Seriously, this is 4 Tuesday's in row – is anyone seeing a pattern?
Of course this Tuesday we are 100 Dow points lower than we were last Tuesday and the BS pre-market pump job at 6am has already faded (7:30) although we're still working short bets on the Russell futures (/TF) and the Euro (EUR/USD) from 813 and $1.256 as I put up a note in early morning Member Chat as we spiked on – get this – the news that Draghi cancelled his appearance at Jackson Hole this weekend.
Why would it be good that Draghi is NOT going to the last Central Bankster conference of the year but the buzz is that he MUST be so close to a masterful solution to all of Europe's problems that he can't be bothered to gather with his brother bankers on the eve of his triumph. The announcement was timed to coincide (10 minutes before) bond auctions by Spain ($2Bn 3-month notes at 0.95%) and Italy ($3.75Bn of 2-year notes at 3.06%) and the Euro jumped 0.7% into the auction – lowering the effective rates and both auctions were a "success".
That pulled the EU markets off the floor (still down half a point at 8am) and got the US futures out of the red zone as we finally pushed the Dollar under that pesky 81.50 line, goosing the indexes and commodities. Unfortunately, it's just a sugar rush and we've already run out of steam but I'm sure someone will start another rumor around 9:15 to get us back to green into the open.
As I said last Tuesday, with the Dollar at 81.50 we're looking for adjusted levels of: Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816 and we held the Nasdaq yesterday but that was all so no reason to capitulate on our bearish stance just yet. Last Tuesday we also discussed 3 more trades (there we 3 the Tuesday before) to make 300% if the market did break higher and our first batch had several 100% winners so let's see how our 3 new trades did in a downtrend:
- 2 FAS Oct $107/117 bull call spreads at $2.05, selling 1 BBY 2014 $15 puts for $3.75 for net .35 is now net $1.52 – up 334%
- AGQ Oct $38/45 bull call spread at $3.10, selling BTU 2014 $20 puts for $3.60 for net .50 credit, now $1.18 – up 236%
- 3 DIA Oct $135 calls at $4.05, selling 1 HPQ 2014 $20 put for $3.80 for net .25, now -$2.56 – down 924%
HPQ had a rough week, dropping 20% and that killed that trade, which was the most leveraged of the 3 but not a bad consolation on the first two considering the market moved against us. Of course, setting a stop somewhere before you have a 100% loss can save you a fortune in these situations as well! We never did made our levels and, as we discussed yesterday, our bearish positions had a fabulous week so the hedges certainly did their job.
Obviously, we take the money and run on the first two hedges and there's no need for 3 new hedges when the DIA spread can now be played with 2 DIA Oct $135 calls at $1.23 selling the HPQ $15 puts for $2.30 for net .16 and, if you don't mind owning HPQ for net $15.16 (12% off the current $17.21 price), then there's not much to worry about on this trade but, as I said last week – we are NOT bullish and these are just small hedges against our generally bearish bets.
Realistically, if we played all 3 spreads with even distributions, we laid out .10 in cash and the two winners made $2.70 while the loser dropped $2.56 so, even without stopping out the loser, we're no worse for the wear on the drop. A great example of why all your eggs should never go in one basket.
Speaking of broken egg baskets – check out this Bespoke chart of the Shanghai Composite – what a mess! Our stock indexes are currently back where China was in late 2007-early 2008 and a lot of the reason we're back there is the way we're so enthusiastic about potential expansion into China and the growing Chinese demand for our goods and services and swelling Chinese Middle Class and the endless Chinese demand for commodities and…. hey, what's that smell? Smells like BS to me…
You can read 100 articles and the Punditocracy on the MSM can hit those talking points until they are blue in the face but this chart is A FACT! The Shanghai is down 66.6% from the top and anyone on TV using CHINA as a reason to be bullish should be given a few hundred volts through is chair! What if the US market looked like this and people tried to tell you how great things were? Would you say "well, that certainly not what I see here but, if you say so – it must be true"? Just because the MSM assumes you're an idiot, doesn't mean you have to invest like one.
Despite the "great" bond auction this morning, the rats are leaving the sinking ship of state in Spain at an ever-accelerating pace. The chart on the left shows the outflows from Spanish banks, where deposits fell 4.7% in July alone. A few more months like this and there won't be any banking system left to save!
Spain's once-wealthy Catalonia region has officially requested an emergency liquidity injection of $6.5B this morning from Madrid's sadly insufficient bailout fund. Don't worry Spain, Germany says CHINA will buy up all your debts (not a joke, sadly). Spain officially admitted they are in a recession today as Q2 GDP fell 1.3% after falling 0.6% year/year in Q1 and is projected to fall further in Q3.
