Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Wednesday Wheeeee – Can the Markets Handle Rejection?

Rejected!

After hitting our lines ON THE BUTTON across the board (see yesterday's perfect predictions), we're taking a little pre-market tumble this morning led lower by our favorite short – PCLN, which has negotiated their way to a 15% drop on an earnings miss that didn't surprise any of our Members as it's been a focus short of ours for ages and is in both of our $25,000 Portfolios as well as our Long Put List with the Oct $540 puts, which we rolled into from the $510 puts for a net of $7.  

With PCLN dropping to $575 pre-market, we won't do as well as we did on CMG last month (another focus put of ours) but we should get about $25, which will add, at 5 contracts, $9,000 to our $25KPs!  When asked why we were shorting PCLN in yesterday's Member Chat, my response was:  

Because the exchange rate sucks for one thing (PCLN is very big in Europe), because a great Q is priced in as PCLN has zoomed up with EXPE from last Q but are now outpacing EXPE (who are a much better company) by 20% over the past year.  Also, PCLN has been diversifying into regular travel and cannibalizing their own business and, of course, because PCLN has a p/e of 30, which is a good 50% above the rest of the sector.

SPY WEEKLYThat pretty much sums up PCLN's earnings report.  They are not a terrible company, they were simply over-priced into earnings and we took advantage of it.  Now that we've had our little correction, we're moving on.  We pressed our bearish bets yesterday as we expected a rejection at our Must Hold levels and my comment to Members on the way up was: "If you are going to be bearish – days like this are when you dig in your heels and shore up your positions – not the day you capitulate!"    

As you can see from Dave Fry's SPY chart, the "rally" looks a lit less impressive if you notice the volume, which is lower now than it was before we went off the cliff in May or August or July of last year.  Traders never seem to learn that these resistance lines are very hard to cross when there is a lack of participation but it's not because of any TA mumbo-jumbo – it's just math.  

The S&P represents about 1/3 of the $60Tn Global Market Cap (AAPL and XOM alone are over $1Tn) and, when Global Markets move up in synch, a 7.5% move in the S&P is a pretty good indicator that the Global Market popped $4.5Tn since early June.  Now, I know I didn't take $4.5Tn off the sidelines and I'm pretty sure you didn't either so what's going to sustain the markets trading at a $4.5Tn higher level over time?

The Global Economy (also $60Tn) didn't grow 7.5% since June either and, even if you want to argue that perhaps the market was under-valued at the time – over the longer haul you can see that 1,300 on the S&P is probably a more realistic indicator of our "recovery" than 1,400 is.  That's why we have our little formula that tells us that we need $10Bn in G20 stimulus/QE to get 1 S&P point (at roughly $42Bn per point) with an effect that lasts about 6 months.  $10Bn is 1/4 of what an S&P point represents so, of course we get a reasonable pop – but it still isn't sustainable – even if the money went directly into stocks – which it doesn't. 

SPY DAILYYou can't reprice a $60Tn market based on the excitement of a day or a week.  As I often explain to Members, if I had 100 identical VW Beatles to sell and I sell one at $25,000 but then I have my mom buy one for $26,000 and make a big deal of it in the papers and then my brother buys one for $27,000 and then some guy off the street rushes in to buy one for $28,000 before the price goes up and then I sell 3 to my cousins for $29,000, $30,000 and $31,000 and that causes a frenzy that drives the next 4 sales to $35,000 from regular suckers off the street – how much are my other 90 cars worth?

On the chart – they'd look just like the S&P, wouldn't they? But I still have 90 unsold cars on my lot and, if we've finally run out of idiots and someone in town realizes that a VW Beatle is only worth $25,000 – do I still get to book a $900,000 profit on my 90 remaining cars just because the last idiot paid $35,000 or will that chart turn very ugly very fast?

Stocks like PCLN and CMG are very much like the Emperor parading around naked in their "invisible suit" – no one wants to say anything because everyone else seems to be admiring the threads and you've been told by Cramer that only an idiot can't see the value on display.  That all works fine as long as everyone buys the MSM BS but then, all it takes is one little boy (or an earnings report) to shout out "but he's just naked" and suddenly it is obvious to everyone what that suit is actually worth.  

Value investing isn't dead – no matter how many times Cramer et al try to bury it.  


Tags: , , , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!



  1. And how about wfr!?!? As a guy who has rolled and doubled a couple times it's nice to be in the green!!!! Time to sell 1/2.


  2. Phil
    I got to a point yesterday where I wanted to exit all of my bearish trades until I saw the following comment from you
    "If you are going to be bearish – days like this are when you dig in your heels and shore up your positions – not the day you capitulate!"    
    I am so glad that I hung in there and did not close my trades including PCLN, which alone, I am sure would wipe out my losses on other shorts.
    So thank you very much again for great trade ideas and guidance.
    Thanks,
    gandhjo


  3. Phil/Iflan—thank you very much


  4. The Fed has been quietly pumping liquidity into the market through repo of Agency and MBS securities.  Did about $600M yesterday.   Its only supposed to be a "test",  so I guess the "real thing" will be in the billions.
     
    S&P Above 1400 As Fed Conducts Second $600 Million Repo Following Nearly 4 Year Hiatus


  5. HPQ! thanks Phil those puts should be looking good now.


  6. Good Morning!


  7. Repo Ops – ah yes.. see, no QE3 necessary. We have 'regular repos' along with "Operation Twist" and just your everyday rollovers… a whole toolbox full of 'tools.'  QE forever has been achieved.


  8. Good morning!  

    Big congrats to all PCLN players (and WFR this morning!). 

    I know having convictions can be tedious at times but days like this – it's quite rewarding…

    CMG dropped from $410 to $320 on earnings day (about 20%) and then fell to $280 (another 15%) over the next two weeks.  I don't think PCLN is that bad – especially as the bulk of their problems are based on Europe and Europe may still be "fixed" overnight so, to me, it's just too dangerous trying to squeeze an extra few bucks out of the shorts.  

    Keep in mind that we get a huge pop in downside delta at the open and, since we have Oct puts, we don't get much post-earnings decay – that's why I like to play them that way into earnings.  Once the stock calms down or, even worse, begins to move back up, the delta will squash very quickly, whether the stock goes up significantly or not.  

    PCLN's EPS was $7.85 and that was a BEAT, but smaller than expected.  Still call it $8 and that's $32 for the year and EXPE has a p/e of 20 so say $640 is not an unrealistic price and we're at $575 so holding on hoping for $540 – especially if the market stays strong, it just not a high-percentage play.  Let's figure $25 is a pretty good price for our puts (Oct $540s) or, if you never adjusted the $510 puts, then about $16 should be fair.  

    More importantly, the Euro has fallen back to $1.2339, the Pound is still at $1.564 and the Yen is down to 78.44 with EUR/CHF at 1.2011.  The Dollar is back at 82.50 and we can call that the bull/bear line for the day as we test 13,100 on the Dow and 3,000 on the Nas.  If they hold – there's not much to be bearish about as we're still going to be pressing on the tops of our levels.  

    Silver and gold are flying back to yesterday's highs because bad news is good news (more QE) so we'll have to see how this plays out.  The good news is we'll have a good spot to short oil into the inventories (10:30).  


  9. On AAPL weekly $605 puts, we're lucky to be able to take $1.25 off the table in our $25KP.  


  10. PCLN Oct $540s were a disappointing $21 but better than nothing. 



  11. should we cover SQQQ yet?


  12. MoMo portfolio:   PCLN…… 1 October 540 put sold for 20.00,  1  Sept 635 put sold for 60.00, and 1 Sept 685 call sold for 1.60.   The 1 Aug 665 call will be left alone to expire worthless in 2 days. 


  13. I recorded an exit of the PCLN puts at $21.20 which was the price at the open. Not sure if everybody got that because they dropped quickly!


  14. F Me PCLN!  Thanks Phil and LFLan!



  15. I corrected the 25KPA online to remove the AAPL weekly put at $1.25…


  16. WHEEEE! as Phil says…. Talk about the GOLDEN TICKET. IFLAN AND PHIL Sold my one contract on PCLN and it pays the RENT for the MONTH. THANK YOU BOTH!!!
     
    PHIL, I know I am crazy and I got lucky but I DD'd on the AAPL weekly and MADE 22%  THANKS!


  17. Thanks Phil! since I have learned listen to you and do what you do, my account is moving. Went short 5 PCLN. Cashed in this morning.  Your sense for market and stocks is uncanny! See you in Las Vegas for more fun.



  18. Lots of happy people this morning!


  19. Phil
    I have a Sept TLT $130/$126 bear put spread that has moved pretty well last week or so. Would you leave it on or take it off expecting market pullback and TLT to move back up? Thanks!


  20. phil & lflan
    Thanks for the pcln trade that gave me the first double ever :-)
    gandhjo


  21. Pharm – what do you think of SGEN here?


  22. Phil--I didn't see PCLN buying any of their own shares last quarter, did you?


  23. Phil / What do you think of MCD at this level? Nice pullback this morn.


  24. StJean/ Did you post your oil lines this morning?
    I just cant seem to find them
    Thanks


  25. Dallas Fed's Fischer to proclaim the central bank has "done (its) job."…must need to sell some bonds:)


  26. Market doesn't want to give any ground up.


  27. I need a fresh horse for my Long Put collection!!  That is a good way to start the morning.


  28. Europe down about 0.75% but relatively happy that our open isn't worse and improving.  

    PCLN already a great example of why it's ALWAYS sell into the initial excitement.  

    2:31 AM Asian shares are mostly up, supported by thoughts of more central bank easing. "It might not happen at all, but at the moment it is the triumph of hope over any concrete results," says BT Investment Management's Joe Bracken. Japan +0.9%, Hong Kong -0.1%, China+0.1%, India +0.3%.

    3:30 AM They've had a good run lately fueled by not much more than hopes and dreams – and with the Olympics going on, why not? – but EU shares open lower this morning. EU Stoxx 50 -0.4%, London-0.5%, Paris -0.5%, Frankfurt -0.3%, Madrid -0.3%, Milan -0.5%.

    At the open: Dow -0.3% to 13130. S&P -0.34% to 1397. Nasdaq -0.39% to 3004.

    Treasurys: 30-year +0.2%. 10-yr +0.04%. 5-yr 0%.

    Commodities: Crude +0.33% to $93.98. Gold +0.25% to $1614.65.

    Currencies: Euro -0.47% vs. dollar. Yen -0.19%. Pound -0.15%.

