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Terrible Start to Tuesday – Will Apple Save the Day?

The Futures have given back all of yesterday's last-minute gains and then some.  

After hours last night, Moody's downgraded 5 Spanish regions "driven by the deterioration in their liquidity positions, as evidenced by their very limited cash reserves … and their significant reliance on short-term credit lines."

While Asia shrugged it off and finished more or less flat, Europe is freaking out – about that and the continued terrible earnings reports that are hammering the point home that the economy is certainly worse than it was last year.  Why then, are the markets up over 10% from last year – well, since there's no easy answer to that – down they go!  

The Euro fell down to the $1.30 line (where we went long in early morning Member Chat) and oil futures fell to $87.28 (and make a good buy over $87.50 on /CL) and gold took a pounding to $1,710 while gasoline fell below the $2.60 line, where it's also a good long play on /RB as it's unlikely the Euro fails $1.30 for very long or the Yen goes above (weaker) 80 to the Dollar (now at $79.85) and it's also not likely the Dollar breaks 80 today (now 79.93) – so, overall, this is a nice spot to go long in the Futures. 

It's over an hour to the open but let's call it Dow 13,200, S&P 1,416, Nasdaq 2,980, NYSE 8,250 and Russell 810 and, as you can see from our Big Chart – we're barely holding our Must Hold levels with the Nasdaq crashing us below and we can't even blame AAPL today, which is holding up pretty well so far at $630 – after putting up a $15 gain yesterday (2%).  

As we expected yesterday morning, the Nasdaq held 3,000 like a champ and rallied 20 points off that line into the close before dropping back a few but today will be harder with the Nas gapping well below 3K – painting a terrible technical picture before most people have a chance to make their first trade.  

Has anything changed since yesterday?  Not really – we knew Spain was a mess, we knew Q3 earnings would suck but, apparently, seeing the actual numbers is really spooking investors.  In reality, only 10 of 40 companies missed yesterday but 5 of those guided down and only two companies (HSTM and LII) guided up all day.  As CNBC put it: "Earnings conference calls are beginning to resemble crisis hotlines as corporate executives slash profit forecasts because of fears of higher taxes, a recession in Europe and slowing economy in China."

This morning is worse with 13 out of 52 reporting companies missing earnings (not all in yet) and a whopping 11 giving negative guidance (ARG, CPLA, CNC, DD, GNTX, IIVI, ITW, LRY, ST, XRS, MMM and TECH).    

Guiding up were PLD, R and WHR.  This is not encouraging – it means that, for the average person owning stocks and listening to conference calls – there's an 11:3 chance they are hearing bad news with a bad outlook. 

This is the backdrop for today's Fed meeting, which goes on tomorrow as well and ends in a statement to be released at 2:15.  Even as I write this – the Euro failed to hold $1.30 and the Dollar punched over 80 and oil failed to hold $87 and gasoline is dropping to $2.58 so no fun in the Futures this morning.  Europe is finally together, dropping 1.6% across the board – just as our futures are down 1.2% across the board now as the Euro tests $1.296 and the Dollar hits 80.10, which is up from 79.50 yesterday, accounting for 0.75 of the drop (2/3).  

We don't like to react too quickly to currency-based market moves as they have a tendency to snap back fast.  It it, however a good time to review the suggested Disaster Hedges from the weekend (5 Plays that Make 500% if the Market Falls) or our DIA hedge from yesterday's post.  

We're still looking at the sell-off as a buying opportunity until/unless we fail those Must Hold lines and I will point out that UPS's domestic package business is up 1.2%, which offset most of the decline in Europe – underlining what we expect this earnings season – that the companies that do International business are hurting across the board and, unfortunately, these are the guys who tend to report early.

Not to worry though, as the rich continue to get richer.  COH reports an 8% jump in US sales but that's nothing compared to International, which is up 15% and led by China.  Going the other way is ordinary electronics at RSH, which is down 15% on release of their earnings and XRX underscores the weakness in the office spaces with a 12% decline in net profit that is sending their stock down another 5%. back to the year's low's around $6.50.  

Before we get too bearish today, we'll have to wait for a possible decision from the EU Court of Justice, where they are hearing a suit today brought by a member of the Irish Parliament on whether or not the ESM is constitutionally valid.  Silly as it seems, could be a nice relief rally if the court hands down a quick decision in the ESM's favor.  We hear from the Richmond Fed at 10am but the best chance for a market save today rests with AAPL, who roll out the IPad Mini at 1pm – we need to see AAPL pop over $640 to get the Nasdaq back on track and we'll be watching that 3,000 line closely.