At this point, even the Swiss are running out of money, and patience, as the SNBs policy of supporting the Euro at all costs. The SNB is currently holding 230 Billion Euros, which is 1/2 of their entire GDP, adding 34Bn in July alone. If not for Swiss support, the Euro would surely be at $1.20 or less – even against the weak Dollar. "The minimum price is not for eternity," said SNB's Jordan, "this is an extreme measure for an extreme situation." Any sudden removal of this support can have a sudden and devastating effect on the Euro.
Just ahead of the open we're getting our predicted pre-market re-pump and that's fine with us because – we don't care IF the game is rigged as long as we can figure out HOW the game is rigged and place our bets accordingly. The Russell bottomed out at 808 – up $500 per Futures contract and the Euro hit $1.24, which doesn't seem like a big move (.016) but it's $10 per .001 so up $160 per contract on that one and that is how we pay for our Egg McMuffins.
Now we get to sit back and watch the fun!
50M at 3pm – same program as yesterday.
Dollar making very small move up to 81.37, weakness strongly encouraging bulls to hang on.
TZA/$25KP, DC – No, we need to kill that by the end of the day, no matter what.
CZR getting killed. Have to look them over at this price ($7.23).
Republicans Dodge Tax Details While Offering Rate Cuts http://finance.yahoo.com/news/republicans-dodge-tax-details-while
Proposing cutbacks in tax breaks for charitable contributions, mortgage interest and employer-provided health insurance could mobilize well-organized opponents, said Phil English, a former Republican congressman from Pennsylvania.
'Difficult to Explain'
"Anybody is taking their life into their hands by offering very much specific detail," said English, now a lobbyist at Arent Fox LLP in Washington. "Fundamental tax reform is for Republicans what fundamental health-care reform has been for Democrats," central to the party's agenda though the details are "very difficult to explain in the context of a campaign that involves 30-second TV spots."
Romney's plan would cut individual rates by 20 percent and eliminate the estate tax and alternative minimum tax, which is a parallel calculation designed to keep high-income people from legally avoiding all taxes. He would leave the top rates on capital gains and dividend income at 15 percent and cut them to zero for households making less than $200,000 a year.
For corporations, Romney would cut the rate to 25 percent from 35 percent, keep a research tax credit and impose lighter taxes on the profits U.S. companies earn overseas.
Romney says he would broaden the tax base by reducing deductions and other tax breaks to ensure his plan generates as much revenue as the current system, and avoids shifting the tax burden from high earners to the rest of the population.
The Romney campaign has resisted explaining how it would do that, even after an Aug. 1 study by the nonpartisan Tax Policy Center showed that achieving all of his goals would be almost impossible, given that the rate cuts for top earners would cost the U.S. government $360 billion in revenue in 2015.
Romney has offered only hints. In remarks overheard at an April 15 fundraiser, he said he was considering eliminating mortgage interest deductions for second homes and the deduction for state and local taxes.
Those changes alone wouldn't come up with enough money to offset the rate cuts. Ending the state and local tax deduction could generate $862.2 billion over the next decade, the Congressional Budget Office estimated last year. Phasing out the mortgage interest deduction over that period would yield $214.6 billion. The estimates would be lower if tax rates also were cut.
Mortgage Deduction -131720119.html
GOP prosecute porn…while the Tampa industry is getting ready to 'entertain'. ROTFLMAO.
Thought this was interesting:
SPY – SPDR S&P 500 ETF – A massive bearish spread initiated in the final hours of the trading session on Monday afternoon suggests one big options market participant is prepared for a roughly 8% pullback in the S&P 500 Index during the next few months. Shares in the SPY, an exchange-traded fund that tracks the performance of the S&P 500 Index, slipped to an intraday low of $140.97 earlier today after consumer confidence fell the most in 10 months, but have since recovered to stand 0.10% lower on the session at $141.40 as of 11:30 a.m. ET. The large, approximately, 100,000-lot Nov. $130/$140 put spread purchased Monday for around $2.47 per contract makes money if the price of the underlying slips 2.7% to breach the average breakeven point on the downside at $137.53. Maximum potential profits of $7.53 per contract are available on the position in the event SPY shares drop 8% to settle at or below $130.00 at November expiration. The strategy could be looking ahead to the meeting of central bankers in Jackson Hole, Wyoming; betting the markets may be disappointed in what Bernanke and others have to say as the U.S. settles in for the long weekend. Additionally, with the S&P 500 Index having traded up to its highest in four years on an intraday basis last week, the spread may simply be locking in recent gains to protect against any bumps in the road, central bank-related or otherwise, that could trip up the market in the next few months.
