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Friday Fakery – $188Bn Buys You a One-Day Rally

$188Bn!

That's how much money yesterday's rally cost.  Spain got the green-light on $123Bn from the ECB, most of which goes to just ONE bank (Bankia Group).  This news sent Bankia shares up 15% and did wonders for their creditors' stocks as well because, as we know, the best way to get money from a Central Banks is to owe a lot of money to other banks so – borrow, borrow, borrow if you want to survive the Financial Crisis.  Spain led Europe higher with a 4% gain on the day and hit another 1.75% early this morning before pulling back.  

Also in the Free Money train yesterday was Brazil, who initiated a $65.6Bn stimulus package aimed at much-needed infrastructure ahead of the 2016 Olympics.  This is a "just in time" thing for Brazil as 32 of 58 reporting companies in the Bovespa Index missed sales projections this quarter – the worst performance since Q1 2009.     

The Olympics have also greatly aided the UK's economy and July Retail Sales were the stars of Europe at +0.3% and August should be good too – it's September, October and November we're worried about.  The entire Euro Zone is clearly in a Recession, but it could be argued that it's the same one that started 4 years ago, which some would call a Depression – but not if they want the MSM to listen to them or to keep their Government positions.  

Even China is seeing declining exports, with August projected to come in at less than 1% according to ForexLive, who says "China's Government has underestimated the impact of the European debt crisis on trade flows."  As you can see from the chart on the right for California, China's export woes are hitting us on this side of the Pacific as well as total state revenues are 10% below projections with HUGE misses in Sales Tax – indicating an extremely beaten-down West Coast consumer.  

The state has avoided default by temporarily borrowing from state trust funds, but those accounts will soon need their cash back to continue operating. Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on. With tax revenue plummeting and the state already the second lowest rated credit in the country, if the independent credit rating agencies downgrade the state to “junk bond”, California will be short up to $18 billion and default.

California is roughly 10% of the US economy and about as big as Spain's $1.5Tn economy.  $28Bn may not seem like much as we are so used to such massive bail-out numbers these days but keep in in context of what they collect (about $50Bn, which is already $18Bn short (40%)) and you can see where the problem is.  Obviously California isn't going to be able to raise taxes by 40% to get even as the people who make the most money and pay the most taxes would leave the state.  Unfortunately, like Europe, California has been trying to cut their way out of a deficit and that is failing miserably as they have murdered the consumers.  Only the record incomes of top 1% people and corporations (who take advantage of cheap local labor and sell to other states and countries) are keeping them from total failure at the moment.

None of this, of course matters to the markets, which today are being kept afloat by a misinterpretation of Angela Merkel's comments in Canada.  While she did, in fact, say: "Euro-area policy makers feel committed to do everything we can to maintain the common currency.” – she also said: recent ECB decisions “have made it clear that the European Central Bank is counting on political action in the form of conditionality as the precondition for a positive development of the Euro." 

Conditional is pretty much saying no, or at least, not yet. What she's saying is yes, we're all for helping out, if Spain and Italy SUBMIT to German authority. Who wants to be the PM that finally hands control of their nation to Germany? By September? Not likely…. And, from the same article: 

Even so, Greece, on its second rescue program after triggering the crisis in late 2009, may run out of road at the end of the year. Samaras’s government probably can’t come up with enough austerity measures even if creditors extend the time line as his coalition wants, according to the Citigroup note. That means an end to international funding “looks very likely” after the next audit set for December, it said.

Nonetheless, we are very close to our breakout levels on the Big Chart so it may be that next week we will have to switch off our brains and flip bullish – for as long as our new levels hold up.  While our $25,000 Portfolios have been holding up this week – despite their generally bearish stance, we will have to capitulate and flip more bullish if our breakout levels hold up after the weekend.  

On Tuesday, I mentioned that we had to adjust our levels to account for the fall in the Dollar to 82.50 and we're right there this morning and yesterday the Nasdaq took our 3,060 line.  It remains to be seen if we can take Dow 13,464, S&P 1,428, NYSE 8,160 and Russell 816 and we have continued to add bearish bets as we test the top of our range but once we top 3 out of 5 of our levels – we just need to join the herd and cut back on the shorts.  

AMZN sure didn't work yesterday but we still love them short and, of course, our defensive longs from Tuesday are off to a great start with the FAS Oct $105/115 bull call spread (our favorite long) already $2.40 (up 20%) while the offsetting short BBY 2014 $18 puts have already fallen to $3 (up 7.7%) so the suggested combo of buying 2 FAS spreads for $4 and selling one BBY for $3.25 for net .75 is now worth $1.80 for a very nice 140% gain in 3 days – that really takes the sting out of this little move up for the bears!  

SPY DAILYThe 2014 SHLD $32.50 puts we had wanted to sell for $8 came in at $7.50 but those have already dropped to $6.50 for a quick $1,000 gain on 10 in our virtual Income Portfolio – also not bad for 3 day's work but we're in that one for the long haul.  The EWJ Jan $9 calls already gained over 10% (now .59) did the Sept $9 calls (now .37) and the combo of buying portions of 10 of the Jans for $530 and selling 1 BBY 2014 $18 put for $325 for net $205 is already net $290 for a very quick 41% gain – also a nice long-term bullish hedge as there's no upper limit to the gains.  

Obviously our trade idea on the Russell also did well as it popped 2% since Tuesday and that sent TNA up 6% and the Oct $55/61 bull call spread is now $1.32 in the money at $3, up a quick 20%.  Our idea on that one was to offset the then $2.50 bull call spread with the short Oct $42 puts at $1.90 for net .60.  The Oct $42 puts have fallen to $1.55 already so the net is now $1.45, up .85 from .60 or 141% – much like our FAS trade.  

As I said on Tuesday, it only takes 5 or 10% committed to aggressive upside positions like this to offset fairly sharp losses on the bear side.  We're about 2/3 bearish at the moment but, if we cross those lines – we'll quickly be 60/40 bearish by simply switching a couple of positions but, over the weekend, we'll risk a loss into today's follow-through and move to 70/30 bearish – our last stab before capitulating.  As you can see from David Fry's SPY chart – all the technicals already scream BUY!, but the MACD and RSI are very toppy and we still haven't seen this market hold up on any kind of volume so I remain – unsurprisingly – skeptical.  

Have a great weekend, 

- Phil


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  1. Oil Lines

    R3 – 97.98
    R2 – 96.88
    R1 – 96.13
    PP – 95.03
    S1 – 94.28
    S2 – 93.18
    S3 – 92.43


  2. Good Morning!


  3. I wonder if we might get a chance to buy a Greek Island sometime soon after they leave the euro. We could actually buy two, one for me and my centrist friends, and one for Phil and his socialists. Then, we run an experiment. Could be fun.


  4. Phil— I hear your point about the $188 billion, but isn't yesterday's rally a continuation and addition to the market that keeps on going higher? EVen some of the bears on the board seem to be capitulating now. I agree that the market is overdue for a breather. Still, I think the $188bl might only the beginning of the QE. Otherwise, you might be calling the top again. This market is nuts!


  5. Phil, how about a USO short?



  6. Talking about Bankia, only in Spain could you see this: http://www.youtube.com/watch?v=iop2b3oq1O0



  7. Good morning!   

    Nice gift to short oil at $96 (/CL) after burning us at $95.  

    USO Next week $36 puts at .75 are .30 in the money and I wish I could be more confident but let's start with 5 in both $25KPs.  


  8. In $25KPA – Let's go for 10 DIA $133 puts at .70 – just .05 premium and could be fun but stop at .50. 


  9. USO calls or puts?


  10. So much for the long DIA 133C + DIA 133P for 0.30.  It's down to 0.18.  


  11. I guessed puts for USO as the prices matched!


  12. Why is there a disconnect between oil and USO today?  Am I missing something?  Oil is down but USO is up



  13. The JNJ OCT 65P from the LPL is now 0.53 or up 33% from a 0.39 entry.  



  14. 25KP/ SQQQ – i believe Phil's update to SQQQ position yesterday was:
    "Rolling to Sept $38 calls ($2.55) for $1.10 and doubling down at $2.55. (Nas testing 3,060)"


  15. Nice 57M at the open on the Dow this morning but once again we peaked out and then the selling began – such a joke.  

    Islands/Barf – I've thought that through and I wouldn't want to be on any island that isn't protected by a navy when it all hits the fan – I'll be in the Socialist land of Jersey and we'll come visit you in Greece when we want to do some looting and pillaging.  

    Great note on Socialism by Barry:  

     

    During my last trip to Europe, I was aware of how modest the stress levels were, despite the EU crisis, the looming recession, collapse of the Euro, etc. Their extensive safety net meant that there was not a  ”Stressed Out Middle Class” or even a “Working Poor.” If you have health care, retirement, education, unemployment and day care paid for by the state — and a 70+% tax rate — you don’t sweat minor issues like continental recessions.

    In Helsinki, we got into a fascinating conversation within a small group of locals about that tax rate. The national and local income tax, real estate taxes, state sales tax, and then the VAT tax mean that a 70% tax rate (versus gross income) was pretty typical. That seemed astonishingly high to me. But someone pointed out that once you add in the costs of health care, student loans, retirement investments, etc. — all the things state pay for with that 70% rate — an American making less than $100k ended up with about the same 30% net as the Finns do.

    The difference is we have more stress than they do.

    There is a reason that the Nordic countries consistently rank as the happiest places in the world in annual surveys. Then again, the iPad — along with myriads other innovations — was invented in the US. Perhaps those stress levels have something to do with that . . .

    Shipping/Scott – Ah they joys of becoming a 3rd World country!  

    QE/Jabob – Well you can believe what you want and I might be wrong but I think we're up 140 S&P points since the QE rumors began and, so far, we've only had about $600Bn in G20 stimulus to pay for it.  10% of the markets is $4,000Bn so it seems to me we're on thin ice there.  Our rule of thumb is $10Bn per S&P point per 6 months (in a flat economy) and we're already a month out from the bulk of China's stimulus so we need more like $900Bn to justify 1,428.  So now the question is – will the US and the ECB come up with $900Bn faster than investors get tired of waiting for it?  I think not – for the many reasons we've discussed for two weeks.  But if you need it to happen tomorrow because the time-frame of your bets is that short – then I guess you have to capitulate and, if you make another bet next week that puts you in trouble 3 days later  - you may have to capitulate on that too.  If you have no bullish offsets – you may have to capitulate too.  I don't know what else I can say – your logic is that the most of the market believes the ECB and the Fed will fix things within 2 weeks and therefore I should believe they will because "everyone else does."  No thanks – I need some proof.  

    USO/Jerconn – Good call, was top of my list.  

    LOL IZega!  That's classic getting customers to join in – what can they do to them without looking like total assholes?  I hope that idea catches on here.  

    USO/$25KP, DC – Those were puts!  Thanks. 


  16. stjeanluc / 25KP – i thought phil said yesturday to roll the SQQQ to sep 38 for $1.10 ? am i wrong ?
     
    thanks
    david


  17. St Jean – sorry, that last post was meant to be for you.  Also AMZN roll from Phil yesterday was:
    "AMZN – Rolling to Oct $215 puts ($3.25) for $1.25."
     
    Thanks!


  18. AMZN / Aussie – Since we had the 210 from the day before (I could not update the sheets in the morning) we changed it to 220 in later. That is what I did.


  19. "SQQQ – Rolling to Sept $38 calls ($2.55) for $1.10 and doubling down at $2.55. (Nas testing 3,060)"


  20. Thanks Micro… I'll update the spreadsheet. I am in between meetings all week and I am having trouble catching up during the day! Next week will be calmer.


  21. With earnings wrapping up, the insiders are on the move, with $2.7 billion sold the latest week and $170 million buys.