    Market preview: U.S. stock futures track EU shares lowerafter a string of gains as investors move to the sidelines ahead of the release of lots of Chinese data. S&P futures -0.4%. Not helping the mood is S&P lowering its oulook for Greece and the BOE cutting its economic forecasts. Following earnings, Express Scripts is +5.9%and Soda Stream +8.4%, although online travel firms Priceline (-15%) and Orbitz (-16.3%) get thrashed. Later: EIA Petroleum Inventories

    After the Boston Fed's Rosengren's call for aggressive QE, out trots the Dallas Fed's Fischer to proclaim the central bank has "done (its) job." Unworried about inflation, he still does not see the need to print more money. The Fed needs to avoid the impression it can solve all of our problems, he aruges.

    Q2 Productivity and Costs: +1.6% vs. -0.8% expected, -0.9% prior. Unit labor costs +1.7% vs. +2.1% expected, +1.3% prior.

    MBA Mortgage Applications: -1.8% vs. +0.2% last week.

    In spite of all the focus on Q2 earnings, we remind investors that Q3 and Q4 will also see significant currency headwinds – an impact we (and Goldman) believes is far from priced in for many companies in the marketa total top-line drag of over 5% YoY.  The year-over-year impact of FX rates has become a drag on growth for the typical multinational in 2012

    Consumer Credit Misses As Revolving Credit Has Biggest Contraction Since April 2011.

    44% Say Jobs Market Worse Than A Year AgoConfidence in the U.S. job market has fallen again, with the highest number of Americans in 10 months describing the employment situation as worse than it was a year ago.

    Fiscal Cliff Looms Large as Congress Leaves Town. A much-reviled Congress has now departed for a five week vacation — leaving behind a mountain of unfinished work as well as renewed anxiety that lawmakers and President Obama will be unable to get their act together in time to avoid slipping off the fiscal cliff at the end of the year.

    Weak credit quality of US cities bigger concern than bankruptcies-Morgan Stanley(MS). Morgan Stanley's municipal debt strategists said on Tuesday that weaker local credit quality should be a greater concern for municipal debt investors than Chapter 9 bankruptcy filings. "Our updated case study analysis of recent Chapter 9 filings affirms that bankruptcies may pick up somewhat, but the ongoing deterioration of local credit quality is a more relevant systemic risk," Morgan Stanley Research's Michael Zezas and Meghan Robson said in a report.

    Just 5.49% of mortgage holders were behind on payments for 60 days or more in Q2, reports TransUnion, the lowest level since 2009 Q1. A year ago, the rate was 5.82%. "I expected better," says TransUnion's Tim Martin, looking forward to Q3 for quicker improvement. (see Freddie Mac's Q2 earnings

    The U.S. high yield bond market looks overheated, Sober Look says, as investors snap up junk bonds as quickly as they come to market and retail inflows at BlackRock's High Yield Corporate Bond Fund ETF (HYG) hit another record. "Such aggressive valuations and tremendous retail participation make this market a prime candidate for a correction."

    SEC-Money Fund Showdown: Aug. 29. After months of wrangling in Washington, U.S. regulators are planning to vote later this month on a proposal to tighten rules governing the $2.6 trillion money-market mutual-fund industry. Securities and Exchange Commission Chairman Mary Schapiro has waged a public campaign this year to rein in money funds. Her goal: to avoid a repeat of 2008, when a run on one fund threatened to destabilize the financial system. Butthe proposal has faced stiff opposition from the mutual-fund industry, which argues that the rules effectively would kill their businesses.

    Morgan Stanley's(MS) Entire US Economic Outlook In One Huge Slide.

    Dwindling US Crops Are a Global ConcernThe U.S. government is expected this week to slash another 15 percent off its estimate of this year's drought-decimated corn crop, likely adding to growing angst in nations like China and India that are fighting to tamp down inflation.

    Gas prices climb 30 cents a gallon. Gas prices continued their slow but steady march higher Tuesday, surpassing a nationwide average of $3.63 cents a gallon on the back of refinery problems in the United States and higher crude oil prices globally.

    Data for the construction of power generation facilities in H1 paints a stark picture of the ascendance of natural gas, with 3,708 MW gas-fired plants built, 2,367 MW of wind farms developed, and 1,608 MW of coal stations constructed. Gas provides 41.8% of U.S. electricity, coal 29.7%, nuclear 9.2%, water 8.7%, wind 4.3%, geothermal 0.3%, and solar 0.3%.

    Banks’ Liquidity Hinges on Risky AssetsBy funding short-term cash needs with structured-finance securities, banks are creating significant liquidity risks for themselves and some of their markets, says Fitch RatingsRepos, or repurchase agreements, are a key source of short-term financing for Wall Street banks and other financial institutions, and they are under scrutiny once again for being fraught with risk. A Fitch Ratings report last week found a significant weak point in repo markets, a part of the “shadow banking” system that finances trillions of dollars in banks’ trading activities. The repo market is “an important utility in the financial system and promotes liquidity,” says Martin Hansen, senior director of macro credit research at Fitch Ratings. The problem with the repo market currently, though, is the quality of the collateral Wall Street banks and other financial institutions are using to borrow this short-term cash, says Fitch.

    Expressing "misgivings" because the dollar amount is so low, a federal judge approves a settlement between the DOJ and Morgan Stanley over price-fixing in the electricity market. "There is a risk that a large financial services firm like MS could view such a modest penalty as merely the cost of doing business." You think?

    Having posted $3.7B of extra collateral following Moody's 2-notch downgrade, Morgan Stanley (MS) would have to post an extra $435M if S&P cut the bank by a notch to fall into line with Moody's, MS said in its 10-Q this week. The bank would need a further $2.6B if the agencies cut by another notch, and then $3.7B for additional downgrades

    More from Meister: "If Mr. Soros tried it with (the pound), he shouldn't try it with the euro," he says, commenting on Draghi's warning about shorting it. "Be careful, there's somebody … who may join the game and his pockets are deeper." Perhaps if eurocrats could get past the euro up = good/euro down = bad paradigm, the EU economy could improve.

    Jens Weidmann's isolation increases, a senior member of Angela Merkel's party saying the Bundesbank chief won't swayGermany's support for the ECB's extraordinary measures. "We don't have a rift within Germany, we have different roles," says Michael Meister, praising Weidmann for fighting the good fight.

    Germany is affirmed a AAA credit by Fitch. "Germany has all the ingredients of a declining public debt path … Nevertheless, the longer track record serves as a warning sign," says the agency, noting the country's debt/GDP ratio of 83% in 2010 vs. 55% in 1995.

    The BOE cuts its GDP and inflation outlook, saying the U.K. economy will return to Y/Y growth later this year and end 2012 at almost 1%. The BOE forecasts 2013 at +2% vs. +2.5% prior. The bank expects inflation to finally fall to its 2% target in Q3 2013, later than previously predicted, and to stay at that level until mid-2015. (Inflation report

    The BOE seems in no rush to ease more even as it cuts its growth outlook. "That in itself does not suggest an urgent need for further action," says bank President Mervyn King, adding the underlying data may not be as weak as the headline numbers suggest.

    Under pressure to apply for a bailout, Spanish PM Rajoy is holding out for conditons as soft as those imposed for the €100B rescue its banks received in June, according to an EU official. The European Commission will weigh in on its assessment of Spain's fiscal consolidation progress in mid-September.

    Greece Rating Outlook Cut to Negative by S&PGreece’s credit rating may be cut again by Standard & Poor’s on concern a worsening economy raises the likelihood the troubled nation will need more support from European Union lenders. The outlook on Greece’s CCC rating, already eight levels below investment grade, was revised to negative from stable, S&P said yesterday in a statement. The change reflects the risk of a downgrade if Greece is unable to obtain the next disbursement from the European Union and International Monetary Fund rescue package, the rating company said.

    ECB's Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit. ECB President Mario Draghi's bid to bring down Spanish and Italian yields may spur the nations to sell more short-dated notes, swelling the debt pile that needs refinancing in the coming years. The average maturity of Spanish debt is the shortest since 2004 as Spain, like Italy, hasn't issued 15- or 30-year bonds all year. As Prime Ministers Mario Monti and Mariano Rajoy fight to avoid bailouts that may threaten the euro's survival, the ECB's plan risks adding to pressure on the two nations' treasuries. "In a way what the ECB has done is making the situation worse," said Nicola Marinelli, who oversees $160 million at Glendevon King Asset Management in London. "Focusing on the short-end is very dangerous for a country because it means that every year after this they will have to roll over a much larger percentage of their debt."

    Europe's Scariest Chart In More Detail.

    Good for EWJ!  Japan's current-account surplus ¥433.3B ($5.5B) in June vs. ¥215.1B in May and consensus of ¥415.4B, helped by falling oil prices. Trade portion swings to surplus of ¥112B from deficit of ¥848.2B. The figures ease worries that Japan will need foreign financing to service its debt burden. 

    Japanese PM Yoshihiko Noda is prepared to dissolve the lower house of parliament "in the near future" and hold an election in order to receive support from opposition parties to double the country's consumption tax to 10% by 2015, Kyodo reports. The tax still needs approval in the upper chamber, where the opposition holds sway.

    China bears like to point to flatlining electricity output as proof of the country's sharp growth slowdown, but what if it's justsignaling a shift to a more services-based economy? Suggesting China has gone from Indonesia last year to Switzerland this year is "a little bit of a reach," says Michael Parker, not buying the argument.

    China's National Energy Administration increases its 2015 target for solar power capacity by 40% to 21 (GW) as lower costs and regulation helping to fuel growth in the sector. Stocks likely to benefit include Suntech Power (STP), LDK, ReneSola (SOL), JA Solar (JASO) and Yingli (YGE).

    Foreigners Flee Indian State Companies on InterventionForeign investors are cutting their holdings in India’s state-controlled companies to a three-year low as Prime Minister Manmohan Singh’s government sacrifices shareholder return to revive the weakest economy in nine years.

    Coal to Drop as Steel Output Slows in BHP Setback: CommoditiesCoal used to make steel is set to drop to the lowest price in two years, eroding earnings at BHP Billiton Ltd. (BHP) and Rio Tinto Group (RIO), as European demand wanes and China shifts supply contracts to Mongolia from Australia. The contract price may drop 11 percent to $200 a metric ton in the three months to Dec. 31 from $225 a ton this quarter, according to seven analysts and industry officials in a Bloomberg survey.

    McDonald's (MCDreports that global comparable sales were flat for July, with sales in the U.S. down 0.1% after estimates called for a 2.2% gain. Similar sluggishness was seen in Europe and Asia, suggesting a broad loss of market share could be in play. Shares of MCD -3.1% premarket. 

    Heads are scratching over the weak July sales numbers for McDonald's (MCD). Europe can't be solely blamed with all three major geographical regions coming in below analyst expectations and using the global economy as a scapegoat doesn't make perfect sense after sales held up relatively well in 2008-2009. NBG's Brian Sozzi warns the stock could be a dividend trap as Mickey D's Q3 looks set to disappoint.