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  1. Good Morning

  2. Phil – I hate TZA as a hedge – its my TBT – I think the decay kills it as anything more than a week long trade.
    What would you construct for a hedge using IWM puts – I have the Jan 84s and am selling weeklies against 1/3 of these.
    I know IWM puts won't return 500% so its not as sexy but any insights greatly appreciated.

  3. Good Morning!

  4. Oil Lines

    R3 – 93.27
    R2 – 92.27
    R1 – 90.57
    PP – 89.57
    S1 – 87.87
    S2 – 86.87
    S3 – 85.17

    Yesterday high and low – 91.27 / 88.57

  5. Phil
    do you see a TLT play

  6. TIVO/Opesbridge/Phil
    From yesterday:
    October 22nd, 2012 at 1:47 pm | 
    Phil / TIVO – Any adjustment here now that it's below 9.75? Thx
    TIVO/Opes – What's the position?  They're resting on the 50 dma at $9.75 and I think they are being artificially depressed by the funds, who are accumulating, before the patent story catches on:…"
    What was the position?  Thanks!

  7. Good morning every one. Having been in the air most of the time yesterday I see things went well yesterday but what is going on this morning? nothing really changed since yesterday only I guess the talk of Obama and Romney has frightened the crowed. 
    Back in the hole of Cancun

  8. BTW, I was not here in the Nixon years, but I have to say that never in my adult life have I seen a politician willing to lie as much as Romney has over the last 3 weeks! It's actually quite scary not just for Democrats but also for Republicans and the country in general – at this point we have no clue how this guy will govern – taxes, defense, foreign affairs, social issues. He has been shifting positions on everything on a weekly (and sometimes) daily basis. Business people like to complain about uncertainty, but Romney is black hole compared to Obama at this point. The devil you know…

  9. Good morning!  I've been playing oil down since 5:00.  It looks to me like the sellers and the buyers have finally reached an equilibrium.  Seems like 87 is a good place to try a long.  This is it's fourth try to pop over

  10. Phil/Frigates   You have to love Rmoney's attempt to garner votes where those "frigates" are made….

  11. Phil/ SBUX
    Would you consider a play on SBUX before their earnings 1 nov?
    They are back to their Aug lows

  12. It's probably a good idea to pick up the 90% win in the FAS calls with 3 days left!

  13. Good Morning All – One other point is that the Treasury does have to sell about $100B worth of US paper this week.

  14. FU MARKET!!!

  15. Ouch… Tough time with AMZN and AAPL!

  16. Good morning! 

    Ugliness all around.  NYSE right on the 8.200 line, Dow 13,150, S&P 1,415 is a level that used to be significant but sure doesn't look like it's holding now.  1,400 is the big line to watch on the S&P but that's down 2.5% for the day so we REALLY don't want to see that.  

    The saving grace at the moment is volume is not so impressive – just 11M in the first 10 mins of Dow trading, which is much less than the 40-50M of buying volume at the close yesterday but that was 30 mins so we'll see but hopefully this is it for the morning sell-off.

    AAPL back to $625 – let's buy back the remaining weekly short calls ahead the IPad of event in the $25KP.  $625 calls are $19.50.

  17. AAPL  Wow I'm muddling along with my mostly sold premium portfolio, but when I go back over the adjustments to that AAPL position my head spins.  I don't think they covered trading like that in "Options for Dummies", more like a PhD trading program.

  18. AAPL – Net $33.32
    We closed the MAZN long put basically even.

    Losses are mitigated partially in this portfolio because we have spreads on DIA and CMG!

  19. For those going to PSW Las Vegas, we are finalizing the itinerary and I will send a preliminary one out in the next day or so.  Let me know if anyone would like to present….. 8)

  20. Phil:
    Do you dare DD on USO weeklies or is it best to wait and roll out? I know we are at .11, but we only started at .35.

  21. And on a more serious note:

  22. Thaks for the CLF response Phil…much appreciated.

  23. Nasdaq 100 nears 200 day ma

  24. Tempting to take some TZA weekly's money off the table….

  25. LOL Pharm…

  26. AAPL/phil – ipad mini, won't any anticipation for that already be priced in? you know, buy on the rumor, sell on the news.. why would it go up more than a fractional blip on any announcement or unveiling?

  27. Any thgts on GOOG's contrarily bullish move against the tide today ? Anyone good with casting of bones,analyzing entrails or crystal balls  to determine if 678 will hold ?

  28. It looks like we might need a bounce off the 200 DMA now for all the indices… I will definitely need to plot the Big Chart upside down and go with charts of TZA and SQQQ!

  29. Very glad I've been patient on oil since my calls and puts expired on Friday.

  30. TLT/Crussell – I would have said up happily at $120 but now $122 and still likely to hit $124-5 by Thursday's 7-year auction but not a very sexy play.  The weekly $121s have just .40 of premium at $1.50 so that's the way to play it, if you are so inclined but I'd play it like the futures and keep very tight stops on that $122 line.  