  22. Phil:
    Similar volume as yesterday 65m, but muted (so far) response to higher dollar.


  23. Hey Phil,
    Any thoughts on GRPN? Its dropped quite a bit more than I expected and the whisper number I keep reading is $3.  I sold a $6 put for today for 30cents as per a trade idea you had posted on Aug and it is 14, and it is looking like I will be taking a major haircut.  Should I roll or just exit the trade completely, thoughts?
    Thanks


  24. Looks like they are buying up /DX today….Yes?


  25. The downside just can't seem to gain any momentum. Just get it over with! A 10% drop and we all can get happy and go long like the rest of the sheeple.


  26. I did a quick Pivot table with the 25KPA closed positions to see where we made our money and so far it looks pretty good. Obviously PCLN is the big winner but we have lost money only on 6 out of 26 stocks so far – AMZN, BBY, F, SDS, TZA and VXX. 3 of them are still in the portfolio so we could make some of the losses back.


  27. V looking weak


  28. File:2008 Top1percentUSA.pngBankia – That's the problem when you oppress the masses.  The more people you oppress, the more chance there is of some people finding a protest that catches on.  The way they keep Americans from doing it these days is we're all trained to blame the Republicans or the Democrats, who are pretty much 2 sides of the same coin, while ignoring the top 1% people and corporations, who are the true oppressors.  Notice how Occupy Wall Street was brutally put down last year – that one worried "THEM" and action was taken.  

    DIAs/Burr – Yep, didn't work so pull the plug, hopefully the $133 puts (now .80) get it back.  

    Wow StJ – that was a fast update!  

    $25KPs – So we're down for the week but positions way bullish now and we'll either be lucky or we won't.  I don't expect we'll dip much below $35,000 so still good progress for 2 months and we have plenty of ways to get bullish if this rally is going to extend.  That's the key to having a balanced portfolio – we'll likely pull the plug on EDZ, VXX, AMZN and V and then – PRESTO! – We're bullish.  See how easy that is?  

    USO/Ct – Oil is whatever oil is trading at but USO is whatever people buying an ETF think it's going to trade at.  Intra-day, they can diverge quite a bit (and we're happy to take advantage when they do).  

    JNJ/Burr – That's pretty good!  

    MoMo Money/Iflan, StJ – Really good job riding out the storm on that one!  

    SQQQ/Aussie – Thanks, I thought I had said that already, was just about to suggest the same again.

    Yen punched 79.50, must be buying Dollars as we're up to 82.70 and Euro down to $1.231 and Pound right on the $1.57 line and failing.  EUR/CHF kicking up over 1.2010 (stronger Franc) and you KNOW they hate that so we'll see who runs out of money first (I'm betting the Swiss do).   

     

     

     

      


  29. Pivot table for the MoMo portfolio. Very AAPL heavy and AMZN seems to be the problem child in this portfolio as well!


  30. AAPL flying to $644 and Nas not up much – not a good sign.   They are jamming it hard trying to get the Nas over resistance and CNBC has a guy pushing every possible bullish AAPL rumor at the moment – would be funny if it wasn't such blatant manipulation of the markets….  


  31. Amzn / StJean – Found it…thanks!


  32. SPY 142 it is….there may be some volatility, but there is NO way they are letting this sink now.


  33. Pharm – Mucho Gracias for SGEN and CELG.  Bright shining stars in my Day PnL.  Thanks again!  I owe you a drink at PSW!


  34. stj – will you be able to make it to the PSW meetup now that your company is sold?


  35. Options Traders

     
    When selling options, does the value of the option on expiration day reflect the differential of the strike and the value of the stock?
     
    For example, if a stock is trading for $10 and you sold an $11 option, would the value of the option if you wanted to buy it back be $1?


  36. My time-frame isn't short and I agree with you and think you will be proven right (that we are toppy here)..
    My point was more that yesterdays gain with the188bl "real" QE wasn't so bad considering the 140 points sice the rumors began.
    I am not telling you to believe anything.. that is not my logic?
    I think I am more surprised that there has NOT been any selloff in the market without QE3 or any other "real" substantial QE from the G20. So I think my logic is the same as yours.


  37. I'll update the Income and Strangle portfolios sometimes this weekend!


  38. Hi Phil Like the confusion on USO even up to a call can we have a simple sell or buy the USO weekly  put TIA


  39. Vegas / Nicha – Actually, the opposite is happening. They actually want me to work now… (I had to sign for at least 1 year) I have been having some really busy days and there will be a lot more travels as well so my schedule is really up in the air at this moment.


  40. stj – too bad :( . I really wanted to meet you!


  41. Burr – UR welcome.  Agreed.  Those two companies that have kept me afloat.  As have all the other biotechs.  First rule of Pharmboy….trade what you know.

    Being short is getting nasty…..


  42. Maybe next year Nicha…. I don't know how long I will survive in the "corporate"environment!


  43. Phil/Occupy  I think it had as much to do with apathy (I didn't go to any rally) and scorn from the right – including those demanding (they don't know it) less for themselves……


  44. Phil
    We get the morning trade and then the volume dies. Is that why the reaction to the rise in dollar is so subdued?


  45. AMZN
    can someone please lay out the AMZN trade in the 25k portfolio for me? I seem to be having a major stroke or something
    i know the 205's were bought for $4 something and then they bought some more at $3?
    Did we sell the $205's and buy the 220's?
    what is the total cost now?


  46. CELG – there are several ways to play this now.  Our call calendar spread is very nice, and I think it is wise to now milk premium on the down side target.  The 200d MA has been breached, but the supports are many on the way down.  I am going to initiate a Sept/Oct 67.5 P calendar spread for about $1.

    To protect the gains in the call side, one could roll down to the Sept 70s, but in the event of a move up (I believe the market will go for the final thrust of taking out the highs), we should stand pat.  Just don't let the gains get away, and for the above P calendar, start small and leg in.


  47. Jeez, I thought Marketwatch site was down showed all zeros for few seconds.  Is everyone sleeping?


  48. Thinking like 'THEY' would
    If I was 'THEY',

    I would be distributing/ offloading/ buying puts between 1360-1420 on the S&P so this stage in motion.
    From next week start the correction and get MSM nd Cramer and likes drum up 'Buy the F***in Dips'
    From Sept 1 get my puppets in the MSM streaam out with negative news and short the crap of the markets interntionally leading to a panic.
    This way I get more FREEMONEY from FED and ECB in the 12/13 meetings

    However If I were 'THEY' and I know from my sources that NO QE coming then

    Continue to goose the markets and blow technicals incl PSW bull levels so that people BUYBUYBUY and I dump dump dump
    And then enjoy one Helluva ride down

    No the question is which 'THEY' am I?


  49. Maya
    Phil
    August 16th, 2012 at 12:25 pm
    AMZN – Rolling to Oct $215 puts ($3.25) for $1.25.
     

    rpme
    August 16th, 2012 at 12:58 pm | PermalinkIgnore this user
    Phil, on AMZN, we rolled to the 210p yesterday.
    stjeanluc
    August 16th, 2012 at 1:21 pm
    This is an updated spreadsheet – on Tuesday we rolled the V puts to 125 and yesterday we rolled the AMZN puts to 210 at 10:30 or so. Hopefully I got everything now.
    Phil
    August 16th, 2012 at 2:46 pm
    AMZN/$25KPs – Still want to roll up but, since it's $1.50 to roll to $220 puts – that's the move off the $210 puts.  Keep in mind we are up 40% and 60% in the two portfolios so this is a gamble we can afford but we will take the loss if they break $246. 
     

    You will have to decipher!


  50. 25KP / Maya – The spreadsheet has all the transactions with the dates.


  51. Interesting chart – the value of a college degree during a recession!

    http://kaysteiger.com/2012/08/15/the-value-of-a-bachelors-degree-in-the-recession/


  52. Suicide rates: 
    U.S… M: 19    F: 4  
    Finland:  M: 27    F:8.6  
    Sweden:  18.7    6.8  
    Norway: 17.3  6.5 
    Denmark:17.5  6.4
    Seems women are likely to find life in the Scandinavian countries not worth living by a third more than U.S women.
    And the men in Finland are really depressed.
    So much for the Happiness of our Nordic brethern.


  53. This doesn't look like a great earning period:

    http://www.bespokeinvest.com/thinkbig/2012/8/17/final-earnings-and-revenue-beat-rates.html

    The second quarter earnings season is now completed, so below we highlight the final earnings and revenue beat rates.  Of the 2,278 companies that reported between July 9th and August 16th (Alcoa's report date through Wal-Mart's report date), 58.7% beat earnings estimates, while 48.4% beat revenue estimates.  The 58.7% earnings beat rate is the lowest reading seen since the bull market began in March 2009.  The 48.4% revenue beat rate was also the lowest reading seen since the bull market began, and it's well below the average revenue beat rate of 61.7% that we've seen since 1998.


  54. oh the horror…
     
    Facebook shares sagged 6.3 percent as it put millions more up for sale; the day's drop
    personally cost Zuckerberg $600 million.
    His net worth is now down to $10.2 billion.
    Short WOR @ 23 or sell $23 puts..for Oct


  55. suicide - A little light therapy could help….
     
    Buy PHG
     
    :)


  56. flip:  Its the same reason why suicide rates are low amongst the inner city poor yet crime and murder rates are so high.  You have some to blame for your unhappiness so you go out and kill them.


  57. Good Morning All – Saw this clip and thought it was funny. 
    Making a Deposit with a Wall Street Bank
    http://www.southparkstudios.com/clips/222624/the-importance-of-saving-money


  58. Phil,
    Need help adjusting AMZN short positions. Here are the details:
    Oct 160 for $2.45
    oct 180 for $3
    oct 210 for $5
    i have 15 of the 160s and 10 each of the 180s and 210s.
    Thanks for the help


  59. I'm doing a little GRPN with FB – Half off – only 18.95 (includes s&h)   :)


  60. KINK FLIP
    I remember reading in a college physc book that humans are predisposed to homicide or suicide. Most don't do either whichever way they are wired.


  61. Pharm – Q on the CELG Put Calendar.  Just to confirm, you are selling the Sept 67.5 and buying the Oct 67.5. 
    You're reasoning is that CELG will hold up in the short term which bleeds prem from the short front month, but by Oct you would expect a downside move which should increase the value of the Oct.  The trade will also benefit from a increase in IV.  
    Just checking.


  62. CHK- I have a short put- Jan14 $15. I have made  a fair rtn.- i am thinking of buying it back then selling another put with a lower strike and same exp.  Logical or just screwing around?


  63. Well, volume has picked up but now the VIX should be a zero by next Friday.


  64. shoot – I wasn't done buying yet (was looking for entry at 10 or so). Now the conundrum is do I wait for a pullback and risk it possibly going higher?


  65. shadow / suicide -- Although not formally classified as suicide (hard to prove), a large number of single occupant vehicular fatalities are believed to be suicides. From http://en.wikipedia.org/wiki/Suicide_methods#Vehicular_impact:  
    Some researchers believe that suicides disguised as traffic accidents are far more prevalent than previously thought. One large-scale community survey (in Australia) among suicidal persons provided the following numbers: "Of those who reported planning a suicide, 14.8% (19.1% of male planners and 11.8% of female planners) had conceived to have a motor vehicle "accident"… Of all attempters, 8.3% (13.3% of male attempters) had previously attempted via motor vehicle collision."[37]


  66. Some important dates to note:
    - Aug. 29 – YELP lock-up exp.
    - Oct. 16 – FB lock-up exp.
    - Nov. 14 – FB lock-up exp.


  67. lnkarri – good one!


  68. GRPN/Ging – I'm confused about what you sold as GRPN is $4.59 so I don't get how you sold a $6 put for .30.  - maybe a $5 put?  Anyway, no – we gave up on GRPN as they just look pathetic.  If you were investing long-term, that may be another thing as they are now (finally) somewhat realistically and they do have $1Bn in cash and no major debts but if you are betting they won't go to $2.50 – not a good idea.  If you are betting they turn around now, or in 3 months or 6 months – not a good idea.  

    /DX/Ging – Yep, you can see from watching the relationships.  

    Euro failed $1.24, again.  Pound failed $1.57, again.  Clearly currency traders have no faith at all in things being fixed in Europe – ignore them at your peril….

    LOL DC – let's hope! 

