and up into August to pay for the buy back of the 605 and 610s and sell a little more premium since GOOG typically drops after earnings.
    Of course, the 605 and 610 could expire worthless but, if not, should I roll and sell to say an August 625 call — or higher, or lower?
    I will be taking the long 580 calls out — probably early on — no matter what so I'll be pushing margin to do what I'm thinking about. It this too greedy? A stupid move?
    And, if you advise against new adventures, it won't matter much: It really turned out to be a great little set up for me since I managed to sell, buy back and re-sell the 575 puts for a profit before where I find myself now, and from when I entered what was a net zero trade to begin with. Thank you very much indeed.

  183. GOOG/Phil post script
    Futures not looking good right now so I could also be crapping in my pants and just getting the hell out at the bell.

  184. Good morning!

    Futures down a bit but nothing exciting so far but looks propped to me.  

    Someone killed 14 people and wounded 50 in a shooting at a late-night screening of Batman in Denver.  Not good for IMAX or the 2nd amendment.  I'm surprised the market is holding up so well on this as it's a pretty big negative on several levels.  

    CMG $350 in foreign trading!  Congrats to the faithful on that annoying company.  Kudos to Mr. M, who nailed the drop and to me as this is the first time I went short on them since last earnings, when they fell from $442 in April to $384 in May.  That was just shy of 20% so we'll see how they do at around $325 – maybe playable for a bounce there (but that does not mean we don't sell our puts into the initial excitement as $350 is a very nice pay-day!).  

    Nat gas/Savi – Nicely done.  And crossing $3 again this morning but tough short on a Friday.  

    Oil below $92 so 3rd time shorting those .50 levels was a charm on that one!  Gold $1,582, silver $27.13, copper failed $3.50 to $3.48 and gasoline $2.9045 is too high to go long on.  

    /NKD with a spectacular fall from 8,825 to 8,675 and now at 8,700 so let's watch that line.  

    Dollar at 83.15, Euro $1.2244 (awful!), Pound $1.57, 78.58 Yen to the Dollar and EUR/CHF 1.2008 indicates they are actively trying to support Euro (as you get less Euros per Franc than their target 1.2009) so the Euro is weaker than it looks here.  

    Spanish debt back over 7% despite positive movement on bringing in that 100Bn Euros finally (but we already rallied over that yesterday and about 6 other times before).  

    Friday's economic calendar:
    No events scheduled. 

    Notable earnings before Friday’s open: AEPALVBHI,FHNGEIRSLBSTIVODXRX

    3:06 AM Asian stocks trade mostly lower, with financials and utilities dragging the Nikkei sharply down. Japan -1.4% to 8670. Hong Kong-0.1% to 19545. China -0.9% to 2165. India -0.5% to 17199.

    4:41 AM EU shares are flat-to-lower, with markets focused on the expected authorization of the details of Spain's bank bailout, and major results from GE, Schlumberger and Xerox. EU Stoxx 50 -0.3%, London -0.3%, Paris -0.3%, Frankfurt flat, Milan -0.8% and Madrid flat. Spanish 10-year bond yields are flat at 7.01%. 

    Outsourcing isn't the problem… It’s that the prosperity of America’s big businesses – really global networks that happen to be headquartered in the U.S. - has become disconnected from the well-being of most Americans, Robert Reich writes. "Without a government that’s focused on more and better jobs, we’re left with global corporations that don’t give a damn."

    Never one to miss an opportunity to voice his opinion on a subject – any subject – "The Donald" weighs in on the looming fiscal cliff issue: "I’ve never seen a mess like it,” Trump says. We have absolutely no leadership on the subject. A deal needs to be made now, or this country's in big trouble.

    Eurozone finmins are today expected to approve the draft terms of Spain's €100B bank rescue, although the country won't know exactly how much it will need until the results of deep-dive assessments of the sector, which are due in September. Yesterday, Spain's parliament authorized €65B in savings, while hundreds of thousands of anti-austerity demonstrators marched in Madrid.

    Investors holding Spanish stocks should sell before the country is forced to ask for a bailout "in the coming quarters," according to analysts at S&P Capital IQ. European markets as a whole will lag, with the south underperforming the north.

    Oil traders floating desperate rumors as they need to dump August barrels:  Iran has developed plans to disrupt international trade in oil, according to U.S. officials citing new intelligence. Those plans include possible attacks on oil platforms and tankers, both inside and outside the Persian Gulf. Oil traders are apparently focused on other news, with crude futures -1% to $91.72.

    The price of iron ore at Tianjin Port falls to $125.60/metric ton, a new low for 2012 as Chinese inventories hit a record high. Even as demand shrinks, producers continue to increase output, both RIO and BHP digging up record amounts this year, and BHP planning on nearly a 40% increase by 2014.

    The drought could cause crop insurers – including Ace (ACE), QBE (QBE) and Wells Fargo (WFC) – to suffer their first underwriting losses in ten years. However, with the government providing subsidies and reinsurance, taxpayers may have to foot 50%-80% of the bill. The severity of the drought makes it tempting for farmers to give up on the crops and claim the insurance rather than try to save their products.

    Requests from investors for banks to repurchase soured mortgages have intensified over recent months, a trend that has come to light in the latest earnings reports. BofA (BAC) – who else? – faces the worst of it, with outstanding claims soaring over 40% to $22B in Q2. Other affected banks include Wells Fargo (WFC), PNC Financial Services Group (PNC) and Fifth Third Bancorp (FITB).

    Defaults on private student loans topped $8B last year, a government report released yesterday said. The amount has risen over the last ten years due to aggressive marketing by lenders to borrowers, some of whom couldn't afford the debt. "Subprime-style lending went to college and now students are paying the price," Education secretary Arne Duncan said.

    Summing up the managers' picks at CNBC's Delivering Alpha conference: everything from shorting HPQ (Jim Chanos) to Bill Ackman's big stake in Procter & Gamble (PG) to going long Brent Crude (Beau Taylor), and beyond.

  185. CMG/Rdn – If you want to short a stock, short a stock.  Trying to hit a $5 target on a $375 stock (on earnings, no less) is like trying to thread a needle by holding the string 6 inches from the end.  

    GOOG/Zip – Hey, those were clever plays!  Good job taking early profits.  You have learned well, my son but now you come back to me and ask permission to be greedy?  We're almost exactly on target at $610 and you are making a spectacular amount of money but you feel compelled to find a way to gamble it?  Our trade worked because GOOG was at $560 and we had conviction that it was priced way too low ahead of earnings and we were willing to buy it for net $575 and take a nice bonus if it made $600 – that was obvious (also we had $550 for an obvious stop out).  What you want to do is gamble so, if you are asking my advice, I'd say don't.  You might win, you might lose but we make money by PATIENTLY waiting for good opportunities and HOPEFULLY we manage to be right on those more often than we're wrong but when you bet on coin flips – you have a much better chance of a random streak going against you.

    When you have a big win like this – the best thing you can do is cash out and use your trading computer to find a nice place to go for dinner this weekend – maybe treat yourself to good tickets at a show or a concert or go buy yourself something you've been putting off.  It's good to remember WHY we are trading sometimes because we don't (or shouldn't) trade just to trade – that's gambling.  We trade to build wealth but if you only keep that wealth on paper – or in electronic numbers on your trading computer – then, like a casino with their chips, the money doesn't seem real to you and you forget the significance of your actions.  

    That's a trick that casinos use to keep you playing – don't go fooling yourself with your own account.  You are not a successful gambler until you walk away from the table with your winnings in your pocket – always remember that!