I hope that guy is right.
The ECB plan / Asmussen: "…the ECB will buy under the new program, only bonds with short maturities….[a]nd though Asmussen makes a point to say that depressing short interest rates is not the same as financing governments, it's also true that short-term borrowing does the 'heavy lifting' for European sovereign borrowing needs, so this is a de facto form of central bank debt monetization."
So Europe is going to transition from kicking to rolling over the can down the road. How fast will they roll the can? "Asmussen lays out the real long game, which involves financial, fiscal, economic, and political union. The EMU is not complete yet, and has serious flaws, but there is a path involving work on all these areas. A key point that Asmussen makes, which is very in keeping with the German stance, is that he's more concern with the quality of reforms than the speed."
Unfortunately, the market is likely to concern itself with the speed of the reforms rather than their perceived long-term quality, especially with China belly-flopping to the east [not much help with Peripheral Note-buying from that quarter], making 2012 the Year of the Dollar. That should make Bill Gross happy.
NTE still flying but that could be just us buying – only 2.5M shares all day.
Details/Shadow – Good article but a brief summary and a link would be preferred next time.
SPY/Rustle – That's a good bet.
Dollar down another 0.4% today so not very impressed with the gains.
Can't develop a candle body over 80.43 even on the 1 minute chart, tried and crashed again.
Sorry afraid noone would click the link. Will do!
CRM is close to even from the DD….you better darn well get 1/2 out even, or just get the funk out!
StJ – Do the "virtual" portfolios get updated with actual fill prices or just the bid (or ask, depending) when Phil decides on a trade? Did you actually get filled on that TZA spread at $1.5? I got a quote 6 minutes after the post for $1.7…same thing happened with $3 PCLN 540 Sept puts earlier in the week.
cdel – same here. 1.7 was the bid/ask. The 16/22 was 1.50, so could be those. Always ask b'f entering IF you have questions.
Now the VIX is up at 16.46, what silliness. Does indicate put buying picking up into the close.
TZA/Cdel – If you are a little more patient than 10 minutes to fill a 5-month spread, you might get a better price!
Phil, still not 100% sure how to play this Bull call spread (TZA) and therefore won't take this trade, however can I confirm that (if I were to do it) I would:
Buy to Open 50 TZA CALLS @xxx
Sell to Close 50 TZA CALLS @ xxx
And the difference between what I paid out in a) and got paid in b) is the £1.50 premium cost?
Phil/Oil-What do you expect crude will do heading into the inv. report tomorrow in light of the hurricane and speculation that high gas prices will drive a release from the strategic petroleum reserves ?
WFR tacking on another 3% today! Yeah!
Buy to Open 50 TZA $15 CALLS @xxx
Sell to Open 50 TZA $22 CALLS @ xxx
Phil/TZA – I was looking at the trade and simply wondering 1. If it was the correct spread 2. If you (or anyone else) got an ACTUAL fill at the stated price and 3. if the virtual portfolios are updated when you propose a trade or when the trade actually gets filled. It took me 3 days to get the proper PCLN fill…patience is not an issue
Cool – glad you clarified part b)
Phil Scottrade is showing a $3 diff between bid and ask on TZA Jan 13 or Jan 14 strategy. Guess I just don't know enough to pull the trigger on this one yet.
SDS 15 Sept Calls 58c. I still have those darn 16 calls as well at 22c (net ave 39c). These are my 'bet' on a sell off b'w now and then….
VOLUME//COUSIN PHIL! YOU TALKED NTE DOWN WHILE YOU WERE BUYING..SMART!
ST JEAN ONCE THEIR TOP LINE TRIPLES AND THEY ATTAIN MARGIN GOALS AND INVESTORS REALIZE THE CUSTOMER IS AAPL..THEN THIS PRICING WILL SEEM LIKE A STEAL..THE IMPORTANT THING TO KEEP IN MIND KOO IS 70 SHARP OR TOSHIBA WILL TAKE HIM OUT..SO A BACKSTOP AND AN AMAZING VALUE GROWTH STORY TRIPLE DOUBLE
I SENT YOU THE PAGE AND A HALF SUMMARY PHILLIP
Sept. $14 calls? $15's at .22?
Up to 60M at 3:50 and Dollar back to 81.38 with Yen back over 78.50 but Euro still way up at $1.256 and Pound at $1.582.
TZA/Markilus – All correct except is should be in Dollars. 8)
Oil/Rich – Should head up into report, hopefully $97.50 so we can short it again but depends on the hurricane too. It's going right up the shipping channels so 3-4 days of deliveries halted. Won't reflect in this report, which is through Sunday, but we're going to have a major draw next week.