    6 of 26/StJ – I hate statistics like that because it makes me feel so much pressure not to decrease the winning percentage…  8)  That is the point, by the way – just try to have more winners than losers and, if all goes well, one of your winners gets a chance to run and pretty much wipes out the losers.  At the moment, our biggest loser is AMZN and that's the one we've chosen to focus on – as we did with PCLN when everyone wanted to bail and we stuck with it.  Too bad we missed CMG in there but we had PCLN in play and, because we manage our positions, we couldn't afford to have two dangerous puts at the same time due to rolling and doubling costs.  This is something a lot of people need to learn – portion control! 

    V/Ct – From that California sales tax revenue, you would think V and MA would be jumping off cliffs. 

    Keep in mind that, when the Dollar is going up, we are more impressed that our levels are holding.  Volume only 70M on the Dow at 10:30 after putting in 57M in the first 15mins so hard to draw conclusions.  

    Oil just bounced off $95.50 so now we wait to retest $96 or fail $95.50.  Playing .25s is silly when it's this volatile.  

    Value/Exec – I, for some reason, do not understand that question.  I think I want to say yes, if you sell a $11 short put for $1 and the stock is at $10.50 on expiration day, then the "value" of the option is .50 but the PRICE of the option can be higher with premium almost up to the last second.  Usually, you can't shake that last .05 until the last 5 mins before the close and, sometimes, not even then.  Of course, once you get used to being assigned, it's amazing how many times you can save a bit of money by just dealing with the stock on Monday.  

    Surprised/Jabob – I'm shocked but (and sorry if I misunderstood you) I see that as no more reason to capitulate than I do on AMZN's run to a p/e of 300.  The market can remain irrational longer than we can remain solvent so we do have to, at some point, take our losses and wait for sanity to return.  We did that when oil ran over $120 to $140 but we jumped right back on when it finally topped out and made back all the losses and much, much more. 

    USO/Yodi – It was BUYING a PUT, the next week $36 puts, now .85.

    Corportate/StJ – I haven't worked for someone else (not counting as a consultant) for over 20 years.  I couldn't possibly imagine going back to it at this point.  I imagine it's going to be a rough year for you.  

    Apathy/1020 – Actually the media grossly underreported the participation.  It was really catching on but then things got very ugly and New Yorkers in particular don't like to clash with the police, post 9/11.  That's what really killed it, Bloomberg did a very good job of diffusing it and then they very effectively boxed the protesters out of existence.  Also, the idea of a "leaderless" movement is stupid – people need leaders, with no one at the helm, they had no way to get re-organized in other locations.  Remember last fall, there were coordinated national actions to stomp out the movement in every city – quite coincidental, wasn't it.  Here's occupy Oakland being tear gassed just for gathering – barely made the news.  In fact, try Googling it and see if you can find evidence it ever happened from a mainstream outlet.  It clearly happened, the blogs are full of it – but barely a mention from the MSM.  THAT's what we should be marching about – give back our free press!  

    FB back near $19 – It's $2Bn a point – poor Mark!  

    Reaction/DC – I think the funds got a nice dump out at the open of everything they couldn't get rid of into yesterday's close so they are happy to float us through the rest of the day if they can.  I had noted yesterday that more than 50% of the volume came to the downside but the buying was strategically when the trading was thin and they got almost 1% out of it.  If it worked yesterday, they'll certainly try it again today – the question is whether or not there are still large funds looking to take money off the table into the weekend.  

    Oil back to $96 (/CL)!  Gotta keep shorting it until it stops working.  

    AMZN/Maya – In the $25KP we bought 5 at $4 and 5 at $3 for a $3.50 average on 10 and then we spent, I think, a total of $2.25 to roll them up Oct $220 puts, which are now $4 and we're in for net $5.75, so down 30%, which isn't so bad as the $2015s are $1.90 so, had we not rolled and doubled down, we'd be in the $205 puts and down 50%.  That's the point of scaling in and sticking with a put like this – you add more money when you need to and you always keep yourself in a position when a 30% move in your favor gets you back to even and you can scale back out to a manageable size again and then restart the cycle.  Unless something goes up and up and up on you with no pullbacks – you can ride out a pretty big move against you this way.  At the moment, the $225 puts are $5.10 so we need about a $5 drop, say $235 to get 1/2 out and back to 5 $220 puts for $2,875 after starting with 5 $205 puts at $2,000.  

    Thinking/Checho – Don't hurt yourself…  

    College/StJ – Sure but what's the value of having $200,000 cash you didn't waste on college and buying AAPL at $85 in a recession?  

    Scandinavia/Flips – You know, I'm going to give you that one.  The ones that are still alive probably skew the polls pretty happy since a lot of the unhappy people just kill themselves (which is kind of like Ryan's plan only in Scandinavia, it's voluntary).  Although it may be possible that the insufferable happiness of so many people in a Socialist state makes those that are unhappy much more so and leads to more suicides.  I was in Copenhagen one summer and I went into a club at 11 and came out at 2 and never saw the sun go down – that's cool but I don't think I'd want to see the flip side of that coin in the winter.

    Earnings/StJ – Shockingly bad, not much better than the worst of 2008 yet, again, not a word in the MSM.  In fact, if I hear one more person come on CNBC and talk about strong earnings, I'm going to be sick.  Essentially we are performing EXACTLY like Q2 '08 – all the signs are CLEARLY there but the market rallies on.  

    LOL 1020! 

    South Park/Ink – That one is a classic.  Couldn't stop laughing the first time I saw it.  

    AMZN/Japar – Well, the good news is it's a cheap roll but, in general, assuming you want to stick with it, you've got an $11,675 investment that's down to about $3,500  - that's not good.  Obviously, at a 50% loss, it's a really, REALLY good idea to cut your loses.  You didn't do that on any of them.  So pretty much you are down $8,000 on AMZN and you need to think about whether or not it's even practical to keep going.  That depends on your budget, etc.  but this may not be the kind of trade you should be making because, I assume, you had the $160 puts from before they popped from $195 to $233 on earnings.  Had you rolled up then and doubled down, you would have been thrilled with the drop back to $206 by the end of the month.  July earnings popped them (despite the miss) from $214 back to $240, then back to $228 and now $241 again.  There's no point in you adding more puts if you don't take them off when AMZN drops.  You have to have a reasonable place you will stop your losses and a reasonable place you will take profits or you're just flushing your money down a toilet.  I would take $5,000 and buy 10 Oct $225 puts for $5 and you should be THRILLED to make $2,000 and cut your net loss to $6.000.  If AMZN goes up THEN I would roll BEFORE I take more than a 30% loss and plan to DD at around $240, assuming it costs about $2,000 to roll there ($7,000) and they drop below $4, which would end up with 20 $240 puts at $11,000, or $5.50 each.  The Oct $240 puts are now $10 so I do like that plan but, of course, it's assuming there's no actual stimulus or AMZN doesn't have some particularly fantastic news and we don't pop 3 of 5 of our levels to confirm the rally.  Under those conditions, I'd commit the extra $1,500 (net of cashing out the junk you are left with).  

    Homicide and Suicide/Shadow – We should make an app that gets those people together!  

    CHK//Newt – It's always a good way to make money.  As long as it's worth it margin-wise, that's essentially the cornerstone of our Income Portfolio.  

    VIX/Rain – 13.92!  

    Euro barely got back over $1.23 at the close, Pound failed $1.57, Yen still at 79.52 with /NKD at 9,200.  Dollar 82.72 and I'm worried they can tank it to goose the close but AAPL over $645 is doubtful for today and it's hard to move the market without them.  Oil (/CL) hanging at $96.02 at the moment, but looks about to fail the line.  


  69. Hello All – For those of you older and more experienced than myself, have you ever witnessed a market more disconnected from the economic reality surrounding it?  For example, when I see that the IBEX is up 20% but yet unemployment is at 25%+, my brain just doesn't fully comprehend that.  I understand that stimulus(or heopes of stimulus) is responsible for that but still find it hard to accept.  TIA


  70. GRPN offering a new deal, shares at 75% off the IPO price.


  71. Rain – Let me know when they offer a groupon to Bora Bora for 75% off.


  72. Rather than take a loss on the DIA puts in the $25KP, I'd rather spend .45 ($450) to roll them to the Sept $129 puts (now .95) in both $25KPs.  


  73. I agree that AMZN is way over-valued. But seasonality is starting to be a factor when it comes to shorting them as they blow the doors off in Q4. 
     
    I kind of like being a pundit when I'm 100% cash. Think I'll apply for a job at CNBC – I have great hair.


  74. 13.46


  75. rainman
    If you have followed any of my mormon trivia, I have an accident story. My girl friend's Mom after all the family scandel, decided to hold up the LDS church she went to with a gun. She was supposed to report to gail that week. Sunday morning she left the house got on the main road and in less than a mile crashed at over 100MPH and of course died, no seat belt!
    Was classified as an accident, we disagree.


  76. gail is jail sorry


  77. How can AMZN puts lose 35c when AMZN is down?


  78. Just found UVXY (Ultra VIX short term futures), is there a 3x somewhere?  Check out the volume increase in this thing since the March reverse 1 for 6 split.  Tempting to buy some but it looks like another broken VIX POS.


  79. oburlacu / AMZN — Uh, the VIX is down 6.4%?


  80. S1 seems to have been a reliable short line for oil this morning…


  81. S1 / STJ  Thanks for posting the oil lines each morning.  Very helpful.


  82. Phil
    You know about tubes mentioned seing them in Japan. 2 more sold this morning, these were next cheapest 2. The picture is worth a look, what people will buy, not much use for these because odd pin assignments. I need to add more, I have 11 of the second read my discription down a little.
    http://www.ebay.com/itm/251127926840?ru=http%3A%2F%2Fwww.ebay.com%2Fsch%2Fi.html%3F_sacat%3D0%26_nkw%3D251127926840%26_rdc%3D1
    http://www.ebay.com/itm/EL-519-Extremely-rare-NOS-Ei-Yugoslavia-/251111698724?_trksid=p4340.m1985&_trkparms=aid%3D444000%26algo%3DSOI.CURRENT%26ao%3D1%26asc%3D13%26meid%3D1393693874889224380%26pid%3D100012%26prg%3D1022%26rk%3D1%26


  83. I'd like to dedicate this diddy to the "Restoration Hardware" CEO who just found love and got fired for it……..
    http://www.youtube.com/watch?v=MgFDv_4oKsw
     
     
    http://www.cnbc.com/id/48703371
     
    I could go many places with this one…but I digress…. :)


  84. Phil /  Any idea why the volume on /CL is so low this morning?  I can't remember seeing such low volumn.  Makes me anxious being short.  I'm going to close my position.


  85. Hello Phil
    Back in town.  Keeping track of you guys on the road tho.  Love to meet up with you if I'm around when you make it to Californication in Sept.  Sadly accurate assesment this morning on our once great state.  May the rest take heed. 
    On the shipping side…..no recovery in the West Coast ports.  all year long we have been behind last years levels.  Despite some news reports to the contrary….we are down a fair percent in overall cargo tonnage YOY and that ain't good.  A significant percentage of national import and export tonnage comes into and out of the twin Ports of Los Angeles and Long Beach.  If our numbers are down….it is a reflection of the entire economy.  The strategy/hope now is that we hold these minimum levels for the rest of the year.  Christmas rush and fourth quarter should make that possible.  Fortunately the Port of Long Beach has always been a well run, fiscally conservative organization so we are in good shape to weather an extended great recesion.  Not so for our twin Port of Los Angeles.  City run like LAX…county and city of LA running a huge deficit with no viable fiscal plan in place to respond.  The story of the entire state I fear.  I may need to visit the Ports of New York/New Jersey one of these days! 


  86. Phil/Value

     
    I think you answered my question.  But just to be clear, lets work with real numbers. 
     
    DMND is currently trading at $18.40 and selling the Sept $19 puts are bringing a premium of $2.35.  There is a differential of $.60 from the strike price of the option (19) to the true value of the stock (18.40).  Thus, $1.75 of the $2.35 is actual premium.  So the question was, if today were expiration day, the option should be trading at or very close to $.60.  Is this correct?
     