    TIVO/Laddoo – I don't think he ended up saying but, obviously from my comment – the answer is to keep it, whatever it is (and, in the fund, it would likely be a short, long-term put with a possible artificial buy/write kicker).  TIVO is still holding $9.78 this morning (the 50 dma) and you can sell the 2015 $10 puts for $2.50 for a net $7.50 entry and TOS says that ties up just net $2K in margin to make $2,500 over 2 years – not bad!  

    What changed/Yodi – Exactly.  It's amazing how fickle investors can be.  

    Romney/StJ – The funniest thing yesterday was that, suddenly, Romney decided to pretty much say "My policies are exactly the same as the President's except, when I do them, they will work wonders and fix all our problems."   Of course that's exactly the same kind of BS he used to feed to his victims at Bain when he'd come and tell them how he'd run their company the same way they like it – only better!  Sounds real good until the company is gutted and management gets their pink slips along with 75% of the work-force to juice the profit margins while he auctions it off for parts.  Would actually serve America right if they vote for him and he rapes the country but I still have a vested interest here so I'd rather he not be given the chance…

    Oil/2can – As long as you play with tight stops.  Like we tried $87.50 this morning and that didn't work so we take a .05 or .10 loss and now we try $87 and then $86.50 – hopefully, at some point before $85 (a .50 loss) we get a .50 move back up and all is well.  

    Frigates/1020 – Is that what this is about?  Trying to buy Virginia votes?  

    SBUX/Lionel – I find it very hard to believe that SBUX will have a Q but a lot of that is priced in with a 25% drop from April's high.  They had R&D and marketing expenses they don't usually have with their new machine (I'm sure you've seen ads) and I question the logic of that whole thing anyway as you are telling X% of your customers to stay at home and make their own $1 coffee instead of spending $5 at the store – even if they make $100 on the machine – they kill that benefit pretty quickly.   So I think they are right-priced here – perhaps still 20% too high (at $35, I'd buy) but there's really no interesting plays on them given the uncertainty.  

    Hey, there goes AMZN – that's a relief…  

    Income Portfolio/StJ – I agree, may as well take the money and run on the short calls and let's sell 2 Nov $97 puts for  $2 ($400) as we don't mind owning some FAS at that price (we'll only sell calls against it anyway).  

    Dow volume now 21M at 10:10 and no movement since 9:40 really on another 10M in volume but we won't be out of the woods until Europe closes at 11:30.  

    AAPL/$25KP, Lincoln – At this point I'd be thrilled to catch one run back to the $30s and get the hell out of this crazy trade – today is our best chance for that to happen – the Nov $615s are $32 so figure we need a $20 move up in AAPL, to about $645, for us to be able to cash out even today.

    Richmond Fed was bad – not at all helpful – they need to build more boats:

    10:01 AM Oct Richmond Fed Mfg. Survey: -7, vs. +6 expected, +4 previous.

    With the market set to record its biggest opening gap down in months, ukarlewitz looks at the last four 9:30 AM flushes. The market was higher shortly thereafter in each instance. Quantifiable Edges looks at occasions where the market gapped down 1% ahead of a Fed meeting – all of these turned positive over the next 2 days.

    Hardest hit of the world's major markets thus far today is Canada's TSX Composite, off 2.1% in early trade after the Bank of Canada's surprisingly hawkish policy statement. There's no reward (yet) for conservative bank policy, the MSCI Canada Index (EWC) has underperformed the S&P 500 by more than 1,100 basis points over the last year. 

    The ECB's Benoit Coeure does the good cop/bad cop routine all by himself, asserting the bank will stop buying the bonds of any country not meeting conditions, but then putting the possibility of a rate cut on the table. "OMT is not here to subsidize borrowing costs," he says. Actually, Mr. Coeure, that's exactly what it's there for. 

    Isn't this why we got out yesterday?  Peabody Energy (BTU -3.3%) is cut to Neutral from Buy at Goldman Sachs, which views the coal producer favorably but "risk/reward for shares appears more balanced after BTU has rallied with other U.S. coal stocks as signs China steel production is picking up and domestic thermal coal inventories are slowly falling."

    Boeing (BA -1.15%) increases its 777 production rate to 8.3 a month from seven, reflecting "the strong demand" for the aircraft, the company says. (PR)

  31. Summary of Mitt Romney foreign policy: "We'd do exactly what you're doing. But I'd be President!"

  32. Laddo / TIVO – My apologies – I missed that. The position is the same as the one in the Income Portfolio.

  33. $25KP – USO is too low to roll but the Nov $33 calls were $1 yesterday and now .55 so the .37 loss, if fully realized, on the weekly $33s nets us in for .92 so no worse off than if we had bought the longer calls yesterday so let's buy 20 of the Nov $33 calls and hopefully we can get out of the weekly $33s with a smaller loss tomorrow.  Oil hitting $86 at the moment.