  29. Beverage companies 
    spend millions on water conservation projects to ensure a stable supply of their primary ingredient after long-term forecasts for the industry show scarcity of water as one of the biggest risks to the industry. Big players such as PepsiCo (PEP), Coca-Cola (KO), Dr. Pepper Snapple (DPS), Molson Coors (TAP) created an alliance in 2006 to address the concerns, but this year's prolific drought has raised awareness to even greater heights.

    Macy's (M): Q2 EPS of $0.67 beats by $0.03. Revenue of $6.12B (+3% Y/Y) in-line. Shares +0.8% premarket. (PR)

    More on Macy's (M): Online sales grew 36.1% Y/Y and contributed 1.7 percentage points to same-store sales. Gross margin held steady at 41.9%. Expects full-year EPS of $3.30-$3.35, up from prior guidance of $3.25-$3.30 and just below the Street consensus of $3.36. Shares +2.6% premarket. (PR)

    H-P (HPQ+5.4% after stating it expects FQ3 EPS of $1, above a consensus of $0.97. Also, Enterprise Services chief John Visentin is leaving (EMEA services head Mike Nefkens will handle his job for now), and the company will take an $8B goodwill impairment charge stemming from a lower stock price and Services business conditions. The FQ3 report arrives on Aug. 21. (PR)

    This is a BIG deal and why I'm long-term bearish on MA and V:  Starbucks (SBUX) will equip nearly 7K stores with Square's tiny card readers, and invest $25M in the payments juggernaut. Starbucks will also support Pay With Square, an app-based solution that lets users set up a tab, later this year. Now that Square, already very popular with small businesses, has landed its first big retail chain, time is running out for card-reader rivals (III) such as PayPal (EBAY), Verifone (PAY), and Groupon (GRPN) to gain critical mass. (SBUX mobile apps)

    More on the Starbucks-Square tie-up (previous): According to academic Bill Maurer it would take a "big merchant" jumping into the mobile payments to break the mobile payment barrier of consumers who see little reason to change from a physical wallet to a virtual wallet. If the SBUX-Square deal hits full stride, shoppers at stores won't even if have to take out their phone to make a payment, much less actually sign a receipt. Did mobile payments just break the 4-minute mile? 

    Guidance from Priceline (PCLN) on Q3 implies light bookings growth and heavy foreign exchange headwinds. CEO Daniel Finnegan doesn't tread lightly over the company's prospects, particularly Europe, during an earnings CC: "We're assuming fairly significant deceleration in growth rates from here on out." PCLN-14.8% premarket.

    Goldman Sachs takes down its rating on Priceline (PCLN) to $760 following Q2 results (III), but keeps a Buy rating firmly in place. After sizing up earnings multiples, the firm says it continues to believe the risk/reward profile on PCLN is favorable. 

    United Continental (UALreports its consolidated July revenue passenger miles fell 2.8% as revenue per available seat mile stayed level compared to a year ago.

    GameStop's (GMEGame Informer is now the nation's third most widely circulated magazine after cruising past Better Homes & Gardens. Circulation rose 37% over the last year to reach 8.2M.

    Best Buy(BBY) Founder Envisions New Tack. Best Buy Co. founder Richard Schulze envisions a turnaround plan for the electronics retailer that involves cutting prices to better compete against Amazon.com Inc. and other online retailers while ensuring that the in-store customer-service experience is as good as Apple Inc.'s, according to people familiar with the matter.

    Premarket gainers: WFR +31%

    MEMC Electronic (MEMC): Q2 EPS of $0.14 beats by $0.16. Revenue of $808.4M (+8% Y/Y) beats by $58M. (PR)

    Army to Issue $7 Billion RFP for Solar, Renewables.

    A123 Systems (AONE): Q2 EPS of -$0.56 misses by $14. Revenue of $17M (-53.4% Y/Y) misses by $5.9M. (PR)

    Told you so!  More on A123 (AONEQ2: Chinese autoparts company Wanxiang Group plans to provide financing of up to $450M in A123, thereby significantly easing the company's funding crisis. Net loss widens to $82.9 from $55.4M a year earlier. Shares surge 23%. (PR)

    India says it has worked out how to monitor corporate emails sent to and from Blackberry devices without needing encryption keys, which RIM (RIMM) says only customers have. Aside from being disturbing for Big Brother reasons, the news is problematic for RIM because one of its major attractions is the security of its email system.

    Research In Motion (RIMM +9.6%) is taking off in the absence of major news. M&A speculation has been swirling around the company in recent days – yesterday morning, Jefferies arguedSamsung could be interested, while a CNBC columnist made the case for Facebook – but this has been going on for a while. RIM had a short ratio of 3.6 as of July 13. 

    EBay(EBAY) lures big retailers in Amazon(AMZN) battle. EBay Inc, once a scrappy auction site for mom and pop sellers, is enticing some of the world's largest retailers by arguing it can help them compete better against e-commerce leader Amazon.com Inc. EBay Chief Executive John Donahoe and other executives have been telling retailers that Amazon is their enemy, while eBay is a friend because, unlike Amazon, it holds no inventory.

    Amazon (AMZN) faces increased competition from clothing start-ups at one end and eBay (EBAY) at the other. The start-ups cut lots of middle men and make items to order to avoid needing warehouses, and so can undercut even Amazon. eBay tells retailers it can help them compete by putting store fronts on its site, with [[RSH],BKS, and GNC doing so.

    Tensions Rise Over Iranian HostagesEvidence Emerges Men Held by Syria Rebels Are Linked to Iran's Revoltionary Guard, as Tehran Warns U.S. on Their Fate. A band of 48 Iranians being held hostage by Syria's rebel army journeyed from Tehran on a trip organized by a travel agency owned by the elite troops who support and protect the Iranian regime, people familiar with the trip said. That connection—denied by Iran, a staunch supporter of the Assad government—suggests the hostages have strong ties to Iran's elite Revolutionary Guard Corps, as the rebels claim. Tehran, which says the hostages are religious pilgrims, warned it would hold the U.S. responsible for their fate due to its support of the opposition.


  30. SGEN/bdon – I like them.  a buy/write is fine.  Jan 13 25 call/put combo. Or, the January 25/30 BCS along with the 20 put sale is a net 0 cost.  Margin of course.  Less risk but more cash up front is the 20/25 Jan BCS.  I am in Dec 25/30 BCS with the Dec 20s sold.  So moving out a bit in time is worth it.  Earnings are today, so do at the risk of the up or down move….


  31. Phil / V and MA
    Instead of just buying puts on them and rolling, why don't we establish a long term bearish play, using the inverse of our long term bullish plays.  
    So we would buy a Bear Put spread and then sell a longer term (or multiple short term) calls against it.  If we put something like this in the Income or 25K port it might be nice to track.  What do you think?  


  32. Lionel, here you go:

    Oil lines

    R3 – 97.21
    R2 – 95.81
    R1 – 94.57
    PP – 93.17
    S1 – 91.93
    S2 – 90.53
    S3 – 89.29

    Good timing as we are testing R1 now.


  33. Thanks Stj/
    EIA inventories are presented as bullish (who cares about consumption)
    R1 short
    Let s see if they push it higher


  34. Bought USO Sept 33 puts for .61


  35. USO based on Phils oil statement for 10:30


  36. SHADOW F…NICE 10 MIN CANDLE ON TZA!  10.42 am


  37. Congrats on WFR, Jrom! 

    You are very welcome Gandhjo – Congrats.  

    You're welcome Savi (and all others – to save comment space but I do really appreciate knowing I was helpful).  

    Repos/Kinki – Hmm, last week they said it was just a test but if you "test" it once a week – isn't that a program?  

    Back over our levels except Dow (13,165) and S&P (1,399.92).  1,395 in S&P futures which, as we learned yesterday, are the real deal.  Same for RUT but Futures there over 800.  

    $21.20/StJ – That was the right exit, thanks.   Held $21 for a while then back to $18, where they still are.  Now PCLN buyers seem tired so we'll see what happens but would take about a $10 dip (to $568) now to get back to $21 as the excitement is out of the delta (.30).  

    You're welcome Newt.  

    AAPL/$25KP – Lucky escape for us!  Sitting $10 out of the money with 3 days left to trade is NOT what we signed up for so – even though AAPL looks weak – our premise (that we'd crash by today) was blown and we're better off saving the money for the next idea than risking it on an old one where we now have to be lucky – not good.  

    AAPL/EM – A bit risky but it's what you do if you really think something spiked against you and will reverse.  As above, just be aware of the pressure you are putting on your position when your time-frame is so short and you are the sucker paying the premium.   Give my best to your landlord – congrats.  

    Thanks Crussell.  

    TLT/Crussell – Ahead of today and tomorrow's auctions I would cash the $130 puts and put a stop on the $126 puts but hopefully you'll get a better price on them as TLT moves back to $130.  Maybe a stop if they fail to hold $126.  

    Double/Gandhjo – I hope it will be the first of many.  We don't "go for" doubles but, if we play smart – we hit them once in a while in the normal course of things.  Ty Cobb, who hated home run hitters, accidentally won the triple crown one year when he led the league with 9 home-runs – all inside the park!  

    PCLN/Jabob – I didn't look.  Yahoo shows them buying $1Bn in March Q but I haven't seen June yet.  What a ridiculous waste of $2Bn+ buying back their own stock over the past year and that's 10% of the company so earnings would have been a big, fat miss if they hadn't.

    MCD/Amalfi – Been waiting for $80-85 as a good entry but I'd rather give them a chance to pull back more as they hopefully will come back to $80 on a broader market decline and then they higher VIX will make selling 2014 puts very attractive.  

    V & MA/Burr – You can do that but I think the whole market tanks this month and the puts simply make more money with less hassle.  

    USO/Jomp – Great call.  We broke below $94 again on /CL so good Futures short as well.  Too bad they didn't tag $95 but topped out at $94.72 on the inventories, which had already priced in a big draw:

     EIA Petroleum Inventories: Crude -3.7M barrels vs. consensus of -0.9M. Gasoline -1.8M vs. consensus of -1.2M. Distillates -0.7M vs. consensus of +0.5M. 

    Dollar punched below 82.50 so can't be too bearish here.  


  38. stardawg
    Hope you were short. When do we drop the rest of the way?


  39. shadow f—yup grabbed .08 cents there….no second candle so neutral right now!  thinking sell off into the close today…but will play within the ranges for today…


  40. Hanging on  Strawdawg


  41. They are just embarrassing themselves testing our levels again with 26M on the Dow at 11…

    Now PCLN legging down nicely, $570 being tested and puts back to $21.  Next week $515 puts at $1 are a fun way to play if you think you'll regret not staying bearish.  