    If this is correct, I was also curious as to how fast the premium begins to decay as you close in on expiration day.  In other words, is it a linear decay or does it increase as you near expiration.
     
    Your previous response also raises a interesting question.  In you experience, is there any pattern to the movement of the stock the Monday after expiration?


  87. exec / decay — Theta decay chart  This should be burned into your brain or posted above your computer.


  88. It seems like, when the insanity reaches it's peak,  (as it seems to be now) that a negative catalyst is what is needed to change the direction of the market.  Anyone see something short of a natural disaster that might do that?  Deteriorating China data, German authoritarianism (is that a word?), and a poor US earnings season do not seem to have tamed the bull.  Or, will we be impatiently waiting all the way to Jackson Hole…
    Given the trend of the past few weeks the lower VIX should give us a nice (FU VXX!) stick into the close, after all the future is only 1 day away…


  89. Phil,
      Thanks. I'm usually pretty good at rolling (thanks to you) but it's just been tough recently for me to make trades. Fortunately I made some money on PCLN 510 puts to offset the AMZN losses


  90. At least it seems like a good sign that all the CNBC talking heads are bullish….would love to get a look at their personal portfolios


  91. QUOTE OF THE WEEK
    The hardest thing in the world …
    is to change yourself;
    The easiest thing in the world …
    is to fool yourself


  92. Phil / reserves — See, already backpeddling.  Yesterday it was about Iran, today it's about pump prices. Yes, related, but it's all about the spin.
     
    WASHINGTON (MarketWatch) – The White House had no comment on reports that the administration is considering releasing oil from the nation's emergency fuel storage to combat higher prices at the pump, said White House principal deputy secretary Josh Earnest on Friday. "As we have said for some time, a release of the Strategic Petroleum Reserve is an option that is on the table, but I don't have anything to announce further on that topic at this point," Earnest said. The White House is carefully monitoring the global oil market and the global price of oil, he said. Leaders of the G-8 industrial economies agreed in May to coordinate as needed in the energy market, Earnest noted. Retail gas prices have risen to just under $3.70 a gallon this week. That's up from $3.39 a gallon a month ago.                   


  93. Oh, that explains it. Silly me.
     
    Gluskin Sheff's David Rosenberg says numerous factors have driven the recent risk-on trade:

    Upward revisions to U.S. second quarter GDP and third quarter estimates.
    French and German GDP beat expectations
    There are more pro-euro comments coming out of Germany and there are rising hopes of an European central bank (ECB) intervention.
    Earnings are no longer negative and have been turning mixed, especially in the tech sector.
    "Dividend payouts remain impressive."
    Even though hopes of QE3 have dwindled there is a sense that the People's Bank of China can ease monetary policy further, which has helped commodity research bureau (CRB) commodity index rebound over 10 percent.
    "While government bond yields have risen from their multi-decade lows, high-yield bonds have stabilized and as such, junk bond spreads have tightened in around 40 basis points in the past month to 590 basis points, and this is a much more important determinant of P/E multiples and gauge of risk appetite than the direction of yields alone".

    Read more: http://www.businessinsider.com/david-rosenberg-global-risk-on-trade-2012-8#ixzz23pJmIVAk


  94. Vehicular suicide/Rain – That's interesting.  

    Disconnect/Ink – It's similar to what we had in 2008 but it could be argued that, in 2008, we didn't know any better so at least that was sort of an excuse except before that we had 1999 and that was kind of ridiculous from a value perspective but the World wasn't falling apart at the time, we were just overly optimistic.  This is a combination of being overly optimistic and ignoring the reality of the World around us – a pretty powerful combination.  

    Seasonality/Bird – Maybe but I'm happy to roll back to Jan if they aren't down in a couple of weeks.  

    AMZN/Obur – VIX dropping faster than anything else and, in the end, it's a supply and demand thing.  

    Ultra-Vix/Rain – I think UVXY is a long VIX, the short refers to the term of the contracts it's covering.  I THINK.  

    Tubes/Shadow – You're selling those?  EBay is amazing, you can find the most obscure stuff there.  

    60%/Rain – But it's priced in at about 90%.  

    Restoration/1020 – I didn't watch the videos but the whole story is interesting. Nothing really inappropriate, other than dating a co-worker, but he ex-boyfriend, who had something to do with securities – made a huge issue of it, calling the board members and every paper that would listen and just made the whole thing so miserable he ended up resigning over it.  

    Oil volume/2can – Probably because they can't find any real buyers at this price.  No one really wants to short into a weekend either but next week is rollover and look at gasoline – down all day – does that make sense?  What do you think is more real – the price of gasoline, which is being delivered tomorrow, or the price of oil, which is delivered next month?  XOM and CVX and XLE all down too, OIH barely flat – so oil is magically rallying all by itself and all the traders of all the things that are connected to oil are selling.  Boy those guys must be dumb – OR – maybe (gasp!) those guys at the NYMEX are faking it!  

    Thanks for port update Living.  I'll let people know about CA when I firm up dates with Ron for meetings.  

    DMND/Exec – Yes, exactly right.  There are formulas for rate of decay but I find that to be a waste of time since moves in the VIX and sentiment change it anyway so there's no real science there that you can count on because your values don't remain steady.  Also, of course, the stock price changes and that changes the premium along with the contract price so the whole thing is a tremendous waste of time other than saying you sold $1.75 of premium over 5 weeks so you should expect to pick up about .35 per week to be "on track".  And no, there's no pattern but if, for example, I had sold AAPL $640 calls for $2.50 and they are now $5+ and maybe they don't shake a .25 premium into the close, I'd take the assignment and hope there's a pullback on Monday rather than buying them back since I think the move up is a little overdone.  If I'm wrong on Monday and AAPL is $650 – then I take my $10 loss on the stock and sell the Sept $670s for hopefully $10 (now $8 but we're assuming AAPL is up $5 on Monday).  Keep in mind that I sold the calls for $2.50 and, if I'm right and AAPL falls below $640 on Monday – then I'm even on my short position and I keep the $2.50 as well.  Goes back to the same thing I say all the time – if you only sell puts on stocks you really, Really, REALLY want to own long-term and only sell puts on stocks you really, Really, REALLY want to short long-term – you have many options to adjust and a lot less worries.  

    Impatience/Cdel – Well, our last 2% pullback was two weeks ago and since then we're up 3% and people think it will take an asteroid hitting the earth for the market to sell off.  

    I really have run out of ways to respond to these questions.  We're up 5% in 3 weeks overall but there was a 50% pullback in between – I wouldn't even call it impatient for the people who can't wait anymore – it's simply a lack of instant gratification.  We took positions in the Income Portfolio back on June 4th and pretty much haven't touched them.  They are near 100% bullish and the market went up and we did nothing and then it went down and we did nothing and now it's up and we're doing nothing – BECAUSE IT'S LONG-TERM!  What is so tragic about taking a position and sticking with it?  You can't day-trade your entire portfolio – it's insane….

    Now, speaking of the Income Portfolio:  

    We're in 20 TZA Sept $16 calls (not $18s was a typo, the $18s were half that price) at net $2.58 and they are down to $1.73 and we can spend $1 to roll them to the Oct $14 calls ($2.72) which gives us another month of insurance and a $2 better strike for $1 

    SQQQ is also the wrong roll (from Tuesday's adjustment) as the Sept $44 calls were only $1.50 that morning, not $2.30, that would have been the $42s, which are now $1 and we're in 20 for net $2.50 and we can spend $2 more to roll to the Dec $37/53 bull call spread at $3, which puts us in for net $5.50 and the plan would be – if the Nas takes off, to lock in gains by selling something like the March $25 puts (now .35) for about $2 and spending that $2 to roll down the spread.  Somewhere between here and Nas 3,400 – there's probably going to be pullback. 

    40 VXX Sept $19 calls are now .14 and those were a gamble at .45 so we don't want to turn it into a bet so we'll leave those alone and see what happens next week.  


  95. Thanks Rain,
     
    That's what I was looking for.
     
    And that my friend explains why selling premium is where it's at.


  96. livingfull – Great insight!
     
    Phil – I'm sure the first video puts a smile on your face!   :)


  97. Wow, one of the CNBC guys actually said it's ridiculous that comments by two Central Bankers drove the market up 24% and now the Aussie Girl is backing him up – could this be the sudden about-face in CNBC we've been expecting?  


  98. exec / premium — Yes, except with the VIX this low, and being so wrong on the bear side, I had to buy a DIA straddle.  Well, I don't have it yet.  I have an order in and "they" won't split a $0.2 spread with me!


  99. 30 years ago! – An Eddie Murphy classic showing he had incredible vision as well…..
    http://www.youtube.com/watch?v=w1TKGtai7og&feature=related
     
     
    Too bad he's no longer funny……


  100. I just bought a 95/90 Oct put spread on oil futures options for 1800. Risking 1800 to potentially make 3200. I will continue to press my bets on oil, this cant last. Hurricane season almost over, no demand, potential release of strategic reserves, etc…
    I also am doubling down with a UVXY play…I dont know how the vix doesnt go up between now and Sept 12th!?!!?! Insane…


  101. looks like the NASDAPPL is getting some tough resistance…S&P DIA look like they would be negative if not for this pump job. IMHO.


  102. That's a 0.02 spread.  Greedy bastards.


  103. Burr – yes, I am burning the premium from the front end, and want CELG to hold 67.5-70 range.  Since the deltas are almost even, we want that front end to get hit harder, and will take any profit b'f Sept OPEX.  The original CELG was a two month calendar to give the stock plenty of time to go back up, as they are range bound.  I expect one more push up.


  104. Pretty appropriate for an "impossible market to trade". Remove This Word From Your Vocabulary


  105. Anybody know of vacation rentals in San Diego?


  106. Phil tubes
    I have hundreds and every other component, half a room full. Solid state changes parts constantly and usually the frist is the only good one. Not worth the effort, I have a great class A amp, can't get the output transistors, the replacement sounds like, bad words! Tubes done right sound better and they hardly every make a new one, the old ones that are minutly radioactive last forever and very quiet. I bought every good and popular one I could find a long time ago. So I build a phono preamp with them and decided to start selling the ones I will never use. The ones I sent a link I would love to have more and use but $150 each and all I could find 3 so good by to them. They disappeared in less than 30 days when the factory in Yougoslavia closed down, too bad a great design down the "TUBE"!!


  107. They are just MILKING premium left and right.


  108. Nicha – the VRBO website has nice rentals throughout the country


  109. Pharm — Milking Premium


  110. jromeha – yes, I did check it out but when I contact the owners/managers of the property they are already rented. The response from them is that vrbo is slow to update.


  111. AVEO with another leg up.  Very nice.


  112. 2:37 PM Dennis Gartman says tapping the strategic reserves could have an unexpected result: higher prices. Sure, oil prices would fall at first, but without a distressed market as would be the case after an attack or natural disaster, the market would quickly expect the oil to be repurchased and replaced. And if a big buyer steps into the market, "speculators could drive oil to new highs." (also) (Read the comments on this)


  113. Nicha  -  Flip key is part of Trip Advisor, and handles vacation rentals.  You might look at them too


  114. What's with the RUT taking off today?


  115. /TF up almost 1% while the S&P is up 0.11% seems odd


  116. of course I am wrong. NASDAPPL plowing higher.


  117. jjennings / RUT — playing catch up on the 6 month charts.


  118. Pharmboy,
    Time to buy ALXA for 12/2012 PDUFA in EU?


  119. Rolling/Japar – That's a good thing.  You have to have a stop discipline.  A position is worthless when it goes below 50% and you should be POSITIVE, once it goes down 20%, that you are ready, willing AND ABLE to make the next necessary adjustment at 50% or you should just take the 20% loss and be done with it.  Imagine if you done that with the first AMZN position – you'd still have most of your money and now be shorting for the next cycle.  Of course, maybe your allocations are $100,000 per position and this is chicken feed but, if so, you wouldn't be going 15,10 and 10 when the proper way to scale in is 5, 10 and 20 (not to mention rolling in between).  