  34. Watching the debate last night it kept coming back to me that this guy is a corporate raider for God's sake, and becoming the POTUS makes the U.S.  next tatget. His constant lying, repetition of the same talking points,  fixed smile and cold reptilian eyes gave me the creeps.  I hope Americans are not as stupid as I fear they are.

  35. DIA in the $25KP is a lucky break as we ended up in the bear spread, rather than the naked short puts.  Notice it's better to be up 40% of $3.10 than 50% of $1.31!  Same with CMG – that's why those bull and bear spreads are much better ways to play if you want to be more conservative.  

    28M on the Dow at 10:30 so 7M in last 20 mins and mostly down volume.  So, what do we see – 11M all down volume in 10 mins followed by 30 mins of 10M flat, followed by 7M in 20Mins down again – that's no proof of a bottom – big volume is pushing us lower and the pauses only leave us flat – no buyers showing up yet in enough volume to matter.  

    USO/DC – Good question but, as you can see, better to buy some more time.   Oil not even holding $86 at the moment.  

    NYSE down 2% at 8,165 – they were our furthest above index and they are playing catch-up to the downside – not good…

    I'll be more worried if the S&P fails 1,400, of course.  RUT 800 in sights too.  

    LOL Pharm!  I like that Letterman one. 

    You're welcome Ink.  

    Germany down 2.25%.   

    Tempting/Hemas – Best to set a stop on 1/2 and another on the other 1/2 – keeps you from guessing a bottom.  

  36. PHil, gotta thank you again for recommending that I get out of those AAPL weekly calls yesterday…made my money and got out…

  37. Phil,
    Dupont DD has taken a hit, my current basis 34.49.
    Make sense to you to sell a 2015 35 Put for 3.6, and then later a Call at 57.5 when practicable? Thanks for the advice in advance

  38. TZA/Phil – TZA disaster hedge from the weekend has already returned 60%…many thanks for that!
    Do you think PNRA will go the way of CMG?

  39. Phil
    If FAS is 106 is that a good point to enter a Nov. BCS ?

  40. Phil,
    624 seems to be the resistance on AAPL today…..Please suggest a long term play That goes out to 2014 or even 2015, Thanks 

  41. Phil,
    Would you be taking profits on hedges here?  I'm holding 60 November 14/18 spreads with a $1.00 basis. Now $1.90.  Or would you set stops and layer in another hedge, and if so, which one? Maybe a higher TZA spread?

  42. On the S&P futures (\ES), S3 is 1403 and that held so far!

  43. You can write the 25 UCO put for .90, should be safe to about $82 in oil and full expiration close to $83.

  44. @Pharm,  I will speak for 30 mins on the Covered Call portfolio.

  45. Speaking of covered calls, I just read the latest ThinkMoney magazine from TOS and they are coming out with a Covered Call Roller tool which will roll your covers every month (or period) automatically based on your preferences – deltas for the setup, days before expiration and so on…. It will almost be like collecting dividends automatically!

  46. TZA Weeklies/Hemas – Absolutely I'd take that and run!  RUT should hold 800 (and S&P 1,400) – at least for a bounce and, with the weeklies – why risk a bounce?

    IPad Mini/Scott – I think AAPL is just hungry for any excuse to go up.  $625 is a ridiculous price.

    GOOG/8800 – Someone put their foot down around $675 – also a bit too low but why buy GOOG when AAPL is right there? 

    Good job Rustle.  Looks like 3rd try's a charm though with $86 bouncing nicely. 

    Hope/Jbur – As Carlin used to say: "Just think how stupid the average person is and then realize half of them are even stupider."   The actual average IQ is just 100 – 79 is considered disabled so it's a fine line, yet they give you a driving license and a voting card just for turning 18 (not to mention a gun license).   This chart shows us ranked 23rd by country with an average IQ of 98 and, per sterotype, those Asians are kicking our asses: 

    AAPL/Jerconn – You're welcome.  I hope we get the chance to do the same today! 

    DD/Jasu – You're way ahead so no big deal.  Your basis is $34.49 and you can sell the 2015 $40 puts and calls for $13,50 and that drops your basis to net $20.99/30.49 so IF you have to DD, then it's at a lower price than your original entry.  At $40 you make $19.01 so about $9 more than you have now and DD has to get to $54 for you to make the same.  I think that's a nice, conservative way to play it because you don't know DD won't drop back to the low $30s on a major crash (it's down $7 in a month already).  Rather than trying to make the most out of a position, try concentrating on dropping your basis to zero and then, once you do over time, you never have to worry about that position again and you can move your free'd up cash to a new position and work that down over time.  That's the old "planting trees" strategy.  