  42. shadow….ya bit of a nail biter :-)  tza seems to be stuck in the 17.47 to 17.52 range,,,


  43. PCLN / Phil – The next earning report should be interesting for option sellers because if you thought premium were crazy on Friday when lflan sold the straddle (and that straddle was mispriced by $50!), I am guessing that following this 15% dump, IV will be even higher next time! As Jeff Augen says in his books, options have memories!


  44. Coal still have way to go it seems:

    http://www.city-journal.org/2012/22_3_coal.html

    And coal consumption will keep rising as electricity consumption rises. Between 1990 and 2010, global electricity production increased by about 450 terawatt-hours—roughly the amount of electricity that Brazil consumes—per year. The International Energy Agency (IEA) expects electricity use to keep growing by about one Brazil per year through 2035. Given this surging electricity demand, it’s no surprise that between 2001 and 2010, global coal consumption rose by 47 percent, or the equivalent of about 23 million barrels of oil per day. During the same period, daily consumption of petroleum grew by 10 million barrels, while natural-gas consumption grew by the equivalent of 12.9 million barrels of oil per day and nuclear-energy consumption grew by the equivalent of 510,000 barrels per day.[...]

    In its latest energy forecast, ExxonMobil predicts that in 2030, the cheapest form of electricity production will remain coal-fired generation units, with a total cost of about $0.06 per kilowatt-hour. At that price, electricity produced by coal would be cheaper than electricity produced by natural gas, nuclear, wind, or solar photovoltaic panels.

    On the other hand, we are screwed for climate change…..


  45. Income Portfolio – Let's buy back the Aug $76 puts for .15, may as well free up the slot with 9 days left. 

    $25KPs – Yay!  

    • JRCC – Not ready to give up yet as we haven't really failed bullish levels yet.  
    • SQQQ – I have a good feeling about those.  
    • VXX – Same good feeling.
    • AMZN – Those too.  
    • BBY – I haven't read anything to change my mind so far.  
    • EDZ – At $12.90 now so no way we would pay $1.28 for the $13 puts.  
    • SVU – Still going up ($2.35) 

    Well that was easy but I am tempted to clean house and go to cash as we have too many long-term positions and we're up 60% in the $25KPA so maybe we should shift to having some fun, rather than worrying about protecting ourselves.  We'll see how the week plays out – we can't kiss these levels forever without either scoring or getting slapped.  


  46. It must be one of those go up because we go up days. The draw on oil was because when prices start goin up people fill up their tanks and as long as people need to do that it is trouble. Diesel fuel is $4.00 here, up .45 in 2 weeks. Did I hear a refinery was down? Naw that couldn't be it, 100 million found lost money, didn't know what to do with it.


  47. Next/StJ – Good point, next time, I think there will be good money to be made on the short strangle.  

    Coal/StJ – That's depressing.  

    Wow, oil heading for another run at $95 after bouncing at $93.50.  I do like the /CL short at $95 but right out if we're over!  

    Dollar diving to 82.30 as Euro pops back to $1.2375 into their close.  Pound at $1.5672, Yen stronger at 78.35.  

    Silver popped $28, that's a bullish sign if it holds, Gold $1,618 will confirm at $1,620 (and of course, that would make it foolish to short oil – or anything else) but copper not very strong at $3.42 and nat gas going down at $2.94 and gasoline barely holding $3 so it seems like a QE rumor rally and nothing more (but ignore those at your peril!).

    S&P futures 1,398 with index at 1,402 so figure 1,404 on the index is our breakout line. 

    Dow 13,186 – very close too.  

    RUT futures (/TF) 799.20 with index at 801.20 so 802 on index is goal there and figure that's 8,020 on NYSE, which is over at 8,022.  


  48. 10:00 AM On the hour: Dow -0.08%. 10-yr +0.08%. Euro -0.46% vs. dollar. Crude +0.44% to $94.08. Gold +0.2% to $1613.85.

    11:00 AM On the hour: Dow -0.04%. 10-yr -0.03%. Euro -0.29% vs. dollar. Crude +0.69% to $94.32. Gold +0.28% to $1615.25.

    Watch out for a correction — or worse (Market Watchsee also Dow Theory Still Says Sell (WSJ)

    However, these Leading Investment Indicators are positive (Above The Market)

    Has CNBC Lost its Mojo? (A Dash Of Insight)  see also Worn Down Investors Turn Off CNBC Amid Market Malaise (Investor Place)

    Fannie Mae (FNMA.OB +11.4%) reports Q2 income of $5.1B, up from $2.7B in Q1. Like Freddie Mac, the agency is benefitting from higher property prices/lower delinquencies. Like Freddie, Fannie is able to make its $2.9B dividend payment to the Treasury without having to draw from the Treasury. (PR)

    They call this realistic?  Maybe a trendsetter, Indiana drops the assumed return on its public retirement plan 25 bps to just 6.75%, the first of the country's largest 126 pension systems to go below 7%. The return over the last 10 years was 5.74%. "This is a prudent move … to recognize potential long-term global realities," says the plan's executive director.

    Maybe the most interesting item from Berkshire Hathaway's (BRK.BQ2, suggests Blaine Rollins, was a 50% cut in its exposure to the health of municipalties. Buffett's firm terminated contracts with notional value of $8.25B that would have paid out in the event of certain municipal or state defaults.

     It seems like we can have higher stock prices or lower crude oil prices, but we can't have both. Crude continues a 6-week rally, moving to its highest price since spring at $94.24. The gasoline ETF: UGA +14.9% in the last month. Earlier, inventory data showed an unexpected draw on stocks. 

    Solar stocks outperform (TAN +1.4%) following MEMC's (WFR +18%) strong Q2 report. Revenue of $933.4M (+20% Y/Y and+78% Q/Q) blew past consensus by $184M, while non-GAAP EPS of $0.14 beat by $0.16. Also, MEMC is guiding for wafer revenue to grow 3%-8% Q/Q, which suggests a consensus for a 31% drop in total revenue will prove quite low. Between MEMC and First Solar, is there reason to think solar is finally bottoming? There's still a lot of bad news to go around. (PR)

    Toyota (TM -0.9%) exec Jim Lentz says it makes sense for the automaker to manufacture even more models in the U.S. with the yen still strong. The company currently produces about 70% of the models its sells in North America in the U.S., a percentage that is likely to head higher.

    Green Mountain Coffee Roasters (GMCR +5.4%) continue to build up momentum after peer SodaStream beats estimates with itsQ2 report to help lift sentiment on the single-serve market. SA author Seth Golden's breakdown of GMCR tips off that investors should tread very carefully, but the glory days for shorts may be in the past. 

    Rackspace (RAX +12%) is taking off after posting a decentQ2 report featuring growing cash flow and healthy customer data, and getting upgraded by Jefferies and Pac Crest in response. Jefferies predicts revenue growth will re-accelerate in 2013, fueled by demand for Rackspace's just-launched OpenStack cloud infrastructure solutions. 14.8% of Rackspace's float was shorted as of July 13.

    Sirius XM Radio (SIRI +3.8%plans to offer $400M of senior notes due in 2022. The company says it will use the proceeds from the offering to pay down debt and redeem higher paying notes. Shares of SIRI are up on the day, possibly influenced by news that Liberty Media will pile up some cash by spinning off Starz. 

    VeriFone (PAY -9.4%) slumps after Square lands a potentially game-changing deal (III) to see its form of mobile payments used at 7K Starbucks locations. The company was also hit with a downgrade to Neutral from Buy by UBS with catalysts looking played out.  - This is funny as just yesterday I said

    PAY/Davidor – Good growth but a hard company to get a handle on – as you can tell by the frequent 20-30% price swings.  The problem with going long is they can hit hard by someone like Square but, on the other hand, they are deeply embedded and certainly worth $30, which has been a firm floor since 2010. 

    Research In Motion (RIMM +9.6%) is taking off in the absence of major news. M&A speculation has been swirling around the company in recent days – yesterday morning, Jefferies arguedSamsung could be interested, while a columnist from The Street made the case for Facebook – but this has been going on for a while. RIM had a short ratio of 3.6 as of July 13.

    Google continues to move forward with its ambitious self-driving car initiative. In a blog post the company says that select employees will use the cars to commute to work and "take over" if the famed Google algorithm goes awry. The industry as a whole has been keeping an eye on the self-driving concept (III), but Google picking the Lexus RX450h for its testing could give Toyota (TM -1.1%) a leg up.

    How Google Can Avert the Next Financial Crisis (Bloomberg)

    Apple (AAPLscores a tactical victory in in the California theater of its legal war with Samsung (SSNLF.PK) when Judge Lucy Koh allows a 132-page Samsung document comparing the original Galaxy S with the iPhone to be used as evidence. The document provides a feature-by-feature comparison of the devices, and often suggests the Galaxy S needs to be more iPhone-like. (previous)

     iPhone Caused “Crisis of Design” at Samsung (Memo) (All Things D)

    Seven Tricks Your Mind Plays on You (and How to Fight Back) (Lifehacker)


  49. Europe with full recovery into their close – almost straight up since our open.  


  50. Oops, didn't mean to hit submit.  Anyway – so why is Europe up?  Because bad news is good news – they just HAVE to bail us out with news this bad:  

     

    Europe's Output Slumps

    Industrial output in the euro zone showed worrying signs of retreat in June, with Spanish production declining for its 10th straight month and German output weakening even more than expected.

    Keep in mind we topped out yesterday at 12:30 on a push up after the EU close so let's see if we can top yesterday's highs of 13,215, 1,407, 3,028, 8,049 and 806 before we start drinking any Kool-Aid.  


  51. MRX – Oct/Aug $35 Calendar.  83c  Earnings today.  So might be a bit volatile.


  52. Who will take the Blame for the possible world depression? The Oil trading scam continues with the help of our Media. 8.3% unemployment here, demand is down. We are exporting products but the media doesn't read the Government Inventory Reports, but just Hypes a phoney number. We are refining more than we are using, but some how manage to show a draw. Now here is how Sharon Epperson reporting todays report. Now remember she may work for CNBC, but she is really working for GE Energy. The higher the cost of Energy the more GE makes.



    Now the facts in the inventory report. this is what they are bidding up the price on

    Over the last four weeks, motor gasoline product supplied has averaged 8.7 million barrels per day, down by 4.2 percent from the same period last year. Distillate fuel product supplied has averaged 3.6 million barrels per day over the last four weeks, down by 2.8 percent from the same period last year. Jet fuel product supplied is 3.6 percent lower over the last four weeks compared to the same four-week period last year.