    As with PCLN, we'll be tracking our moves to the bitter end and, with PCLN, I think we were up to something like $11 per contract before we finally caught a break – that's just the nature of shorting the Momos but we had a plan and we stuck to it but your plan can't be randomly buying more positions and it absolutely can't be buying new positions without even salvaging 1/2 of the previous position.  Look at the difference, you began with $3,657 and had you stopped at 50% (doesn't matter what new position, you would have had $1,825 left.  Next you spend $3,000 and again, $1,500 should have remained before you bought your next 10 at $5,000.  That would put you in 10 Oct $210 puts at net $8,325 and,currently, they are down 50% at $2.50 so you are down about $6K.  

    NOW, assuming your original allocation was $12,000 (which it should be as you spend 25% in round one, right) you are down 50% of your full allocation and you can either pull the plug or decide to double the position (hopefully just to 10% but in our $25KP, for example, it would be moving to 20% to DD as we began more aggressive but that then makes it more likely we give up at this point).  If you are going to stick with it, you have $6,000 cash on the side and 10 $210 puts at $2.50 so you spend $1,500 to roll up to the $220 puts at $4 and then you DD at $4 and now you are in 20 Oct $220 puts for $12,000 and they are worth $8,000 so you are down 33%.  Considering you entered at $160 – being down 33% $60 higher is not really a terrible thing, is it?  

    There's a reason we only have 6 out of 26 losses in the $25KP and it's not that I'm a genius (although I am pretty good) – it's because we have a system and we stick to it.  It allows us to be right a little more than half the time but then WORK WITH our losers and turn half of them into winners.  We don't have to work with our winners – they are winners.  Take care of the losers and the winners can take care of themselves – gosh, I wonder if that would work with society as well…  Nah, too Socialist…  

    FB/StJ – ROFL!  The analysts who called them the next Google – in fact, everyone who had the nerve to say $100Bn and Facebook without the word "bullshit" in the sentence – should be taken out and shot.  What a total scam.  They arrest Madoff yet the people involved in this Ponzi scheme get to walk away Scott free.  

    Everybody plays the fool, Jabob.  

    Reserves/Rain – Who ever thought it was about Iran.  Iran is BS. So are pump prices for that matter but releasing the SPR sticks it to the speculators and THAT is a public service.  If I were President, every NYMEX expiration week, I'd announce a 10Mb release and then I'd buy them back into the crash.  Hell, they still have 74Mb of contracts that close next Friday, I could buy them all short – dump 14Mb EACH DAY out of the reserve (and I'm already guaranteed $96.50 for them) and collect $7Bn which I would need maybe $5Bn of to buy back the oil next week and I could put the $2Bn profit into my deficit fund (or my re-election campaign) or use it to outbid China for AONE.  

    Rosenberg/Rain – Is he flipping?   Maybe I am the last bear….

    RUT over 816 goal (go TNA!) but NYSE did not come along yet.  Nas is over too but we need the NYSE (8,160) or the S&P 1,428 or the Dow 13,464 to confirm.  

    Dow volume at 2:30 97M.  Back to normal slowness after the morning pop but what a pop it was.  

    Murphy/1020 – Yeah, he used to be so great.  

    Oil/Jrom – The key for the bulls is the very real possibility that they will stop using ethanol, which is 15% of gas so about 1Mbd of increased demand if that happens.  

    AAPL 1.5% is still 0.3% of the Nasdaq's 0.32% gain today.  15 of 30 Dow components are red – how is that risk off? 

    Tubes/Shadow – Better sell them fast.  I'm at the tail end of the baby boom and I'm hitting the end of my frivolous spending cycle over the next 10 years and the people younger than me are not likely to be super-interested in spending their money on components where you can't get replacement parts.  Better to put your energy into something that require a transistor you can buy for 2 cents and sell for $2 a million times.  

    Rentals/Nicha – Try Craig's list – they organize by who listed last so you'll see them right when they come on the market.  

    SPR/Rain – That is asinine.  It assumes that the buyer for the SPR is as stupid/evil as Bush and would buy back at any price.  We have never needed the SPR for anything and we have record commercial storage that combines with our 700Mb SPR for about 1.3Bn barrels and we import 8Mbd so that's 162 days of imports and, of course, we get 5Mb from Canada and Mexico and 1Mbd from our man Chavez so that leaves us with 2Mbd of overseas oil we'd need to replace (and we are the only country in the Americas that imports oil from off-continent) which means we have a 750-day reserve of oil – I think we can spare 30 or 40Mb without changing the Global dynamics very much and just consider the reaction we get to oil prices when there's a 3Mb build – we can add 3Mb/week for 10 weeks!   

    Also, look at the NYMEX strip – I can lock up 141Mb of oil for delivery next December at $95.63 a barrel.   That means I can dump 10Mb per month from the SPR between now and then and I've already got the commitments to deliver with ZERO impact on demand.  Actually it would be funny suing all the people who would fail to deliver because it's not possible to deliver 141Mb to Cushing – it only holds 40Mb max.  Today's NYMEX volume was about 350Mb – don't let anyone BS you that it would be disruptive if the Government wanted to buy 30M of those barrels over the course of a months (7Bn barrels of trading).  

    Wow, over 100M volume at 3:13 – been a long time…  Now we'll see how much selling comes in. 

    PCLN/Jabob – So what are they going to do, stop advertising?  It's wrong that GOOG can do this but they can screw any web competitor and good luck proving they are doing it.  


  120. TOS question, do PSW members get breaks on future contract commissions?


  121. And the news continues to be so bad, it must be good:  

    Forty-four states recorded unemployment rate increases in July, two states posted rate decreases, and four states had no change, the BLS reports. Nevada continued to record the highest rate (12%), followed by Rhode Island (10.8%) and California (10.7%). New York and New Jersey hit their maximum unemployment rates for the downturn.

    Consumer delevaraging continues, writes Sober Look, as banks easing underwriting standards on home equity loans, does little to stop the steady slide in loan balances. Not only that, but an increasing proportion of lenders view their home equity portfolios – even loans with high LTVs – as having sharply lower risk than a few months ago.

    The Fear Gauge Goes Quiet—Too Quiet (WSJsee also Stocks Approach Multiyear Highs (WSJ)

    Why are people overconfident so often? It’s all about social status (Barkeley HAAS)

    New rules expose bigger funding gaps for public pensions (Washington Post)

    The Treasury's move to help itself to all of the profits of Fannie Mae and Freddie Mac has indeed blown up a popular trade - that of buying up the preferreds in the hope the companies would one day earn enough to again make payments on them. One issue, the Fannie 8.25s, is off 59%.

    Can't get enough of the Treasury/GSE news? Behind the move, speculates ZH, is Tim Geithner's fury at FHFA head DeMarco's snubbing of administration plans to impose principal reductions on mortgages ahead of the election. More? From the Treasury PR: "(This ends) the circular practice of the Treasury advancing funds to the GSEs simply to pay back dividends to Treasury." Did Treasury just admit it was running a Ponzi operation?

    "The risk of default on municipal bonds in California is rising," says Moody's MD Robert Burtter, lead author of a detailed look into city finances there. "Across-the-board rating revisions are possible … in the next month of two." "Bankruptcy as a tool to extract bondholder concessions as part of a budgetary solution is a significant new risk for bondholders," says another report author.

    SEC Plans to Make the World Safer for Fraudsters, Push Through JOBS Act Con-Artist-Friendly Solicitation Rules (Naked Capitalism)

    A release of strategic oil reserves is not warranted by market conditions at this time, says IEA head Maria Van Der Hoeven, calling the market "sufficiently supplied" and reminding the stocks are there to bridge serious disruptions. Yesterday, chatter hit that the WH (or is it the reelection campaign) is considering an SPR release.

    Nomura joins the list of those sticking a finger in the economic wind and finding conditions aren't dire enough to prompt imminent further action from the Fed. The brokerage's team cuts the chance of QE3 being announced at the September FOMC meeting to 40% (40% being code for zero).

    China and India Lose Their Hunger for Gold (WSJ)

    Fiscal Cliff Crisis Rooted in Senate Ploy to Pass Bush Tax Cuts (Businessweek)



  122. IWM went up a little but the market did as I said yesterday sideways. I still say by Wednesday things will sell off because history keeps repeating itself. I am holding TZA until ???? to make it easy. Optional decay is what scares me and caused my last loss so this can wait until next month but I really think it will be next week. Waiting for the market to tell me what the plan is. FWIW


  123. Phil:
    Do you want to roll those USO $36 puts or DD before the weekend?


  124. anyone buying off the long put list today?


  125. I like that chart above, it simplifies things nicely, we collect 10% of our GDP less taxes than Germany.  That's a $1.6Tn annual gap because we pretend you can have your cake and eat it too.  That money has been funneled up to the top 1% and has created the largest wealth gap since the Great Depression.  This is totally insane – we live in this country but we're killing it.  

    TOS/JJ – Sorry, I have no idea what the new guys are doing.  

    Dow volume 105M at 3:37 – that's less than 5M in 25 mins – did we close early?  Should be another 40-50M in the last 15 mins – if it's down volume, like this morning's 50M was – then it will be 2/3 down movement and 1/3 up today (was about 60/40 yesterday).  


  126. USO/DC – No – you never know what will happen over the weekend.  Either we'll be happy on Monday or, if there's a spike up, then we roll it.  

    Long Puts/Newt – Plenty of good ones left.  


  127. Silver back to $28 on the nose – that's almost as good as 1.2009 on the Franc lately.  


  128. Long Put List: Absolutely.


  129. Nicha
    What dates will you be in San Diego?


  130. I'm confirmed for Las Vegas!! (as long as Savi indicates there is still room)!
     
    Looking forward to seeing everyone there!


  131. gerryf – arriving late afternoon on Oct 11 and leaving early morning on Oct 14.


  132. /DX collapsing. Something in Euro land?


  133. Dollar/Rain – No, just giving us that last-minute push, masking the late wave of selling by pushing the indexes up against the sliding Dollar while the pumpers turn to dumpers into the close. 

    Dow volume 111M with 3 mins to go..  

    Dollar 82.60.  


  134. Apple's 1.7% climb today pushes the stock to a new all-time record ($646.98 currently), and above a $600B market cap for the first time. As good an excuse for buying as any, speculation grows the company has begun production on an iPad Mini as well as the iTV.

    Problem solved. The Treasury issues funding rates allowing pensions to use a 25-year historic average (rather than a shorter time frame) of corporate bond rates to calculate expected future returns. The move adds about 200 bps to the average effective rate, allowing fund sponsors to cut contributions as much as 20%. 

     U.S.oil demand fell to 18.062M barrels/day in July, reports API, off 2.7% Y/Y and the lowest monthly usage since September 2008. "(It's) a strong indication the economy is still faltering," says API's John Felmy. It's not all a weak economy, though, points out Citi's Tim Evans. Consumers are buying more fuel-efficient autos, thus tamping down gasoline demand. - Don't forget we then turn around and export 1Mbd!  


  135. Nothing like the last minute push…..


  136. Have a nice weekend Phil. Maybe next week they will try the "other way" for change? :)


  137. Nice pop into the very end with Dollar dumped to 82.54.  

    Dow volume looking like 138M, maybe 140M by the time it stops.  

    That makes 6 consecutive weekly gains.  

    Have a good weekend everyone!  


  138. Nicha,
    Check sandiegovacation (dot) com   They have a few oceanfront condos open at around $700 for the three nights.


  139. Phil
    The last 3 sales were to 20 to 39 year olds. My age think they are rediculously expensive and maybe you don't know like record producers the factories are reopening here, UK, more in Russia and China.
    There are only 2 devices that don't product a staircase waveform, records and tubes. You can try to slide a transistor but very little is usable. They like to be on or off as in digital and a large protion of people know that. China builds more tube amps with tubes from their tube factories. Japan builds the solid state stuff and won't sell the good parts. Todays transistors are tuned for digital, good sounding ones cost way more, less available than tubes.
    You can't download a LP only a digitized verson. I have a few of  CD also and never has anyone chose CD over LP on my stereo. They never believe it until I remove the CD or shut it off. Last one 29 years old!