WFR/Jbur – The new super-stock!
Patience/Cdel – That's good. I see the $15s at $3.15/3.25 and the $22s at $1.53/1.57 so a bit wide. I'd offer $3.15 for the $15s and offer to sell $22s for $1.60 and, whichever fills first dictates my next action.
dc – I have both … naked as a jaybird. That is a better strategy for less risk.
dc…yes 14 & 15 calls, sorry.
big volume in SDS at the end.
Markilus – there are some great primers for options. One i found partulcarly helpful early on (approachable, understandable) with terminology etc was "Options Made Easy" by Guy Cohen.
IWM held the 80.30 line @ close, over in last minute now under.
Portfolio / Cdel – It really depends. In the case of the TZA BCS I will actually check the prices that the options traded at 5 minutes after Phil's post to be fair (and since Phil doesn't split the prices!). And sometimes I use Phil's prices for expediency. For the exits I usually try using the last trade price after Phil's post. When I update the portfolios I use the Mark price since I can't be bothered with spreads… These are "learning"portfolios in any case so exact prices should not matter that much!
I'm showing $81.30 ish not $80.30 – is this a typo as it threw me earlier?!
TZA/Jacalyn – It's this Jan – if it were 2014, I'd say 2014. No biggie, the net spread doesn't change much day to day and we have all month to fill it.
Summary/Angel – Did not work at all.
Volume worse than yesterday, just 81M on the Dow at close but was very clearly all downhill on the last 20M at the end. Still the kind of pattern that suggests fake trading during the day to pump up the markets and back to cash at the end of the day to fool 'em all again tomorrow.
Considering the Dollar dropped 0.4% today – super-pathetic for the indexes.
TZA lucky to get out even – other indexes all fell but RUT held ground, unfortunately.
Tomorrow morning is GDP at 8:30 but it's 2nd revision of Q2 estimate and not likely to deviate much from 1.6%. We have Pending Home Sales, at 10, oil inventories at 10:30, 5-year notes auctioned at 1pm and the Beige Book at 2pm so busy, busy….
$/£? Is there a difference?!! Thanks for pointing out Phil
Phil, I'm so glad you clarified the time frame for Option buying as I was confused (couldn't get near the spread).
a) In week calls (like the TZA earlier) its a get in as soon as you can type of recommendation (it climbed pretty fast)
b) Longer term spreads and calls may involve purchasing both legs at different points to generate the final score but certainly not a hurry
Incidentally, decided to short Gold last night (DUST) and Silver this evening (ZSL) close of play on the basis that Bernanke punts the ball down the field and does nothing. Didn't do options as the spread was too wide. What do you think as a pure 'no QE coming' play? I suspect you/we are being played with on TZA and FAS/FAZ. . .
They're onto you Phil 🙂
Sorry I make errors, only 80s was the breakdown around 80.40. I stopped day trading because the pain causes my mind to deviate, I am holding TZA still and the stock is no where near as dangerous as those options. I am sure that is why Phil said get out out before the close. My reactions are just not sharp. If I am right whenever it is I can turn on pain control with a refil.
Good news for those that worry about addiction, no withdrawal 6 days, only happens if you use it to get high!
Without getting totally exact $$$ divided by about .63-5 = Pounds. I do buy parts in your country as long as small, even light and large shipping gets out of control. UK and Germany should look into that. Israel is dirt cheap and I get UK and German parts there more often, doesn't make sense to be that way. Cheers to the anglos!
Time-frame/Markilus – Yes, for a day-trade/short-term play, you want to get it right away but 5% one way or the other is about the most I'll pay over. Call it a nickel for things under $1 and a dime for things that are $1.50 and so on but you just can't go chasing things that are 10% more than you wanted to pay – it's like giving yourself a 10% handicap to start. Obviously, if you do pay an extra nickel, you're just going to make a nickel less on the exit – under NO circumstances to you try to make up your bad entry by waiting too long to get out!
Not only do longer-term spreads not matter (you can always adjust the strike) if they don't fill but you can often do better if the market moves so much you miss an opening. Look at the 3 examples above – 2 returned 200-300% and one was a total failure so, easy enough – "chase" the failure. Even if you took a hit on it, that's the one you want to DD and roll, right.
NTE / Angel – Sounds great but I am guessing there might be some profit taking along the way – up 20% last week, up another 25% this week so far is bound to attract some attention.