    Wednesday August 8 Government Inventory Report



    Summary of Weekly Petroleum Data for the Week Ending August 3, 2012 



    U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ending August 3, 36 thousand barrels per day above the previous week’s average. Refineries operated at 92.6 percent of their operable capacity last week. Gasoline production increased last week, averaging just under 9.3 million barrels per day. Distillate fuel production increased last week, averaging 4.7 million barrels per day. Over the last four weeks, crude oil imports have averaged 8.9 million barrels per day, 453 thousand barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 457 thousand barrels per day. Distillate fuel imports averaged 71 thousand barrels per day last week. Total motor gasoline inventories decreased by 1.8 million barrels last week and are in the lower half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 0.7 million barrels last week and are below the lower limit of the average range for this time of year. 



    Remember imports of Crude is aslo down from last year, by almost a half of million barrels a day. But SCREAM DRAW


  53. Sept 15 SDS calls.  47c. 


  54. I offed a PCLN 600 Aug put so I can hold the Oct 540 for now.
     
    Nice job everyone though. With PCLN (like CMG), we needed a hell of a lot of patience. But inevitability is inevitability.


  55. Good morning all!  Been away from the computer this week with the birth of our second son, but glad to come back to a portfolio that is up almost 10% since last Friday.
    Phil, one of my first buy/writes when I started my subscription to your site was buying DIS at $36.05 selling Jan $30 puts and $35 calls for $8.55.  With DIS popping to $50.48 this morning and the puts at $.13 and calls at $15.00, if I am understanding correctly my max gain is $7.50 ($8.55-$1.05) and I am showing that I my position has profited $734 in total, with dividends collected for the past 18 months.  Do I just exit here and take profits or sit tight, earn my dividends for two more quarters, and let the position be called away come January?  This is the first or 5 or 6 buy/writes and also the first to attain close to max profits.
    TIA


  56. Amazing calls on PCLN Phil and lflan, very much appreciated.  I grabbed the next week puts for $1 with 10% of my profits.  Now it would be great if someone comes out with a big downgrade.  


  57. Europe -  When the house has burned down and 'democracy' can't purchase social order ("the consent of the governed") anymore, social order will then be imposed..  see article from Hugo Salinas Price.


  58. Phil / FAS:  Doing anything with the $90 Calls? or hoping for a pullback?  Thanks.



  59. Hugo – and more to the point, he says Europe has already burnt down, and austerity and democracy are incompatible.


  60. Phil,
    I have a 3-way of TZA as follows:
    Bought Sept 19 call: 1.85, now 0.94
    Sold Sept 21 call: 1.24, now 0.60
    Sold Sept 15 Put: 0.30, now 0.37
    Would you take off the 21 call in hopes of a market tank or leave it on and see how it plays out?
    Thanks


  61.  Bio D Chris
     
    You are brave.
    I am ashamed to admit I did not follow the play book on PCLN. I may be
    the only idiot here with a current loss on the position. I still own  the 10/2012 550.00 P and sold the 08/12 600.00 Puts. I tried to buy the Augusts back yesterday, but apparently not hard enough. I had an order in for $ 3.70, and
    $ 3.90 was last trade. Today is another story. I was thinking of setting up a bear put spread or rolling out the puts to Oct 525 ( or 500’s), you can have my puts, I wish I owned something else now, That is what makes a markets…Thanks for the poker lesson last year in Vegas!
     


  62. Hello All – Any CHK longs still holding or getting out now?  TIA


  63. AAPL ex-div day:  8/9/12 ($2.65), no  premiums for weekly ITM calls. would you suggest a trade? 
    TIA


  64. If anyone is in the LIFE Aug/Sept 45 calendar….how do those look now?  Any pull back into next week's opx and these will be very pretty.


  65. Now that's a crappy auction….


  66. Oil/John – Nice review, thanks.  Back to $94 now.  

    SDS/Pharm – Great idea with SDS at $14.55 – it was $18.26 in June and we'd be thrilled to split the difference around $16.50.   Let's go for 20 of the SDS Sept $15 calls (now .49) in both $25KPs and we'll risk .10 ($200) with a stop at .39 to make $2,000 with any luck.  

    Congrats RPeri!  On DIS, earnings were spectacular and now they are over $50, that may become the new floor outside of a market collapse.  So you have a Jan buy/write at $27.50/28.75 with a call-away at $35 for a $7.50 profit and just the one contract I take it.  If you cash in at $50.50 and buy back the $35 caller $15.70 and the $30 putter .18 then you collect $34.62 so clearly it's not worth waiting 6 months to make .38 more.  If you REALLY like DIS long-term, you can roll the puts and calls out to the 2014 $40 calls ($12.30) and $40 puts ($2.70) for net .88 and then you raise you call-away $5 for .88 and you net $4.12 more for another year – IF ALL GOES WELL – and collect another .90 in dividends over 18 months.  Since I'm sure you can find better things to do over 18 months than make $5 on $34.62 (14%), it does make sense to take the money and run and wait for the next good sell-off to pick up a bargain on.   Don't forget, you're 6 months ahead of schedule on DIS so, even if you have to wait 3 or 4 months before finding a good opportunity to put this $3,462 to work – you're still ahead of plan as you only started with $2,750.

    Thanks Bruce – good portion control. 

    Great article Scott.  

    FAS/Mjj – Not hoping… planning.  

    Farrell/Diamond – Do you find that reliable?  I find it interesting that we're still not technically overbought – just complacent:  

    NYMO

    NYSI

    VIX

    Oh it must be 12:30 because we're selling off.  

    3-way/Ging – Congrats on that!  Haven't had one of those in many years…  8)   Easy answer to these is, if you're going to be bullish – be bullish.  The short puts seem safe so nothing to do there but now's the time (before you are down 50%) to roll the calls lower and you can drop to the Sept $16s, which are $1.50 in the money, for $1.15 – seems worth it to me.  That puts you in the $16/21 spread at net $1.76 and you're pretty much 100% in the money and, that being the case, I'd buy back the $21 calls for .65, which brings the net up to $2.41 and then you just have to make sure you sell the $18 calls ($1.33) before they fail $1 (if it goes against you) so you are in the $2 spread for net $1.41, worst case.  If all goes well, TZA pops and you can sell the $21 calls for over $1 on a move back up (down on the RUT).  Of course, you don't have to wait for the stop – we have our highs now and you can simply cover if we break them but, otherwise, be patient.  

    PCLN/Randers – You are not in such bad shape but next time, .20 is not something it's worth risking earnings on.   The Oct $550 puts are now $26 and the Aug $600 puts are $34.  I don't know your original price but this is about recovering your loss at this point so why not just roll the $600 putter to the Sept $580 puts at $32.50 so you spend $1.50 to make a $20 improvement in position.  From there you should be able to roll into a reasonable October vertical if you have to and you can cover a big move down by picking up the next week $515 puts, now $1, as that will buffer a sudden hit on more bad news – consider it the cost of insurance for the week.  A more aggressive move would be adding 1/2x the Oct $500 puts at $11 and rolling the short puts to 1.5x the Sept $560 puts ($22.50) and that's about the same $1.50 out of pocket (plus the new puts) but now you've sold 100% premium in Sept and 2/3 of the position are well-covered by your Oct puts.  

    CHK/Ink – We got out last week as we expected a rougher ride.  Not too interesting at $20 with the low VIX.  

    AAPL/Ed – I don't mess around with dividend plays – it's priced in by people much smarter than we are.

    The good times for dividend income - 402 of the S&P 500 are making payouts this year, the highest since 1999 – could end in 2013 if current law nearly tripling the tax rate on divvies to 43.4% isn't changed. Instead, look for the money to shift from payouts to buybacks, says Howard Silverblatt.

    Another poor auction on the 10-years.  TLT dropping to $125!  

    The Treasury sells $24B in 10-year notes at 1.68%. Bid-to-cover ratio of 2.49; indirect bidders take 40.6%. Direct bidders take 5.2%.


  67. randers - Don't beat yourself up. Remember that no one has any idea which way the market will go on earnings and its pretty mucha  gamble. I had to take several beatings before making PCLN work.
     
    Poker – Phil how about a multi-table tournament next time at PSW-LV2.0?


  68.  

    Buy Neutrinos

     
    By Barry Ritholtz – August 8th, 2012, 12:37PM

     

    Must read article in Spetember edition of Wired Magazine on How Wall Street Got Addicted to HFT. In light of the JKnight Trading snafu, Wired decided to post it on line earlier than suual.

    Here is an excerpt:

    “Faster and faster turn the wheels of finance, increasing the risk that they will spin out of control, that a perturbation somewhere in the system will scale up to a global crisis in a matter of seconds. “For the first time in financial history, machines can execute trades far faster than humans can intervene,” said Andrew Haldane, a regulatory official with the Bank of England, at another recent conference. “That gap is set to widen.”

    This movement has been gaining momentum for more than a decade. Human beings who make investment decisions based on their assessment of the economy and on the prospects for individual companies are retreating. Computers—acting on computer-generated market trend data and even newsfeeds, communicating only with one another—have taken up the slack. Conventional economics views all this as an unalloyed good: It is axiomatic that all trades are a net benefit to the economy because they enhance “liquidity,” the ability of investors to buy or sell assets at the best price. Indeed, in 2007 the SEC instituted an ambitious new rule, the national market system, that opened the door to dozens of new venues for stock trading, but now that transaction times are measured in micro­seconds and prices are carried out to six decimal places, those opportunities have arguably gone past a point of diminishing returns.

    Source:
    How Wall Street Got Addicted to Light-Speed Trading
    Jerry Adler
    Wired, 08.03.12 
    http://www.wired.com/business/2012/08/ff_wallstreet_trading/all/


  69. AAPL recovered fairly easily from a -4% / 30 pt downward move. PCLN's move at 15% probably indicates more bleeding, (or get really lucky even and see an accounting scandal or some such nonsense sends this POS into the 300's).  I'm holding the Oct 540 put for now and probably looking to build up for more short term downside once IV settles down a bit (and I have the Aug 460's as part of the earnings play anyways). I like the Sept 515 timeframe and strike, but 9 bucks is just too much right now.
     
    I was considering some short term upside / dead-cat-bounce plays but at this point don't really see it in the cards.


  70. Pharmboy
    What do you think of QCOR   Questcor Pharmaceuticals Inc ?
    Thanks


  71. Poker/BDC – I would love to do a tournament.  I wanted to do it last year but I guess it was too difficult to set up.  I imagine we'd all have to commit money in advance or something but I'll be in Vegas between now and then so I'll see if I can get some details.  I don't think PCLN is all that bad – just overpriced and not so much now as they were.  It would take another 20% drop before I hit the buy button though…

    12:00 PM On the hour: Dow +0.12%. 10-yr -0.02%. Euro -0.28% vs. dollar. Crude +0.43% to $94.07. Gold +0.16% to $1613.25.