    TZA/Cdel – That's why I love those things.  PNRA is interesting, I used to like them and, like CMG, bailed when they got ahead of themselves in the low $100s and, like CMG, they keep going up but we missed the whipsaw back to $100 last year and they jumped so fast out of it that it just wasn't fun buying back in at $140.  I think there's something a little more universal about a bread and soup and sandwich place than Mexican – more comfort food and PNRA has way more (1,600) locations than CMG – and they didn't get a kick-start from MCD.  I still think $160 is too much those but I like them too much to bet against them.  If they drop to the $140s and you can sell 2015 $120 puts for $20 – then it would be a great deal but right now there aren't even any $120 puts to sell and the $140 puts are about $20 – but those are the ones I'd watch for a good entry. 

    FAS/QC – The regional banks are having trouble making money because of the low rates – they can't play leverage games like the big boys and they're still scared to make home loans (rightly so).  So, while they report, I wouldn't count on any big moves back up in XLF.  $15.50 to $16.50 should be a firm range for a while which is why I took advantage this morning to sell a couple of puts on the dip to $15.75 but hard to say when they head higher.  

    AAPL/Jasu – I like selling the 2015 $400 puts for $43 (net margin $4K per contract) and buying the 2014 $570/620 bull call spread for $25 so you still have a net $18 credit and worst case is you end up owning AAPL at net $382 (38% off) and best case is AAPL hold $620 through next Jan and you pocket (assuming 400 holds through the next year) $68 total, so it's as good as buying AAPL and having it go up to $691 from here but with 38% built-in protection.  

    Profits on hedges/Palotay – I'd take it on short-term ones and put a little into the longer-term ones, like from the weekend post.   If the S&P fails 1,400 and the RUT fails 800 (same time), then we can add more short-term puts.  

    Poor RIMM….

    UCO/Rustle – Weakness today is strange, Dollar not that strong (now 80.125)

  47. AAPL $25KP – If we do not get a pop in the next 2 hours, our capitulation will be selling the Nov $665 calls, now $11.50, taking the Nov $640 calls, now $18.50 and rolling to the April $635/700 bull call spread at $25 so our basis on the $65 bull call spread is around $30 and we have 4 more months to sell or roll the caller if AAPL jumps up but we're $30 in the money to our caller with another $35 to run up so not likely we get blown out to the upside.  

  48. Phil – did you have a chance to comment – sorry if you did. 
    Phil – I hate TZA as a hedge – its my TBT – I think the decay kills it as anything more than a week long trade.
    What would you construct for a hedge using IWM puts – I have the Jan 84s and am selling weeklies against 1/3 of these.
    I know IWM puts won't return 500% so its not as sexy but any insights greatly appreciated.

  49. Anyone know when is the AAPL announcement today?  What time?

  50. @ Pharm I would request Phil (or someone) talk about Income or LT portfolio for those of us who don't do the short term trades on the site. I've read all on the WIKI, but would like to discuss more with the group. Thanks

  51. IQ – holy cow, India is only at 81! 

  52. This is scary and has been like this for awhile.  What would Teddy Roosevelt say:

  53. AAPL announcement 10 am PST

  54. Jerr – 1pm EST

  55. With the Nasdaq composite bouncing off the 200MA it's hard to imagine Apple doesn't pop, no?

  56. PNRA, — They sell food, and when people are watching their wallets they buy cheaper food (grocery store), so PNRA has to maintain, pay rent and staff 1,600 locations that could easily see half as many customers show up tomorrow, and then add in COGS rising 10% per year and that doesn't sound like a formula for growth to me. But with a P/E of 30  (versus CMG's now at 27) I'd say they *might* be "fairly priced" (whatever that means), for now, but this isn't a long term bullish play by any stretch of the imagination.
    And when markets look GRIM like they do right now once in a while 30 P/E's adjust quickly back to a more reasonable 15 and keep that in mind if selling puts on PNRA.

  57. Interesting…..don't know if it will play out, but interesting none the less…

  58. So Romney came in and diced up all these company's at Bain, shipping all the jobs to China and now he wants to go get tough on China after China was largely responsible for the wealth he managed to scalp in management fees by shipping jobs to China?
    They must be like, WTF?
    Hey POTUS, why don't you point all this BS out, so I don't have to?!?

     weekly retail sales +1.6% v +1.7% prior week….much worse than headlines of "consumer is making a comeback"(normally around +4% in recovery)….i have a feeling some retailer earnings blowups coming with iphone release and weaker than perceived economy

  60. cturb & INk – thanks on AAPL announcement time!