I trade $ a lot and the difference is a nuisance but i rarely get confused except when typing! I only trade US stocks, ETF's and indicies as they are more liquid and diverse than ours. Having said that, I've lost a lot of money in so many ways playing the game it's quite scary. However I have learnt a few lessons:
a) The field is completely rigged against you, the Option spreads are manipulated to favour everyone but you
b) VXX, UVXY and TVIX have lost me more money than I care to remember – clearly completely dishonest and in no way representative of anything other than an arbitary ball that you think is going one way and then slaps you in the face in minutes big style
c) We're all fighting the Fed here with our shorts and ultimately until the market direction changes we're all going to continue to get scr*wed and be doubling down at every corner to try and get out. They are hell bent on keeping the market up either for electoral purposes or just because the alternative is too frightening. Only way to play is to run very quick shorts and get out (similar to TZA Option today) as they'll rip you off if you hang around for more than 30 or 40 minutes in a short position
d) Draghi, Bernanke and even Merkel are all playing a game, we all believe that they'll be caught with their pants down but you know when it is about to happen the other one makes some positive statement about how they're going to fix it all and guess what? By the time you've looked back, the original miscreant has managed to get his pants back up . .
We are being scr*wed and until this whole ungodly affair comes crashing around their arrogant and dishonest little skulls, we may as well drink the Coolaid as Phil says and make some money!
e) Why did I ever put my money on the Stock market and why can't I walk away?!!!!
At the close: Dow -0.16% to 13104. S&P -0.09% to 1409. Nasdaq +0.14% to 3078.
Treasurys: 30-year +0.21%. 10-yr +0.12%. 5-yr +0.06%.
Commodities: Crude +0.75% to $96.19. Gold -0.34% to $1667.65.
Currencies: Euro +0.54% vs. dollar. Yen -0.29%. Pound -0.19%.
Market recap: Stocks finished flat in another quiet session, as an upbeat reading on home prices offset a gloomy report on consumer confidence. With Bernanke's potential market-moving action at the end of the week, investors are just biding time. Energy stocks rose along with crude oil prices as Isaac gathered strength en route to Gulf Coast rigs and refineries. NYSE gainers led losers seven to five.
The (Economic) Pros and Cons of Longer Life Spans (WSJ)
When firms pay CEOs more than Uncle Sam, the tax system is broken (LA Times)
Will try GLL and ABX options as suggested. You're neutral on QE probability then?
Not neutral – as I said earlier about 70% they don't do it but that's why we hedge our bets. To me, owning some ABX cheap is not a downside.
I agree 🙂
YHOO/Phil – any vibe on this former juggernaut down here in the 14.5 area? Marissa's new Chief Marketing Officer is someone who has had great success selling her own companies.
Why we trade? I think many fall behind my reason for less reason!
I goined this group about 2 years ago, at the time I told all especially Phil, I could not work, or do much anything and was going broke fast. I also could not stand noting to do and no control over destiny. My last and only thing was trade. I tried to do options and medical problems caused me to lose control and loose enough to not have the margin. I bought parts and built a monster computer with 6 screens to do the JRW thing, one watch IWM 2 stocks TNA/TZA. To this day I have not net lost on that although if I don't pay attention to how I feel I blow 4 months of good in 2 weeks. To avoid that and get back with knowing I am sticking to a set goal that will come some day as this is a house of cards. The stock a tripple will pay big when the market goes down and as today I evaluate every day to make sure the status is the same. Basic premmis, market top, no real reason, and downs are most intense and very hard to tell if this is it or are you chasing jumping in about to get burned. I hold TZA because to me this is when not if and I am out of business and should not day trade until I turn the pain control back on.
Sorry drug control freaks it makes a possitive for people in pain, it is not addictive unless abbused, just proved again.
Goal is TZA $23, under $20 hold. Between hang onto gains. Buy my meds, I have the prescriptions but short property tax without tipping into my trade accounct, never when down again. My living account is $1,600 with all food and fuel on a charge card. It is very scary on the edge! I live alone and see people about 2 times a week, that sucks more!
Fuel yesterday $4.399 per gallon, higher than when oil was $140, highest ever and $95. nobody on the roads again, they just don't get it. It will drop and I have enough gas to wait till after the holiday. I still have buy beer Fridays!
Yahoo is a very unpopular search machine. Some day google will fade if the country wakes up and realizes this crowd behavior is not good for the masses. The light at the end of the tunnel is the iphone is fading. Nobody will believe it but around here it is hated because it just doesn't come close to expectations. Verizon and ATT flat fail for hunders of miles. I know a few that I talked into dumping GOOG unless all fail then search goog. None went back. The world order needs to be stopped. I use Yahoo and they are best for business news.
Seems a better idea than drill, drill….
Let's not forget Portugal…