  140. One night at a bar, a conventioneer sits down next to an attractive women and orders a drink.
    The woman, apparently having already downed a few drinks, turns around, faces him, looks him straight in the eye, and says, "Listen here, good looking. I screw anybody, anytime, anywhere, your place, my place, in the car, front door, back door, on the ground, standing up, sitting down, naked or with clothes on; it doesn't matter to me. I just love it!"
    Eyes now wide with interest, he responds, "No kidding! I'm in banking too!


  141. MoMo – looks like EXPE Oct 50s would be a little better entry today. I didn't sell any yesterday. Do you think folks should have gotten out this morning or look for a better entry on Monday?


  142. those 645 AAPL calls I bought yesterday at 19 cents did well. Over 3, wow!


  143. LOL Shadow, I'm not talking about for Amps, I'm talking about coming up with some silly gadget people would like to buy off Kickstarter – per our conversation the other night.  You have skills but if you focus your time and effort on something that has a maximum return of 2 or 3 units a month – you severely limit your profit potential.  You need to step back from the test bench and think of something simple that would sell – like a decent plug in speaker/mike for the IPhone that can be used in cars and when sitting at your desk.  Something you have the knowledge to make that thousands of people would want to pay your for, rather than something that costs thousands that 3 people might pay you for if you can find them and get the financing and find the parts, etc. etc.   There have been many Billionaires in the electronic industry but none of them were craftsmen – these days it's about coming up with simple solutions that can be explained in a Tweet and sold for under $100.  

    LOL Pstas!  

    Nice BDC – way to start the weekend.  


  144. Barry's succinct summation of week’s events:

    Positives:

    1) Continuing the Draghi put rally, the Spanish IBEX trades higher each day this week and closes at 4 month high. It takes the Italian MIB index with it. 2) US Retail Sales bounce back in July after previous 3 months in a row of declines.
    3) Initial Jobless Claims about in line at 366k but below 370k for 2nd week and clean of July auto distortions.
    4) US CPI rate of change benign in July.
    5) July IP up .6% (but June revised lower) led by auto’s.
    6) NAHB builder survey rises 2 pts to 37, highest since Feb ’07.
    7) Multi family starts rise in July as do permits for multi and single family.
    8) UoM confidence in Aug ticks up led by current conditions at best since Jan ’08.
    9) India inflation less than expected, Sensex near 5 month high.

    Negatives:

    1) If Fed’s goal is to keep rates as low as possible, what do they do now if reason for recent jump is temporary calm in Europe? QE3 alive and well after voting member Williams says he wants it.
    2) NY and Philly mfr’g indices for Aug show contraction, Philly for a 4th straight month.
    3) Single family home starts down 35k in July.
    4) MBA said purchase apps fall for 5th straight week to lowest since Feb.
    5) Economic outlook within UoM confidence falls to lowest of the yr.
    6) Inventory to sales ratio within Business Inventories rise to most since Feb ’10 due to sales drop.
    7) PPI both headline and core rise above est.
    8) Euro zone Q2 GDP contracts .2% q/o/q.
    9) German ZEW falls to lowest of the yr.
    10) Japan’s Q2 GDP rises less than est.
    11) FDI in China falls for 8th month in past 9 in July.
    12) AAA says gasoline price moves up another .04 to $3.72, to the highest in 3 mo’s.


  145. Pharm- Springheel Jack posted an interesting TLT chart this morning- interested in anything your bond ghoul buddies may have in mind?
    http://www.screencast.com/users/springheel_jack/folders/1208/media/95669c9d-7fe7-423f-8144-966d425aa422


  146. Isn't it relative? If economies stink all over world, and the U.S. stinks less, does that mean we smell good? Money has to go *somewhere*, and hate them or not, the U.S. does have some of the worlds strongest multi-nationals. There's nothing inter-galactic available.
     
    Have a great weekend, not many summer weekends left.


  147. pstas – yep.  I read him often.  Bond boyz are loving it, as they were playing the curve.  I have not spoken with mine in a while, but until the EU and China subside, he said 1%.  I will find out if that has changed, but I feel not, as nothing has changed besides the Draghi put.


  148. Well crap…. So I guess I need to buy more tequila than usual?  Are we adding more longs??  I think I'm less annoyed with this market situation than I would have been several months ago, so thanks for that, Phil.


  149. Anyone have any good book recommendations? Need a new one to read while soaking up the rays in Santorini next week :-)


  150. Pstas
    I liked your joke, my wife and I happened to be in the bank when I read your post


  151. Book recommendation/jjenings – I enjoyed this:
    http://www.amazon.com/Conspiracy-Paper-Benjamin-Weaver-ebook/dp/B000QCS93W
     
    Its a great mystery novel that focuses on how far people will go to protect a financial bubble in the midst of financial speculation.  


  152. jjennnings,
    Check out the 'edge.org' Summer reading list:

    http://edge.org/conversation/summer-reading-2012
     
    That should do it for a week in Santorini – have fun!


  153. Phil, I'd like your help with my SVU position.   I've learned a lot of lessons since being a member the past year or so, but I'm still trying to correct some past mistakes around position sizing and scaling.  Here is my tale of woe:
    Back in November I did a buy/write with the stock at $7.25 and sold Jan 13 $7.5 C+P for $3.28.  Seemed like a safe cushion!  After a few months with stock around $5, I rolled the '13 options to the Jan 14 $5 C+P at a loss of $.43.  When the stock kind of hit bottom, I bought back the C + P for a loss of $.69 (the call was about gone and there was little premium in the put).  I also doubled down on the stock at $2.38 and sold $3 Jan 13 calls for $.29, hoping to slowly chip away at the loss.  So now I have a loss of $1.12 on the closed calls and puts and am down $2.48 on twice the initial shares of stock.  I believe SVU has hit some sort of bottom, but it's not a dividend payer any more (so much for buying dividends cheap!) and I can't see it rocketing back to $5 for a few years.

    My question is, can I repair this holding with a spread that gives me much of the upside without the still possible downside and all the cash tied up in this stock?   I am tempted to cut my losses on at least some of it because I hate staring at that big red number in my holdings page every day?

    TIA


  154. Phil
    What do you think of the November XLF 15 calls at .65? If there is a rally into the election, XLF lags the SPX and DOW.
    Thanks
    Strether


  155. Good morning!  

    They waited until the market closed but Reuters put out a nasty note about Q3 earnings

     

    For the second quarter, the percentage of companies beating revenue forecasts was the lowest since 2009. For every company that gave a positive outlook, nearly five companies gave negative outlooks, Thomson Reuters data showed.

    Third-quarter earnings estimates are down sharply, and now show a year-over-year decline of 1.8 percent, which would be the first quarter of negative growth in three years.

    Overall earnings growth for the second quarter looked pretty solid – 8.4 percent. But a charge taken by Bank of America (BAC.N) at this time a year ago skews everything. Take them out, and growth was just 3 percent, according to Thomson Reuters data.

    Investors said the results raise red flags for coming quarters. Early in expansions, earnings tend to strengthen as cost-cutting efforts boost profits – but revenues tend to catch up as demand increases later in the cycle. That hasn't happened in an expansion nearing its third anniversary.

    "What this is telling us is that the economy is slowing down, and that doesn't bode well for the bullish earnings expectations, which we are so used to," said Pankaj Patel, quantitative research analyst at Credit Suisse in New York.

    "Generally there's always a gap, but this gap is much wider."

    We may have to get more bullish next week but we'll certainly be doing it while keeping one hand firmly on the exit door.  

    Relativity/Bird – Yes the US may be the last house to be engulfed in flames that are consuming the rest of the neighborhood but does a wise man stay in the house or get the Hell out and wait for the first to go out before deciding where he'll sleep that night.  Multi-Nationals is the key word, we make 50% of our revenues overseas – the above article note that, FOR A FACT, earnings will be down from 3Q last year and we're up 20% from the TOP of that range and about 35% from the bottom (1,100).  Here's a guy pushing the bull case you might like:

    Why low volume actually is bullish, according to Ryan Detrick: Total-dollar volume is higher now than in the 2003-07 bull market, so how can bears say lower share volume is bearish? "As long as volume stays low and bears use it as ammunition for lower prices, just smile and nod your head, knowing this isn't true."

    He's saying, "sure the volume is low but so much money goes into AAPL, GOOG, PCLN, CMG that the dollar volume is flat" but doesn't that mean that the dollar volume left to everything else must be much worse than it would seem?  I have never said AAPL or GOOG weren't solid and worth their price.  Same goes for BRK.A and even PCLN isn't so expensive now that it's come down and I love ISRG and IBM but what does it prove if some stocks out of 9,000 are sucking up $40Bn (guessing but AAPL is confirmed $9Bn) all by themselves?   

    Longs/Rkyroma – No choice if we're popping our levels.  Glad you're keeping your balance – the wave is bigger than we though so we shift and adjust to stay with it, that's all…

    Santorini/JJ – If it were me, I'd bring Plato's Republic and Homer's Odyssey – whenever I'm in a new country, I like to read the classics from there.  Actually, before reading Republic, you might want to read Plato's "Death of Socrates" (short) as it's a good insight into Plato's mindset as he aged and composed the Republic.  Histories by Herodotus is a good read too.  Enjoy your trip!  

    SVU/Jet – You were doing good until you said "but it's not a dividend payer."  Nonsense!  All stocks are dividend-payers for us.  So you had 1x at $3.97/5.74 and you spent .43 to roll the puts to 2014 $5 puts and that turned the net to $4.40/5.45, which, as you can see, wasn't REALLY worth the .43 but that's OK.  Then you spent (?) .69 to buy back the put and call and that left you with just the stock at net $5.09 and you doubled down at $2.09 for 2x at avg. $3.59 with the stock at $2.34 so down $1.25 per share near as I can tell but maybe you mean you are down $2.48 per original 1x.  

    So, what's realistic?  We can sell the Oct $3 calls for .20.  That means it would take 6 sales like that to get back your $1.25 (x2) and wouldn't be too awful if called away as you drop your net to $3.39 with the sale.  Can we do better?  Well, we can sell the 2014 $2.50 calls for .75 and the $2.50 puts for $1.10 and that's $1.85 and,since the worst thing that can happen is you have another 2x put to you at net .65 – doesn't that seem like a no-brainer?  You actually should have done this rather than DD as you would have dropped your 1x at $5.09 to a new buy/write at $3.24/2.87 and you can still do that since you bought 1x at $2.09 and you can sell it for $2.34 and that's up .25 and that means you drop your 1x $5.09 basis to $4.84 and THEN selling the buy/write for $2 puts you to net $2.99/2.76 with a much more manageable amount of shares. 

    Yes, if you get called away at $2.50, you will be down .49 but now we're back at 1x and that's a LOT better than $2.50, isn't it?  It's a little counter-intuitive to sell calls lower than your net but, when we are behind, the most important thing to do is to get even – stop trying to "win".   You have your side money free'd up and you can still sell the calls and, if SVU goes over $2.50, then you can DD into the covered call to lock in your .20 for the month.  That way, you will reduce your basis to a winner with just 3 sales and everything else is gravy.  

    You've done a really great job of adjusting from a $7.25 entry to a near break-even at $2.50 – this is why we love the buy/writes – even the losers seem like good deals!  

    XLF/Streth – It's a nice gamble on possible QE but you don't break-even until $15.65 and that's up 3% which is 10% on FAS to about $105 and you can play the FAS Oct $101/105 bull call spread for $1.45 with a stop at .80 and risk the same .65 but this way you make $2.55 at XLF $15.65 as opposed to breaking even.  Timing's a bit different, of course, but you get the idea…


  156.  
     