    1:00 PM On the hour: Dow +0.08%. 10-yr +0.02%. Euro -0.25% vs. dollar. Crude +0.42% to $94.06. Gold +0.36% to $1616.45.

    Generally flat Treasurys dip a bit after a 10-year note auctionbroke a streak of recent record low yields by coming in at 1.68%. The current when-issued 10-year yield +0.02 to 2.74%; 10-year +0.02 to 1.65%; five-year +0.02 to 0.73%; two-year +0.01 to 0.28%.

    The buyers who stampeded to buy 10-year Treasurys priced to yield 1.46% at July's auction are absent today (at a 1.68% yield). Today's bid-to-cover ratio of 2.49 fell far below last month's 3.61, and direct bidders took down just 5.2% of the total vs. 45.4% in July,leaving the primary dealers to mop up the restTLT -0.5%.

    Economist David Backworth is aflutter with what he sees as a Fed inching closer to targeting nominal GDP. Rosengren's open-ended QE comments yesterday suggest he too believes the Fed should focus on results (GDP growth) and not inputs, i.e. the size of the asset purchases. Some believe the move would incent the public to do the "heavy lifting" by altering spending and investment habits.

    Transmission breakdown? A chart from the BOE shows the wide gulf between its policy rate and what consumers actually pay. Nearly equal in 2008, loan rates are now several hundered basis points higher than the BOE's benchmark rate. (h/t Ed Conway)  - Same for our rates!

    The new hot items – securitizations of U.S. single-family rental properties – may be unable to get top credit ratings from Fitch, the agency identifying a number of performance/data issues (mostly relating to short operating histories). A number of firms - KKRBX,TWOOZM among them – have joined the rush to get into the residential landlord business. 

    More details about Starbucks' (SBUXpartnership with Square: 1) Pay With Square will be added to Starbucks' barcode-scanning apps. 2) Starbucks loyalty cards (25% of transactions) won't be affected. 3) The deal is U.S.-only (Square hasn't gone international) 4) ~1M people/week use their phones to help make Starbucks purchases. 5) Starbucks was approached by every other mobile payments firm before picking Square. In addition to Verifone, eBay (EBAY -1.5%) is trading lower.

    Bloomin' Brands (BLMN) soars 14.7% above its IPO offering price on its debut. Though the operator of the Outback Steakhouse chain hasn't wowed analysts with a debt load of $1.5B and a growth story that has already largely played out, it did book a tidy $100M profit in 2011. (S-1)

    Chevron's (CVX +0.3%) response to the fire at its massive Richmond refinery is criticized by residents puzzled at how a small leak quickly burst into a conflagration that sent hundreds of sick people to hospitals. While CVX won't comment on the impact the shutdown might have on the gasoline market, analysts say West Coast pump prices will soon pass $4/gallon. TSO +3.9%.

    AK Steel (AKS +5.2%) shares continue on a roll this week, posting their third straight strong gain after Monday's news that it will hike spot prices on flat-rolled steel products. Today, CRT Capitalraised its rating on the stock to Buy from Fair Value with a $7 target price.

    The plot thickens: The board at Best Buy (BBY +0.6%) wants to wait until after the company's earnings report release, scheduled for August 21, to send in bankers to talk to founder Richard Schulze's buyout team again. At the first go-around it became apparent that Schulze planned to lower prices at Best Buy without any major cost-cutting, a move that a private company could pull off easier than a public one. He would also like to Apple-ify the BBY shopping experience, a la JCP's Ron Johnson. - These are, of course, my suggestions.  

    Three lunchtime reads:

    1) Watch out for a correction — or worse

    2) Revisiting the U.S. baseline

    3) What is the economic policy uncertainty index really telling us?


  72. Let's go with 10 V Sept $120 puts for .83 in both $25KPs – fully intend to roll and DD if the opportunity comes but, at some point, some analyst will realize that SBUX, all by themselves, just knocked about $3Bn in transaction revenues off of MA & V, which is roughly $45M in fees (assuming 1.5%) out of $8.5Bn for both (0.5%) but those 0.5%'s add up when MCD and others start using it.  I expect DIS to sign up and many fast food, vending machines, movies (anything teenagers do)….  This is just the first hole in the dyke…


  73. Phil-BDC
     
    Thanks for the tips, next time I will execute a wider moat strategy. Experience is the name we can give to our mistakes..


  74. Phil / I'm holding a $15 CHK Jan 18 put that I sold a couple months back. So far, there is a 3% gain. Saw some folks talking about CHK and wondering what i should do with this position? Thx!


  75. Phil, BBY must have good numbers to report. The board wants a higher buyout and options for them, of course.


  76. What is "Square"? are they owned by someone?


  77. Oil/ nice bounce on PP
    Bought shorts back
    Waiting to reenter if we fail PP


  78. QCOR/qcmike – well, we loved them in the teens and twenties.  Their Athcar gel for infant epilepsy is stellar and making boo-koo bucks.  One trick pony though, and it is hard to keep it up.  I know Sabrient likes them.


  79. On the treasury auction – the bond boys hedge things with the yield curve, so those that bought at 1.49 probably also hedged that out with shorter duration treasuries to make sure that they could absorb any movement.  I still think they break north and head to 1%….just need time.  Isn't Japan already there?  Adding to my TLT Sept/Aug 130 calendar for 79c.


  80. V – it looks like earnings will be around 10/25, so maybe the Nov's are better? But then again, you'll be rolling/DD but either way you'll probably want to have something in the game for an earnings miss.


  81. Phil,
    Is almond milk really worth 38% on Dean Foods (DF)?  Short?
    Thanks


  82. I'm a sucker for XLF calls as an inflationary hedge/speculation — they just seem so cheap to me. Bidding on a few more Mar13-17 calls. 


  83. My FXE Sept 22 $120s are up 17% today, Euro not happy all of a sudden.


  84. RIG not buying this rally.  RIG has been a money machine on the weekly calendar wheel.


  85. Phil/JRCC
    Earnings tomorrow
    Would you change your position at all?
    Like selling long Put and buying it back after earnings with lower vol?
    Keeping SEP short puts.
    Thanks


  86. morx: Growing very fast – may enable phone payments
    http://squareup.com
    Square: Accept credit card payments anywhere with your iPhone, Android or iPad


  87. Phil,
    how about a bear put spread for Jan 2013 on Dean Foods (DF)?
    Buy the 16 put for $1.20
    Sell the 12.50 for $0.35
    maybe sell a $20 call for 0.50
    all in for $0.35?
     
    Thoughts?


  88. LLY – I hope everyone shorted the bejeezers out of them.  With the PFE/JNJ miss on their Alzheimer's drug….and LLY already missing…they are gonna get a scalping.  Sept 41 Ps.


  89. LNKD/lflan – you mentioned covering the 100s with sale of 115 calls..and if i recall correctly, then uncovering on a pullback? Watching to see if/when this turns..


  90. WMT B/W called away early.
    I have a good problem similar to Rperi. Did a B/W on WMT on dip in March 2011. buying for $52 selling Jan 12 52.50 P & Cs for 5.80. Rolled the Cs in Sept on another dip to Jan '13. Ps expired in Jan 12. Now my caller exercised early (TYVM) so I collected all the premium early. I was going to roll the caller again in Jan to go out another year or two  as it is a company I was counting as a planted tree because I see it being around for quite a while. 
    WMT currently is beyond what I think is its value (price does not always equal value to me) and with the low VIX, I don't find any puts I want to sell right now. I use the TWIL list and have added some other companies, but so many of my target companies are above my value/price that I don't have anything to do. So I think cash is the way to go and patiently wait for another opportunity. Unless you have a suggestion. I'm very cashy right now.
    Thanks again for teaching me how to grow a long term income portfolio through patience. 


  91. Bloomberg: "The $84 Billion Business of Going Back to School"  I would help underwrite a PSW Academy in NYC, Phil.  Spread the wealth, spike the bots, as it were.


  92. I think I am unwittingly making decent returns selling WFR Calls when they spike and selling back when they fall back to earth.  What started off as 20 Jan 14 $3/5 Bull call spreads has produced a few hundred $ a month.


  93. Huge, strange volume on the deep ITM AAPL calls for Jan 13, and also Jan 14.  Any idea what it means?


  94. WFR/rperi.. what calls are you selling? i don't see much premium unless you go out to 2014,,  jus the same 2014 $5 calls each time? or…?


  95. PeterD RUT Spread?
    Just wondering if anyone got filled for 0.675 on the spread he listed yesterday.  It was selling the RUT 875/890 Bear Call spread.  I have a offer out there to sell it for 0.65 from yesterday, but no fill.


  96. rperi/WFR
    Well pointed. I have just entered the following
    WFR JAN 13 2/3 BCS short 2 PUT for 5c on a $1 spread


  97. yes out to 2014, but the $4 calls. I seem to sell 20 of them at $.55-$.58 and then sell them back at $.42-$44.  Commissions accumulate but I still net about $200 each time.  maybe it's just the sellers taking what they can get.  I usually get fills closer to the bid then the ask


  98. ACI has been extremely fickle lately.
    Has anyone had a fill on the SBUX roll down to the 2014 $40 puts yesterday?  I offered $6.45 and the mark is $6.475 and still nothing.


  99. Phil/EDZ – Do you like EDZ at this level?  TIA


  100. Oil short off 93.50 for 30c to 40c gain back to PP


  101. Burrben/RUT  - I have a sell order at .55, but no fill today.


  102. Phil,
    It would help me if you specify buy or sell with your put and call suggestions. Thanks


  103. Normally I would scream, "SELL SIGNAL!" But today we will get a stick but a solid sell signal.


  104. If this S&P action continues much longer, wouldn't this look like a consolidation for a move higher?  My rational mind tells me to be bearish, but technically this is starting to make me think a previously unthinkable move higher.  Any thoughts?


  105. 53M @ 3pm?  Did the KCG debacle take other bots offline?


  106. TRGT….um, pay attention, cause here it goes.  LLY, PFE and JNJ all lost the Alzheimer's products….will they move back up?


  107. AVEO…doubling down on the stock I have.  Jan 7.5/10 BCS is under $1, and selling the 7.5 pts makes it free, or net credit.


  108. broken stick or mr stick???


  109. jabo BOTH!