  61. Good Afternoon
    Vegas Update
    Dinner at Nobu on the 10th of Nov at 7pm—-22 total count—please let me know of any food allergies or dietary restrictions today

  62.  the usual msb 10:30 low on swoon day in…worried about late day aapl weakness after release though

  63. Savi… bad.  Pay Pal on the way!!

  64. Gold – Germany can't verify it's holdings? hmmm. I hope this works out for everyone.

  65. Phil/AAPL
    Are you planning on selling front month calls against the April 635/700 BCS and won't that cause a margin problem in the 25k portfolio? Not a big deal, but what if margin is a problem would you just move to the spread?

  66. Scott – The German's never should have left Corzine in charge of their gold.

  67. Nasdaq might actually get back to 3000.

  68. Phil / CMG – I missed the initial CMG trade, but would like to start collecting some monthly premium on them now.What would you recommend at this point?  Calendars?

  69. IQ
    I guess that chart proves that the IQ test is biased.  Education gets a higher score.

  70. EUR showing better strength than AUD, AUD better indicator of risk.

  71. IQ/williex – and chaos, anarchy, and abysmal poverty gets the low scores. Chicken & egg, question, maybe – or not.

  72. Phil – what do you think of QID Nov $30 calls at around $1 as protection if the market doesn't like the AAPL announcement?

  73. wow, big blocks of AVEO getting bought….

  74. Auto rolling/StJ – That's an interesting idea.  

    Just hitting 48M in Dow volume at 12:12 so another 20M in about 100 minutes more or less flat.  Now it's starting to feel more bottomy. 

    TZA/Samz – Sorry, missed it.  Are you using speads or naked calls.  Naked calls on ultras are foolish – spreads are genius.  Same goes for buying premium with IWM puts.  Selling some to offset is good – just make sure you're selling enough to offset the premium you're paying.  The Jan $84 puts are $5.15 with IWM at $80.85 so $2 in premium over 3 months means you'd better be collecting at least .80 per month.  Selling 1/3 weeklies, I very much doubt you will cover the cost.  On the other hand, the TZA Jan $12/15 bull call spread is $2 and makes 50% at $15, which is 8% lower than TZA is now so figure that allows for decay.  You can sell the current weekly $17 calls against it for .20 and 10 sales like that pays for the whole spread or 1/3 the Nov $17 puts at .75 and you can put a stop on those at $1 and you'll be fine because you'd be 3x $1 in the money on your longs and down just 1/3 x .25 on the short puts.  Since the spread is $2 instead of 5, you can buy 2.5x and that gives you $2.50 of upside for the same $5 you spend on the IWM puts but you don't even need the Russell to go down – just to not go up and you get paid and, rather than trying to work off your premium with short sales – you are actually reducing your basis.  

    AAPL/Jerconn – 1pm.   It's live if you have Safari or Apple TV (tricky!) at (bottom of page).  

    India/Nicha – Yes, that's strange.  To some extent, I think there's an unfair cultural skew to IQ tests but then that means that the Japanese, Koreans and Hong Kongers are even smarter than they seem.  A good friend of mine in college was a native american and very, very smart but I scored better than him on an IQ test and he said to me "yeah that's great but they didn't ask you how to build a lean-to or skin a deer for dinner did they?"  In my travels, I've never really found any one group particularly smart or dumb but, in general, Europeans and Asians are so much better educated than we are – it's pathetic.  The brain is like a muscle and Americans tend to let their children's atrophy at an early age.  Also, you'll never hear an Asian parent say "Oh he only likes to eat chicken nuggets, so that's what we feed him."  

    MNST still going down!  Good point was made yesterday that they only have 10% more caffine than a SBUX capuchino.

    Cool graphic Rustle:

    Also good graphic on control of the media.  

    PNRA/BDC – I agree, best to wait for better prices.  

    Peaks/Pharm – Well, that's the 1,200 range we were talking about yesterday.  Looks horrible in close-up.

    Bain/BDC – Obama gets a lot of pushback from his sponsors when he goes too hard at that kind of stuff.  Let he who has donors who are without sin cast the first stone…

    Retail/Angel – Slow but better than contraction.  Holiday season this year has favorable calendar working for it.  As to IQ – as I said above, it's all relative to who designs the tests and what they consider important. 