  157. Phil
    What would be another good stock for a trade like the CSCO from yesterday trade buying Jan 14 calls and selling front month call?
    Thanks


  158. By the way, on Jet's DD on SVU – this is a point people tend to forget.  When you DD, in this example, on a $2.09 stock and it moves up to $2.34 – you just made 15% on your new entry and made up 10% of your loss.  There's nothing wrong with stopping out of the new 1/2 and taking the .25 off the table.  With any luck, the stock will come back down and you get to do it again but, as Hank Paulson likes to say:  "Don't let the perfect be the enemy of the good" – it's not your new $2.09 positions fault that your old position is down $2.50.  

    When you make a new 1/2 entry, especially if you're not covering it up, you need to treat it like any other new stock positions which means you follow the 5% Rule and set stops 20% below each 5% move (cumulative) so, when you make 15%, the stop on the new half should be 12% and it remains a trailing 3% until you hit 20%, at which point it becomes a trailing 4%.  These are stock rules, not option rules, of course but, if the stock you hold options on does that – then it's probably time to get out, right?  

    The trick is to identify a range for your stock and play it until it breaks – then you can sit back and observe the behavior until you feel comfortable that it's settling in to a new range and start again.  At the moment, we THINK we're at the top of the range on our indexes so we bet the way we know – if we break over what we feel should be the top with confirmation (3 of 5 and hold it for 2 sessions – not much to ask…), then we stop betting the old way and observe the action and test the waters until we get comfortable with the new range.   

    SPY 5 MINUTE

    SPY DAILY

    SPY WEEKLY


  159. QQQ WEEKLY

    SOCL WEEKLY

    XLI WEEKLY

    ITB WEEKLY

    IEF WEEKLY

    USO WEEKLY

    DBA WEEKLY

    EEB WEEKLY

    VIX

    NYMO


  160. Relativity / Phil – Oh, I'm not a bull by any means. I'm loosing my ass being a bear, and it *still* feels more comfortable than being a bull.  As I mentioned ppreviously, I was +30% for the year two weeks ago, and now I'm +5% and on the sidelines. This market is just too complicated for my little brain. I may be wrong – Lord knows that's been happening a lot lately – but MoMo looks safer to me than trying to guess when the next change in trend will occur. If Iflantheman wasn't on vacation we would all be rolling in our AAPL gains.
     
    If this thing cracks as badly as we all think it will, why not wait until this "rally" ends, then go short? I'm assuming a decline of the magnitude that we envision would persist for a while? I'm itchnig to be short, but I just can't fight the tape any longer. When it drops we can ride this thing like Major Kong.  
    http://tinyurl.com/9uu4lgr


  161. Does a Bullish Stock Market Predict a Faster Recovery?
     

     
    The way the monthly jobs numbers have been interpreted by economic and political observers, 110,000 jobs per month would be considered a losing number for Mr. Obama and 165,000 a winning one.
    It is ironic, given the occasional animus between Mr. Obama and Wall Street, that stock market prices are one of the better reasons to think the recovery could accelerate some in the next few months, making his re-election easier.


  162. Thanks Phil.
    Got it.
    Strether


  163. Phil/Exit Door – The Other Side?
    It was my good fortune to have setups which benefited from this extended run-up which now seems to have gone on forever. My portfolio is split between LT sold puts (stocks for a 20% discount), and LT artificial buy/writes with aggressive selling of front month puts and calls. A lot of premium selling, a lot of rolling, applying PSW principles of selection, entry and exits (still my exit strategies are found wanting far too often), but overall a more than satisfactory result.
    As the market continues to move higher (or the markets as it relates to my portfolio), your premise that there must be a 'significant' fall in the not too distant future starts to resonate more. I am certainly trying to locate the exit door.
     
    My question is what does the other side of the exit door look like? Yes, there is the Long Put list and the Disaster Hedges, as well as Cash, but I was hoping you could put it into a context of protecting a portfolio of say (for the use of illustration) $200k profits YTD. The artificial buy/writes all have LT sold puts which are more than 20% OTM – so one could argue that a 20% drop causes no pain, although it takes down the value of the LT bull call spread part of the equation. The short-term sold calls would expire worthless in a sell-off, the ST puts could be rolled (but would probably take a few months to recover depending on the magnitude of the decline. But I have that trepidation to avoid doing what is right in the face of the fear/greed battle going on in my mind.
    I almost came to the conclusion (but it seems too dramatic to be realistic) of closing most of my existing positions, then placing all the cash in buying long term (December 2014) SPY strangles. The Dec 14 SPY 130/155 strangle can be bought for $51.55, guarantees it can be sold for at least $25, so $26 of premium has to be paid off from now until December 2014. Selling front month calls (on the premise that 'market down' looks more likely than 'market up') on SPY. SPY Sep 12 145 calls can be sold for $0.80.
    I just want to keep the golden goose happy (but realise that slaughter is a better option for the goose than for me).  As always any help and suggestions you could offer would be sincerely appreciated.



  164. British guy who's lived in China as an student and entrepreneur since the 80's had decided he's leaving and pretty much airs out all his thoughts and griefs.    Its a fascinating read about what living in China is really like — especially the parts about the educational system.  It also plainly lays out the case why China pretty much can't become a globally accepted Super-Power that many people fear or hope it will become:
    You'll never be Chinese



    'The domestic Chinese lower education system does not educate. It is a test centre. The curriculum is designed to teach children how to pass them. In rural China, where we have lived for seven years, it is also an elevation system. Success in exams offers a passport to a better life in the big city. Schools do not produce well-rounded, sociable, self-reliant young people with inquiring minds. They produce winners and losers. Winners go on to college or university to take “business studies.” Losers go back to the farm or the local factory their parents were hoping they could escape.'


  165. Has anybody used the Sabrient area on PSW for stock ideas?  
    http://www.philstockworld.com/author/sabrient/
     
    It doesn't look like the "Gold Content" works anymore, and when you click on a stock, you get a 404 Error.  


  166. Back in black….


  167. Birdman, Ive had my best year (out of the 3 Ive been a member at PSW) this year. I think the key (and Phil has said many times) is to have a good chunk of your money invested in longer term plays (while also scaling in) and only do the swing/daytrading with 10% or so of yoru money. I have bought FTR, SVU, WFR, GLW and X so far this year when I thought they were near their lows. They all went lower and I doubled down. All positions now are fairly profitable and it is b/c I followed Phil's advice about scaling and focusing more on longer term plays… THat being said, I cashed out most of my longs and doubled down on bearish positions at the close on Friday. lol. Ill be PRAYING  to sweet 7lb 8 oz baby Jesus we get some sort of a pullback here!


  168. Steady she goes… All the Aug positions expired worthless.


  169. I've been doing some reading on Theta decay this weekend and I found this interesting.  Theta decay decreases with option moneyness, so ATM options will decay the fastest (the standard graph you see), but ITM/OTM theta decay slows the closer you get to expiration, and is fastest around 60-90 time frames.  
    Here is a good writeup and graph:
    http://sigmaoptions.blogspot.com/2007/03/what-you-didnt-know-about-time-decay.html
     
    Therefore, it might not make sense to hold shorts for those last 30days, it might make sense to close them out and put on a longer term position.  Just a thought.


  170. SVU/Phil  I appreciate your suggestions, but my situation is worse than your numbers.  Right now I have realized losses on the two short calls and puts of $1.12 plus my original 1X of stock is down $4.91, so my original $7.25 has now lost $6.03 and I've doubled-down on the stock and the new half is about even.  So my break even on the 2X of stock is $5.35, or 128% up from here.  I've got too large a position to put another short put in play and risk losing on that AND the 2X of stock.
    How about selling the stock and buying  the Jan 14 $2.50 call for $.75 and selling the Oct $2.50 call for $.25.  My total downside is $.50 instead of $2.34 if they go BK and if I can sell the call two more times, the long call is free and I have all the upside the stock has with no downside.  I can continue to sell more calls against it for a year.


  171. StJean/Income Portfolio
    I don't know if this was official?
    SQQQ is also the wrong roll (from Tuesday's adjustment) as the Sept $44 calls were only $1.50 that morning, not $2.30, that would have been the $42s, which are now $1 and we're in 20 for net $2.50 and we can spend $2 more to roll to the Dec $37/53 bull call spread at $3, which puts us in for net $5.50 and the plan would be – if the Nas takes off, to lock in gains by selling something like the March $25 puts (now .35) for about $2 and spending that $2 to roll down the spread.  Somewhere between here and Nas 3,400 – there's probably going to be pullback. 


  172. HI Phil, 
    I've just realized that I'm still unclear on how to  calculate my bearish/bullish percentages.  For example when you say we're 60/40 bearish switching to say, 60/40 bullish, is the percentage based on the risk of loss on each position or on the deltas?  


  173. Income Portfolio/StJ – Please not changes from 1:48 on Friday.  


  174. HPQ – Reports earnings after the close this coming Wednesday.


  175. Phil,
    I am truely trying to preform that dream thought. Even the USB light, thought of that with a flexable lead so you can point it at a keyboard instead of that lame idea on kikstarter, but how to get the flexable but hold in position tube produced? Nobody buys your idea, you get undermined trying to sell it. Remember the better bandage guy? I had many good ideas that big money stole. I had this great invention to stop ringing in the ears, made in Canada now and still blocked from Americans. I have talked to the guy for hours who brought it to market, he thinks I got screwed and offered to try to get me to Canada for my next idea. Will Canada accept me with my medical problems? Seems I can't get there from here so I have one buyer of my preamp and my tubes are selling on ebay. Today I got condemmed for correcting my mistake listing something as 4 for when it was pair is $$ have 4 total and fixed it. 1/2 of 1/2 price is too low and hope my 100% posative isn't blown.


  176. I'll update the Income portfolio now….


  177. I thought the George Friedman piece reproduced by Ilene/John Maulding was quite good.  If correct, which it appears to be, then logically Germany will preserve the Eurozone, at least to the extent it includes Spain and Italy [Greece is likely irrelevant].  It will continue to assume as little actual debt in doing so as possible, but will, in the end, preserve its advantage of having countries to whom it may export in the same currency, addressing Germany's problem of exporting more than it imports + defusing the traditional bellicosity among Germany, Spain and G. Britain [or England, if yoiu prefer].
     
    "Saving" Spain and Italy from its debts cannot be accomplished by having Germany pay them off, as it will not and perhaps cannot afford it, but Germany's trade advantages as an exporter can be preserved, and Spain and Italy saved, if the Euro depreciates enough.  Germany would not like a disorderly collapse, given the unpredictability of such an event and Germany's preference for order.  In fact the Euro/dollar has fallen in one year from 1.42-1.21 in a fairly orderly [linear] fashion, despite the apparent disorder of European political announcements and lurches in bailout policies.
     
    I would conclude from this that !/ Spain and Italy will not exit, 2/ The Euro will continue it's decline in order to alleviate [through Eurozone inflation] the Peripheral Debt load, and 3/ that Germany, kicking and screaming all the way, will act tardily but consistently in providing reluctuant debt support at critical market junctures until the Euro falls to 1.10-1.05 with the dollar.  This, looking at the slope of the last year, could take another year, although six months may be closer to the mark. The very gradually strenghening U.S. economy will help that process along, although with what result for U.S. equities I shall leave to others to opine.    


  178. Income portfolio is up to date. 

    We are in the VXX Sept 15 calls, not 19 as per the roll on 8/7.

    Also, Phil, the SQQQ December options are really thinly traded.


  179. BBY – potential transaction news – sounds like a dating spat:
     
    http://dealbook.nytimes.com/2012/08/19/best-buy-says-founder-spurned-chance-to-further-his-takeover-bid/


  180. Another typical hypocrite… Nothing courageous about Paul Ryan:

    http://www.latimes.com/news/nationworld/nation/la-na-ryan-gm-20120818,0,225505,full.story

    http://www.motherjones.com/kevin-drum/2012/08/paul-ryan-bailouts-me-not-thee

     

    This is, needless to say, quite a different thing. Ryan didn't take advantage of a program that had been passed over his objections. On the contrary: he fought hard for a corporate bailout of the kind he now says he opposes. But back when it counted, he didn't oppose it. He supported it. Just like he supported the Bush administration's wars, Medicare Part D, No Child Left Behind, and TARP, even though none of them was paid for.