  110. SPY 141…here we go! (That is the measured move FWIW).


  111. Flying back to Jersey now. Big chart might not be posted until tomorrow early morning.


  112. StJ – I'm gonna burn that Big Chart. 


  113. scottmi/2:22/LNKD……I'm glad you brought that up.  We were about  $700 up on that trade a couple of days ago and I considered taking profits, but was distracted by PCLN and other things I suppose.  Today the trade is down about $700, demonstrating the negative value of distractability.  Anyway, for the portfolio it isn't a large position, and it has another 6 weeks to mature, so I think I'll just leave it alone for now. 
    Speaking of PCLN, what a fun trade that was.  And educational too.  We established a short straddle on a Friday, then added an accompanying long strangle on Monday.  On Tuesday the stock moved up, the opposite direction we thought it should be going, so we bought back the short put for profit and added a second long put, creating a bearish position.  We kept the long call in case we were wrong, so as not to risk a huge loss on the short call if it popped.  The rest is history.  I have no new PCLN plays but I think selling calls is a consideration, as I don't think this sick puppy will get back up quickly. 
    I'm not adding any trades today and I may not be trading much over the next two and one-half weeks.   You know, vacation.  But I'm sure I'll pop in and out  and if I know myself I won't be able to resist a trade here and there.  Be careful out there!  


  114. Pharm/ LLY- did I see that you bought puts?


  115. Good attitude Randers.  

    CHK/Amalfi – I don't see them failing $15 so it's just a matter of if you have anything better to do with the margin than wait for the puts to expire.  CHK may well dip back to $17 but, as long as you don't mind actually owning them for net $14 – why should you care?  

    BBY/Rpme – As I said above, the plot thickens.  I never doubted they were worth more than $20, not sure why this particular Q will prove it but it seems the board thinks so.  

    Square/Morx – You should check them out.  Not public yet as they are funded by Twitter's creator, Jack Dorsey, who isn't short on cash and is now the CEO.  Last I heard, he brought in Khosla, Sequoia and Kleiner-Perkins but more for strategic positioning and financing the banking end (fronting money on transactions) than for operations.  They are still small and a very efficient operation, probably valued at $1Bn already but I'd say maybe on the way to a quick double after SBUX announcement (and I think they are giving SBUX a small slice – which is smart).  I think if you want to make a sideways bet on Square, you can go for VRSN, who does their back-end but, the way VRSN has been flying lately, I think that's priced in already.  

    Oil/Lionel – Yep $93 held up like a champ but a nice little sell-off, nonetheless.  

    TLT/Pharm – $125 holding so far.  

    V/BDC – If they don't fall soon it's not worth risking earnings.  I'm not expecting a miss, just a change in sentiment on their long-term prospects.  

    DF/Ging – You wouldn't think so, would you?  They were just oversold and way over-shorted so any good news caused a squeeze.  Earnings were very good – they made .30 after losing about that much last year and last year they were at $8 in Aug even with those numbers.  To me, I have no reason to short them and they didn't dip enough to be attractive before bouncing, so it's a stay away.  

    XLF/BDC – Will do great if we do get QE.  

    FXE/ZZ – You can tell from EUR/CHF that if that thing isn't propped up 24/7 – it's going down.  Won't take much to dump them back to lows.  

    RIG/Pharm – Rig count was down a bit overall but, long-term, still reasonable at $48.  

    JRCC/Lionel – Well, in the Income Portfolio, we just have the short 2014 $2.50 puts (now $1.80) and those are fine and in the $25KPs, we're hoping to justify our $1.50/$2.50 bull call spread on earnings.  I don't want to add risk to the small portfolios by selling puts as it would be too annoying if we get in trouble so no, no change in either position.  

    DF/Ging – See above.  What's wrong with them?  Your spread is fine if you feel they've still got problems that are no longer being reflected but I like to have some specific reason for shorting things so at least I know when my premise is blown – as opposed to "because they went up real fast".  

    LLY/Pharm – Oct $41 puts just $1.05 – seems like a good deal to me.  

    WMT/Tx – TYVM is right!  I agree they look a bit toppy and the low VIX means no fun selling puts either.  Very good attitude – nothing's on sale so why buy?  Although BBY may still be worth a poke – you can sell the 2014 $13 puts at $1.60 which nets you in at $10.40, which is almost 50% off and TOS says the net margin on that is just $1.40 so 100% return on margin and the kicker is – if they do get bought out – you are called away early again.  

    Academy/ZZ – I'd love to do it if anyone has experience in seminars.  As long as I can just show up and speak (way too busy to prepare stuff) I'm sure we can do very well putting things together.  I'm going to hit Barry's in October to see what he does but it's not a very complicated business model and very profitable from what I understand.  

    WFR/Rperi – Very rational strategy.  Amazing how they died today after that open but that is why we ALWAYS sell into the excitement – you can't let your feelings get in the way of taking profits. 

    AAPL/Esco – IPhone 5, coming soon baby!  

    EDZ/Ink – I always like EDZ at these levels.  We're short the Sept $12 puts in the $25KP and the Oct $12/16 bull call spread at $1 is .90 in the money to start so you can also just buy the spread with 300% upside potential and only sell puts if they drop below $12.  


  116. Short interest in the markets are at lows…QQQ short-interest is now its lowest since October 2000 and SPY short-interest its equal lowest since October 2007 and so ammunition for charging this market higher seems to be running out. This is even more highlighted by the 45% and 30% plunge in QQQ and SPY short-interest in the last six weeks alone.


  117. Nice oil playing Lionel!  

    Specify/Chas – Yep, people try that all the time but it never sticks.  I'd say stick to paper trading if you can't understand the context until you get used to it.  Or you can just ask if something seems unclear.  

    Cosnsolidation/Cdel – Yes but usually volume builds if you're going to break up – as opposed to diminishing.  If we break over, we break over but, until then, color me skeptical.  

    Volume/Rain – As I was saying… 

    Wow, PCLN $560!   $515 puts already at $1.60, not a bad bonus 60%.  $540 puts well past our original $25 target but c'est la vie.  

    Have a good flight StJ.  

    Great chart Pharm. 

    Can they close us green?  Just coming up on 60M Dow volume with 15 mins left.  


  118. OUt of the PCLN puts at $26.00 – thanks Phil!  Scored on two of your PCLN suggestions in two weeks…


  119. WFR 2014 $2.50 puts can be sold for $1, which is a net $1.50 entry.  


  120. Median wages are down … and down … and down.  All due to our service economy.


  121. Resistance is very strong and volume is vaporous. Two days in a row. Screams imminent breakdown, as the macro view is not stable enough for consolidation.

    No news to melt higher, plenty of potential for downside movement.

    The catch? Someone puts out a rumor and the market rallies on that – a la tradebot. Certainly possible on such thin volume. I'm playing OCT SPY puts to hedge the risk of short term breaks.

    As an idea for your Long Put list, YELP is at May highs and has a massive lockup expiration coming at the end of the month. I think it's screaming short at these levels. Waiting to position, as it may be in for one last squeeze as the big money pushes everyone out who positioned for that event too early. Also great hedge if market tumbles, because there is no way the market tanks without taking high flying tech hypes with it. Just a thought.

    Thanks as always for the great insight.


  122. Thanks Deano & Phil re square. Why didn't BBWS think of that?
    Deano, are you the train fan?


  123. Cheap SPY Aug 136 Ps for 15c.  Me likey ikey.


  124. Thanks for the reinforcement on patience. I did the BBY already. Also some AA, F JRCC. As a LT investor, I do some shorter term to keep me interested in the market so I can be ready on dips and pops. I follow daily and greatly appreciate your commentary on whats moving the market. 


  125. LLY/newt – Puts yes.  Phil's or mine.


  126. Still no volume, 62.8M at 3:55 

    You're very welcome Jerconn – great exit.  

    Wages/Pharm – Scary.  And they can't figure out why consumers aren't spending…  

    YELP/Joel – Good observations and good idea on YELP, let's take a look at them tomorrow.  

    Oh now – ALL red now!  


  127. Wow, here come the buy bots. 


  128. The 3:59 stick!


  129. BBBW/Morx – That's exactly the kind of thing we can throw some start-up capital at.  Also the good thing about having officers in California, where all the cool stuff is born. 

    SPY/Pharm – A bit aggressive perhaps.  Only a week + 2 to go but, for .15 – what the heck?

    You're welcome TX – That's just what I believe in, lots of boring, long-term trades and you can amuse yourself messing around in the front months.  

    Well, the S&P is up 1 (almost) and the Dow is up 7.5 and the NYSE is up 0.10 and now the SOX are up 1 too – quite the last-minute effort there.  Volume a total joke at 84M and doesn't seem to be clearing many imbalances, which would make a new low for the month. 

    Neither the S&P (1,399.5) or the RUT (798.3) futures made their levels in the end – bad sign. 

    A stick this late and this lame may indicate that "THEY" are running out of firepower.   


  130. Phil/Ink – I show the 25KPA short the EDZ Sept $13 puts, not $12.


  131. They are cheap puts, and if a shoe drops…they will do better percentage wise than the PCLN ones!!!  Unless of course, one bought 10 of the PLCNS….I did not as the risk was too much for my little, tiny account.  Hindenburg Omen has a clock on it FWIW.  Goes until mid Nov.


  132. So am I right that 4 of 5 indicators (except DOW) just closed for the second straight day above our "breakout levels"? Just wondering at what point I should be prepared to flip bullish, as ridiculous as that may seem.  I realize that volume is pathetic but participation has been an issue all year on both sides…


  133. Great chart pharm, I hope we get some downside action in the next couple days!


  134. EDZ/$25KP, Bolt – You are right.  This is why I don't like to put 2012 in the names of the puts – too many numbers get me confused.  Still a fine target and we can always roll 'em if not.  

    Incicators/Cdel – No because I've said we need to clear the Futures, as well as paint the numbers for the sheeple.  Still not there as we're fail on RUT and S&P and if we fail the RUT, I'm not going to count the NYSE either and the RUT needs 13,200.  As you say, the volume doesn't confirm the move so you can't be a slave to levels you set before gathering more evidence (see my Nobel Prize-worthy Microwave Oven Theory).  

    Of course, we still may get QE/Stimulus but, then again, that's why we're up here in the first place so will even the fact of QE be enough to fill the gap at this point?   BOE just punted this morning so now it's down to the Fed, who have said no in every possible way they could and would have to have an emergency meeting to put something in before September and we have the EU/ECB, the BOJ and the PBOC, who need to come up with a solid $700Bn between them (and it was the PBOC who already came up with half the $500Bn that's been kicked in since June). 


  135. And by the way, how ridiculous is it to expect QE/Stimulus with the markets back at multi-year highs?  

    Think McFly!  


  136. Morx – train fan – no idea what you're talking about, so I guess not?


  137. Pharm- thanks.


  138. CORN – The puts I sold have decayed nicely.  Now I'm considering selling some calls.  Next Ag report is Aug 10.  Does anyone have a feel for how much of the bad news is already priced in?  I'm looking at selling the $56 Sept. CORN calls, but wondering if that might be too aggressive.  Input appreciated.
    TRGT / Pharm – In your opinion, how does the bapinuezumab news effect TRGT ( if at all )?  http://goo.gl/1VF1W


  139. Burrben & stjeanluc,
    I got fill for 5 contracts for RUT 875/890 bear call spread for $0.55 ($1.16 for the 875 and $0.61 for 890).  The order for $0.65 credit is still open.