    AAPL/DC – Depends what happens today.  If we can get $30 for the calls, I'm more inclined to get out and be done with it than roll to a spread but, if we stay where we are ($15-20) then we're down $15 and I'd rather sell something for $10+ and roll to a spread that can double with the added possibility of making more sales.  If no PM, selling 10 of the Nov $665 calls is $90K in margin so a big problem if this isn't a small part of a larger portfolio.  The Alternative would be to spend $31 on the April $700 calls and sell the short calls but then it would be best to sell 6 or 7, not 10 and it's very risky or just move to the vertical and hope that pays off on its own but, if no margin – what on earth are you doing in this trade?  I have said multiple times when we were even on this trade that people should get out if they were uncomfortable with the losses (we were even just last week for about 2 hours) – there's no magic way to work a trade like this properly without using margin.  

    APPL coverage is starting on their site.  

    LOL Ink. 

    CMG/Rkyroma – I like the short puts on them.  They're now too cheap.  You can go with a bull spread like March $190/240 for $24 and sell 1/2 Nov $250s at $5.30, which can roll to Jan $270s, now $6 or 2x the Jan $290s, now $2.60 – you get the idea….  

    Mini/Angel – Gee I hope the guys from AAPL do a better demonstration than that!  

    QID/Jerconn – It's a good play but not one you want to stick with if your premise is blown.  

    Here comes the AAPL guys….

  75. Snow
    IQ. I always thought that IQ was supposed to be a persons natural ability. 

  76. You can follow the Engadget blog for Apple at:

  77. Pharm
    so is AVEO a buy?

  78. Big warning on the video that if you copy it – you die.  

    Event is in a broadway-sized theater.  

    Cook wearing blue polo – totally his own man…  ;) 

    5M IPhone5s sold first weekend.  

    Showing video of Apple stores around the world on launch day – very cool.  This is why I don't get the doubters – what company in the world gets this kind of excitement when they launch a new product?  They could sell and ITurd and people would line up for days…

  79. Wow, what is this conference – earnings guidance!

  80. AVEO – yes, I am in the Nov 10 Cs and Jan13 $10 Ps STO. 

  81. Phil, MLNX
    I am long 5 Mar 115,(no cover) with the company being punished for reduced 4Qr sales forecast, they 
    are presently trading in the low 70s.  What would be your recommendation?  Thank you for the 
    incite and right thinking needed to correct an error on my part.

  82. Pharm
    so you have the 10's synthetic?

  83. AAPL $630.  

    Talking about new IPod touch, which is essentially stripped IPhone – 3M sold since IPhone 5 launch date (one month now). 

    iOS6 200M upgrades/sales in 30 days.  Take that MSFT! 

    Arrrgh!  Video stopped.   FU Safari!   And that's on my IMac. 

    160M game center players – better than Zynga. 

    700,000 Apps (275.000 IPad apps) – 35Bn downloads, $6.5Bn earned by developers (only .50 per download).  

    1.5M books in Apple Bookstore.  400M downloads on that.   Continuous scrolling in new IBooks – that is a fantastic feature I use in other apps.  


    Korean and Chinese and Japanese in new iOS.  

    Mac sales up 15% through June (pcs up 2%).  

    Cook obviously very well-rehearsed in presentation – very smooth.  

    3rd time it crashed – very annoying.

    $633 and they haven't even done anything yet.  

  84. Phil:
    My new MacBook Pro Retina froze too!

  85. Phil: Feeling better about the Nov 640 calls and earnings?

  86. iOS6 / Phil – Not sales, 200M upgrades… And these are free upgrades. This is not Windows 8!

  87. That new MacBook 13" looks good. But $1700 for an ultra book… I guess these Retina display are expensive. 

  88. I just bought the ITurd, Phil.  It's great.  It breaks down exactly what you ate the night before and how much of it is left in  your body.

  89. rustle123
    Will we see that on the presentation today? :)


  91. 4th crash. 

    Apparently 13" MacBook pro is their biggest seller.  3.7lbs.  Retina display 2560 x 1600 resolution – 2x HDTV.

    5 crashes.  Only takes a second to recover but jeeze….

    Back to $629, maybe all the video crashes or maybe because they are talking about a laptop that's already out.  

    Only AAPL has the balls to say their new laptop is "just" $1,699.

    $631 – I guess people were nervous they'd drop their pants on price.  

    If you do want to save money – there is a $999 MacBook Air at the low end of their line. 

    Now Mac Mini – Those are amazing and as low as $599 with 500 Gig Drive and 4Gg Ram and 2.4Mhz.  Consumes 11 watts when in idle. 

    IMac is #1 desktop in US.  They are reminding of original IMac that was that cool see-through bubble thing.  Now it's just a screen with a built-in processor.  

    They are showing new one – screen seems as thin as a laptop – don't know where they can possibly put the stuff.  