    You might, of course, believe that Ryan had a genuine change of heart on January 20, 2009, and suddenly decided that the federal deficit was out of hand and needed to be reined in. Or you might believe that something else happened on that day. It's your call.


  181. stj
    I think something else!


  182. Hi Phil
    thanks for the AMZN puts explanation.
    those are not the type of trades I ever make, but I thought it would be fun to follow you AFTER you did the DD….and even then, I had to scramble to understand…..but, a free weekend is nice to read the posts and understand what I don't normally do…good for learning.
    i will do my roll tomorrow…
    and thanks! Hotel Del rooms are not that great but the beach is long and nice!
    THANKS AGAIN! 8)


  183. Good morning!

    Germany's Bundesbank warns that moves to share "solvency risks" in the eurozone should be decided by governments and not the ECB. The comments follow speculation that the ECB is considering intervention to cap the spreads between peripheral and German bond yields by buying unlimited amounts of government debt. It's a plan that Germany's finance ministry denies any knowledge of but says would be "very problematic."

    That's the story of the weekend so far.  Big rumor that was shot down this morning.  The rumor turned Asia up at the last hour and, while it had a quick effect on bonds – it wasn't doing that much for stocks because it was the worst kind of stimulus for the market as nothing would really come in – just the allowance of endless debt financing for countries on austerity budgets (think how silly that is):  

    Speculation that the ECB might take action to cap the spreads between peripheral and German bond yields causes those of Spain to plummet. 10-year yields are -28 bps to 6.17%, while the 2-year is -39 bps to 3.38%. Italian 10-year yields are -7 bps to 5.72% and the 2-year is -9 bps to 2.96%. With German bond yields rising, the spreads are narrowing.

    The ECB is considering capping peripheral bond yields by stepping in to buy the debt when its spread to German paper rises above a certain threshold, reports Der Spiegel. Draghi has complained that monetary policy transmission is broken, i.e., the ECB eases yet financial conditions tighten further in the periphery – this gives him his opening to buy government debt. A decision could come at the bank's September policy meeting.

    Dollar 82.60 – that can't be bullish.  Euro $1.236, Pound $1.571 – not very impressive and terrible if they fail those lines.  Yen hanging on to 79.50 and Nikkei still 9,200 after peaking at 9,240 to impress us into the close.  

    Gold looks like a good short below $1,620 (/YG), as does oil below $96,50 (/CL).  Silver $28.10, copper $3.38, nat gas still weak at $2.70 and gasoline back down to $3.03.  

    2:19 AM Asian shares are mixed, with Japanese stocks again boosted by the weaker yen and Hong Kong equities falling ahead of earnings results from over 300 companies this week. Japan +0.2%, Hong Kong -0.8%, China -1.2%, India closed.

    3:34 AM EU shares open with little clear direction, with any support coming from a weekend report that the ECB could act to cap peripheral bond yields. EU Stoxx 50 flat, London flat, Paris -0.1%, Frankfurt +0.1%, Madrid +0.2%, Milan +0.2%. 10-year bond yields: Spain -12 bps to 6.32%, Italy -6 bps to 5.72%.

    6:00 AM Overseas: Japan +0.09%;. Hong Kong -0.06%. China-0.38%. India closed. London +0.05%. Paris +044%. Frankfurt+0.53%.

    7:00 AM On the hour: S&P +0.08%. 10-yr -0.2%. Euro -0.09% vs. dollar. Crude +0.06% to $96.07. Gold -0.09% to $1615.85.

    The gap between bank deposits and loans is rising at the quickest pace in two years, coming in at $1.75T on August 8, when deposits stood at $8.87T and lending $7.12T. The gap is well above the $100B average in the 10 years before credit markets started breaking down. Banks are using the money to snap up U.S. debt, buying $136.4T worth this year, more than twice the $62.6B for all of 2011. It's unsustainable, says an analyst.

    "It seems like the [factory] sector is stuck in neutral," says RBS's Guy Berger. Several reasons are at play. "Japan is going nowhere, Europe is in recession, and we’ve got our own problems," such as stalemate over tax and spending, says MFR's Josh Shapiro, who reckons the chance of recession in the next year is 50%.

    A major reason for the poor economic growth over the last decade, says David Leonhardt in the NYT, is demography: the share of Americans of working age grew to 53% in 2001 from 52% in 1997. That compares with an 8 percentage increase between 1967 and 1997. With baby boomers retiring, expect that share to fall.

    Over 60 companies will undergo the "lock-up test" between now and the end of 2012, including Yelp (YELP), Splunk (SPLK) and Carlyle Group (CG). One assumes shareholders and companies hope the stocks will do better than those of Facebook (FB) and Angie's List (ANGI), which plummeted last week following the end of lock-up periods. For a list of expiration dates, see here

    With the causes of last summer's market volatility still relevant, the low level of the VIX, which closed at 13.45 on Friday, isprompting puzzlement. One reason could be that investors want longer-term hedges than the 30 days the VIX gives, while another is that they're sitting on the sidelines and so don't need protection. Others see danger – anything under 15 "is flashing red for us," says Schroders' Robert Farago.

    China is in good news is bad news mode (remember the 90s when a strong U.S. retail sales report could cause stocks to drop), as a better-than-expected report on housing prices sends Shanghai-0.4%. Strong data makes it less likely Beijing will ease policy. It seems trader dependence on central banks transcends oceans and cultures.

    New-home prices rose in 49 out of 70 Chinese cities in July, the largest number since May last year and well above the 25 cities in June. The increases follow two rate cuts and the introduction of incentives for first-time buyers, complicating the government's attempts to boost the slowing economy while curbing property speculation.

    "Fears of an unstoppable Chinese juggernaut are misplaced or outdated," writes Patrick Chovanec, urging to instead focus on a country stumbling badly and not knowing what to do next. How might the next President respond to a devaluation of the yuan, continued dumping of excess steel and other products, or even an escalation of military tension in the South China Sea (as Beijing tries to shift attention away from domestic issues).

    Caterpillar (CAT) CEO Doug Oberhelman gives a sobering outlook for the world economy, saying that while the prognosis is not as bad as at the start of the financial crisis in 2008, it's more uncertain. "The storm clouds are around things that none of us know about – like what will happen with the political situation in Europe," Oberhelman says.

    Japanese car makers face a sales cliff once the state subsidies that have driven revenues this year end. Sales jumped 53% from January-July but are expected to fall 20% in the next quarter. Toyota (TM) and Honda (HMC) hope new models will maintain demand, while Nissan plans to offer support to dealers. - So the comps have been against the quake numbers AND with stimulus.   

    More oil:  Saudi Arabia's oil output +3% M/M in June to 10.1M bpd, overtaking Russia, which pumped 9.9M bpd, as the world's largest oil producer, figures from the Joint Organization Data Initiative (JODI) show. Saudi exports +2.3% to 7.84M bpd, its highest since November 2005. Oil in storage -2.2% to 272M barrels.

    In addition to damaging the corn and soybean harvest, the drought is wreaking havoc with hay, sending prices surging and prompting ranchers to look for alternative food for their cattle. Farmers are also sending their animals to market earlier, causing prices to fall not just because of the increased supply but because the cattle is underweight.

    Could tablets eventually cannibalize smartphone sales? In spite of the obvious arguments against the idea – a tablet can't fit in your pocket, and holding one against your ear is uncomfortable – it'sgaining believers, thanks to the popularity of 7" tablets and Samsung's (SSNLF.PK) 5.3" Galaxy Note (just passed 10M sales), as well as video-calling and VoIP tablet apps. Samsung is reportedly prepping a5.8" device that would further blur the line between smartphone and tablet.

    Apple (AAPL) and Samsung (SSNLF.PK) are set to let a jury decide the full scope of their U.S. patent dispute on Tuesday after being unable to meet the demand of the judge in their trial to narrow the lawsuit in negotiations. Judge Lucy Koh had also asked the companies' CEOs to meet before the jury begins deliberations.

    Motorola Mobility is counter-suing Apple (AAPL) again: the Google (GOOG) unit claims iOS devices infringe on 7 of its patents, and wants ITC import bans. But this time, Motorola (like Apple in its many suits) isn't suing over standards-essential IP that might need to be licensed on FRAND terms, but software patents covering features such as e-mail notifications and Siri. "We would like to settle these patent matters, but Apple's unwillingness to work out a license leaves us little choice," says Motorola. (Posner on software patents

    Some jobs remain beyond the reach of automation, but the list is growing shorter. "The pace and scale of this encroachment into human skills is relatively recent and has profound implications," says MIT's Andrew McAfee. Next: Robots with "eyes" (using technology found in Microsoft's Kinect) that can pick up boxes and drop them on a conveyer belt. Think FedEx and UPS.


  184. Protection/Winston – Remind me in today's chat.  Closing positions is not unrealistic when you are $200K ahead (unless it's $200K out of $100M, then it's not too exciting) – you always have to consider if maybe there are fresher horses to chase and also you have to weigh the cost of protecting 120% of what you started with (if you started with $1M) vs having 120% in cash and looking for the next "obvious" opportunity.  What if I'm right and the market corrects back 10%.  You could spend $100K and on insurance for $1.2M and then the market falls and the $100K doubles while the rest drops 20% and you may be even if all goes perfectly.  Or you could have had $1.2M in cash and gone $50K short and that turns into $100K and then you have $130K cash when the same stocks you have now get 10% cheaper.  I don't know why people feel they MUST be invested.  As I said, if you have $100M invested, it could be such a bitch to unwind that it's easier to hedge but, at the top of a 35% rally – even that's a bit silly when your premise is "I know my $100M is probably going to drop $10M but rather than cashing $100M – I'd rather hedge it to TRY to stay even while it goes down".  Hedging is for unforeseen disasters – what you are talking about is how tight should your seat-belt be if you have no intention of stopping your car before you drive it off the cliff.  

    Consider that you would have probably made more money last week putting 5% of your money into our three aggressively bullish trades on Tuesday while 95% could have stayed in cash.  Then you could have cashed out again over the weekend, up 150% and slept REALLY well.  

    Sounds like a good strategy to me Jrom!  

    SVU/Jet – Please re-ask in new post. 

    Calculations/RDN – If you have money invested and the market goes down and you net a $6,000 loss on your bullish positions and a $4,000 gain on your bearish positions, you are 60/40 bullish.  If you have money invested and a move one way or another has no effect on you – then you are 50/50.  It's not so much how much money or what % the market moves – it's about your net P&L on similar moves.   Some systems let you back-test your portfolio and some you just have to watch but, fortunately, the way this market gyrates up and down every day – you can always see how a 100-point Dow swing affects your portfolio.  It's no great science – often you see me comment "oops, I guess were's too bullish/bearish" AFTER I see the net change in a portfolio after a big market move.  You never really know the net effect until you get a big move but, if you pay attention, you get a feel for it (as long as you are not one of those maniacs who's constantly changing the mix – that would be like surfing while you're juggling).  

    Inventions/Shadow – First to market is a big part of perfecting a patent.  Don't let fear of having something stolen be the reason for never trying.  Patents are BS anyway – unless you can afford to defend them.  Look at AAPL, Samsung and MOT – there's no AAPL vs Bob Costwick of Bensonhurst, is there?  Not, those guys are crushed before you ever hear about a case so yes, people will steal good inventions – they've been doing it for 1,000 years.  If you make something useful and you sell it then you'll get your share first and, if it's so valuable that it's worth stealing, then you can probably afford the lawyers to defend it.  

    Sounds good if they pull it off ZZ.  

    Thanks StJ!  

    Have a good time Maya! 


  185. Pharm: You piqued my interest in the Jaw of Death Pattern. Found this very interesting article:
    http://static.safehaven.com/pdfs/mchugh_2012_02_17.pdf

    I used to subscribe to the Elliot Wave Newsletter for years but couldn't figure out a way to make money with it… the chart analysis was so vague, and always seemed so open to individual interpretation. Still, these charts are convincing and shout "Cashy and Cautious".