  140. TRGT/ryk – I noted them over a week ago on news that EnVivo had positive phase 2b data.  Well, TRGT owns the space, but EnVivo is ahead now.  I like selling the Jan 13 $5 puts.  One can also do that coupled with the stock and the 5 calls for an enhanced, but more risky trade.


  141. TRGT – Yup.  I added some on your initial call.  Thanks.


  142. VEGAS UPDATE—--45 registered
    need to get a count on number of people
    1. attending dinner on Saturday —-lvmoda will check to see if he can get a private room at Nobu, Caesars (last year cost was approximately $100 p/p)
    2. want to have an "easy going" poker  tournament after dinner—--atm have no idea about amount or set up
    please let me know asap as we will have to start this process early to accommodate the large group
    Thanks


  143. lvmoda / Vegas – 1. Yes, 2. Yes (what fun!)


  144. SAVI
     
    Sent you an email regarding the above
    Thanks


  145. Phil – An observation:  The last 2 after hour questions (latest 8/7, the other a few days ago) were never answered.  Also, as a non market hours player I realize the importance of taking care of the board during market hours; the real-time players need your expertise as the day unfolds.  Just a note for future after hours questions  I read the postings after 7p EST and again before my day starts the next morning 7am EST (4am PST). I review any advance orders I have in place and leave the market for the day (one of those jobs where I am 'not connected").   As for tonight, I have no questions.  I am executing the Income Portfolio Trades as I understood your postings.  TIA for your help.



  146. The mechanisms of PFE/JNJ drug (and LLY for that matter) make TRGT and EnVivo two of the better small players.  EnVivo is private.  Yes, TRGT failed in major depression as well as schizophrenia as those are very difficult to treat.  One had to try new ways to treat the diseases, and many will fail. 

    The JNJ/PFE (beta-amyloid plaques hypothesis) is a valid way to go, but unfortunately, many companies made drugs that looked promising (drugs…not antibodies like PFE/JNJ/LLY), but those drugs (small molecules) failed.  Why would a monoclonal antibody be any different?

    AVEO – there are some good things out on the company and their top line results here.  I will continue to buy the stock and sell options against those positions.  I do believe they are this years IMGN…..they also have some interesting things in the pipeline, although those are years away.  AV-203 is one of those drugs (BIIB licensed outside North America) and they are a perfect candidate to take this company out….


  147. Savi – yes and yes….and yes, and yes.  oh, one more thing….yes.  Viva, Las Vegas!


  148. And if I hear or see one more post about QE…I will puke.  READ MY LIPS…there will be no more QE this year by the Federal Reserve Bank….get over it.

    You know when everyone talks, breaths, sleeps QE…it is not going to happen. Much like the AAII survey on bears and bulls. When things are expected to happen, usually it is the other thing that does. EVERYONE wants QE…not gonna happen.


  149. Chinese data sends our futures 50pts higher, wonder if this bullshit will stick.


  150. http://www.sciencenews.org/view/generic/id/342896/title/Global_groundwater_use_outpaces_supply
    CTWS [div. 3%]; CWT [div. 3.4%]  http://online.wsj.com/article/BT-CO-20120808-709307.html?mod=WSJ_qtoverview_wsjlatest
    Note:  33 out of 34 companies listed are rated "overweight" by the analysts covering them.


  151. Well, home sweet home….

    They have to find a better solution than getting stuck in a plane for 6 hours…. Maybe put us under for the duration, stack us up in the plane and feed us some speed at the arrival. On the one hand, all that security stuff would not be needed anymore since we would all be sleeping so no chance of hijacking. On the other hand, rental car companies might object to renting cars to people coming out of anesthesia and on speed. Probably could not waive the additional insurance!


  152. And tomorrow's oil lines today:

    R3 – 96.51
    R2 – 95.61
    R1 – 94.61
    PP – 93.71
    S1 – 92.71
    S2 – 91.81
    S3 – 90.81

    Almost like knowing the lottery numbers the day before. Almost…



  153. MA & V/ Phil
    This is interesting, what I am struggling to understand is the hit to MA & V, as square readers will still use MA & V credit cards.  So is the hit a small % on the overall fees that credit card cos get on the transaction and not a whole loss of business?


  154. PHil – I followed your link to Square, and I'm a little baffled – on the merchant side, they want 2.75% per transaction, which at first glance is IN ADDITION to credit card fees.  So, what incentive would the merchant have to go with Square, aside from money in the bank immeditately whereas with the cc's the money comes in later?  And also if you have a sales force or fund raising force out there, Square guarantees you confidentiality plus the ability to manage the force – I"m not sure what the big advantage on the merchant side is…perhaps I'm missing something?  One the customer side, I can see that Square offers more flexibility, the ability to make payments from your mobile phone, but most merchants will pass on that extra 2.75% to their customers in the form of higher costs, so even from the customer side I"m not sure that I can see a huge advantage, tho I'm willing to concede I may be missing something…
     
    Here's more food for thought…if this is a disruptivbe technology, still these things take a long time to play out, and probably the demise of V and MA would be at least a couple years down the road, if at all.  First of all, they could well develop similar technologies to compete with Square and I'd be surprised if the do not do so.  Second, look at another so-called disrupter – solid state memory (Sandisk and others).  For a year at least one newsletter writer has been predicitng the demise of Western Digital and Seagate, who make the memory discs that have dominated PC's and notebooks til now.  So now you have Mac Air and Lenovo and Intel thin notebooks coming out using solid state memory that has the advantage that it starts up immediately and no moving parts, and yet Western and Seagate are doing better than ever…so obviously the disruption takes a long time to kick in…just food for thought, and perhaps I'm missing some factors here, would be curious to know what you think…


  155. Good Morning
    lol Pharm—thanks
    I have the short oct 10 puts on AVEO—-would you roll down and out? TIA


  156. Good morning! 

    I went to bed at 1 and the Dow was up close to 100 and then I woke up at 6 and the Dow was still up 50 so I went back to sleep and now it's flat – futures are getting completely ridiculous at this point and no reason to worry about things that aren't real. 

    Observation/JFaw – Sorry I'm on summer hours at the moment so after about 12 hours of work I sometimes drift off and have a life with my children.  I'm sure in the fall and winter you'll be able to get me almost all day again.  As always, you can reask a question I miss in the morning post and I'm happy to answer it.  

    QE/Pharm – And the BOJ just voted not to but the market rallied last night on low inflation in China (which makes no sense with gas and food unless they have a server Consumer recession on everything else) because that means they have room to ease.  It's AMAZING!!!  

    Paulson/Diamond – He sees the same thing I do in Vegas (but he has more money to play with).  

    Overbought/ZZ – Yep, there's already a mania in that sector.  It's such a good plan though – invest in fresh water and fracking so you can own and destroy the water supply at the same time!  

    Welcome back StJ! 

    Big Chart – Doing just what we'd expect it to do if about to fail.  Another week flat at the top would begin to look more like consolidation.  

    Heat/Diamond – Thank goodness it's not global warming!  

    Square/Checho – This isn't the square card readers, this is a direct payment from your mobile phone on a new account that bypasses the big boys.  I don't know where I read it now but their whole pitch is comparing their overall fees (about 2.75%)  to V and MA (about 3.5% once you add up all the misc. charges).  I think that's for smaller vendors though – no way SBUX is paying 3.5% – not even to AMEX.  

    Square/Jerconn – As I just mentioned above, I've read some stuff (somewhere) where Square makes a huge point of hidden transaction costs and claims V & MA add up to about 3.5% while they have no adds at all.  While I agree it's early to call for the death of credit cards – we're not playing for that, we're playing for this story to gain traction and cause a 10% or more repricing of the CC co's – hopefully in the next 45 days.  After that (after we cash in our puts), I will have no interest in the outcome anymore.  This is speculative, as is AMZN, as was CMG, ISRG and PCLN.  All we can do is read, put a few things together and guess on the outcome – sometimes we get it right and sometimes we do not.  


  157. Phil – I still think 2.75% is a huge percentage and outrageous, if they would take say less than .5% on every transaction they could own the market and then gradually raise their take…direct payment from your mobile phone is a disruptor but I don't think they are the first or the only…I thought what we're playing for is a big market correction and then these boys, such as MA and V and even PCLN would go down a lot more than 10%, anyway that's what I'm playing for until election season fever kicks in…


  158. Wheeeeee – Dollar just popped over 82.50 and now the Futures are negative. Oil $83.45, gold $1,614 (epic fail at $1,620), silver $27.91 (fail at $28.20), Copper $3.41 (fail at $3.45), Nat gas $2.89, gasoline doesn't care – still $2.979.

    Euro crashed from $1.238 at 3am to testing the $1.230 line now, Pound $1.564, Yen up sharply at 76.33 and that cost the Nikkei 50 points (8,955) and EUR/CHF has been driven back down to $1.2010 in what has to be the World's most reliable trade.  

    Jobs numbers at 8:30 not likely to change much.  

    Market timers are more bullish today than they were at the highs in May, says MarketWatch's Mark Hulbert. From a contrarian standpoint, this could mean trouble. The average stock market exposure recommended by short-term timers currently stands at 50%, compared to May's correction where is stood at just 42%. If these bulls get stubborn and dig in their heels, it's going be one heckuva run to the downside when they finally break. One caveat however: Watch the volume, if the bullish timers run for the exits too quickly, the any pullback will be modest at best. 

    As the S&P 500 moves inexorably towards the 1400 mark, the climb has been more on a "wall of hate" rather than a "wall of worry." Slower profit growth, weak U.S. data, a faltering global economy, the U.S. fiscal cliff and more fallout from the European debt crisis have all combined to make this one of the most defensive rallies in quite some time, says equity strategist Sam Stovall. The index is up over 9% since June, Stovall notes, yet four of the five best performing sectors are defensive in nature. 

    Housing permabears can no longer ignore the data: Home prices are up by the most in at least seven years. Among the many potential impacts: ~1M households regaining a positive equity position, and a meaningful decline in the number of newer mortgage delinquencies. The wealth effect from housing is 10x more than Bernanke's attempts to pump up the stock market, Josh Brown writes.

    Japan's core machinery orders swing to a 5.6% gain in June, after dropping 14.8% in May. The consensus forecast was for a gain of 11%. There's been no significant reaction from the yen.

    China's July CPI +1.8% Y/Y vs. consensus of +1.7%, previous of +2.2%. It's a 30-month low for inflation (chart here). July PPI -2.9% Y/Y vs. consensus of -2.5%, previous -2.1%.