    Glass goes all the way to the edge of screen.  5mm thick on edges – 80% thinner than last one.  I have the last one – already feeling the need to upgrade…

    $633 again.

  92. i doubt ipad mini will be big seller…but that may not be a bad thing

  93. Ipad mini will help AAPL to take a decisive marketshare of POS terminal sales.
    It has an ideal size and weight to run any POS applications.
    Iphone too small and ipad to heavy.

  94. Some poor chinese kid has to hand calibrate each screen.  

    8 pounds lighter.  I think they are missing a market by not making one that folds flat to take on trips – would love a 21" IMac to work with in a hotel rather than a 15" laptop. 

    AAPL Fusion drive has 128Gb Flash and 1Tb or 3Tb hard drive and they configure as one drive which smart-configures your most-used items to flash drive.  They say fusion drive is almost as fast as a full flash drive but with 10x storage.  $1,299 for the 21.5" is their best bargain of all.  $1,799 for 27" version.  

    Now back to Tim – hopefully we're getting to it now.  

  95. Cook just said they sold their 100M iPad last month

  96. Sold more ipads in Q2 then any PC maker sold PC's


  98. 94% of Fortune 500 companies testing or deploying iPad

  99. 100M IPads sold.  2.5 years since introduction.  Again – what on earth could detractors be thinking.  The IPad outsold last Q the total shipments of all products from any other manufacturer.  

    IPads account for 90% of tablet traffic by users.  That's a big number.  Shows people use them way more than others.  

    $629 – people getting impatient.  

    WHR having a very good day after earnings….

    AAPL making a big push for education market with IBooks – 80% of textbooks available.  I wonder if they edit out evolution for the South and Md-West?

    Nas 2,997 – not quite there yet.  

    Oh no, $628, $627 – they are not getting to it fast enough…  Maybe it's not there?  

  100.  oh wait…wfc announces it incrased common stock repurchase authority

  101. buffett…buffett…buffett…please stock the swoon today after i "won" debate

  102. They are doing a great job comparison model with their competitors (Android) tablet.

  103. They still don't have a name for the new, new IPad – just calling it 4th generation IPad with improvements.  

    $627.  Keep in mind, by the way that each $1 in AAPL is $1Bn in market cap. 

    Finally the Mini!  

    Looks like a big IPhone or a small IPad.  7.2mm thick – as thick as a pencil and weighs 0.68 lbs – half of the other IPad – that's cool.  


    7.9" diagonal.  Same amount of pixels exactly so no software changes needed. 

    Now crashing more than it's working.

    Doing comparison to unnamed Android tablet.  Pointing out that, when using the web, IPad Mini has 50% larger image than 7" Android.  Pointing out how much better popular apps look on the Mini. 

    Going over features – in between IPad 2 and "New" IPad.


  104. Looks like we'll have to wait for earnings for a big move now!

    It does make you wonder if they were preparing us for so-so earnings today by saying that things are going gangbusters now and get ready for great stuff in January.

  105. Apparently some people on Twitter not happy that Apple has already refreshed the iPad 3 with a new processor so close to the previous release!

    Oops, down we go…. $625!

  106. $429 for the base 32 GB iPad mini….. $520 for the 64 GB and add $130 for LTE! I guess they decided not to compete on price with GOOG and AMZN.

  107. AAPL going nuts, up and down…

  108. And the market doesn't like these prices apparently!

  109. FaceTime HD is nice to include.  

    $329 for Wifi Only, 16Gb

    $459 for cell system, 16Gb – shipping right away in Nov.

    $623 and falling – not good enough for investors.  I think you have to let the disappointed people bail and then see where we settle up but, on the whole, not likely to get a big pop now.  

    AMZN very happy that AAPL not touching their price.  GOOG greeen too.  

  110. St Jean, Agree.  Could be so-so  AAPL earnings but great forward guidance.

  111. You figure that Amazon sells the Kindle at cost for $200. If Apple wants their 50% margin, these have to go for $400. They all use the same components except for the processors…

  112. ipad missed 3q estimates according to what they said in presentation

  113. The 50% Fib retracement is at $616 and we are holding that so far. 

  114. Hi Phil
    In the event that AAPL earnings are bad, could you please suggest an SQQQ hedge. I could do TZA hedge as suggested over the weekend but I am afraid AAPL may tank without the general market tanking with it. But if APPL tanks, SQQQ will go up – so it may serve as a better hedge for me. 

  115. FWIW, I've been with iPhone since the start, but I didn't buy a 5, and I'm probably going to buy a Galaxy Note 2 next week. As part of your AAPL DD, everyone should watch some youtube videos on the new Android 4.1 Jelly Bean.  It's pretty awesome.  Not saying I would short AAPL, or even sell if I was long – just that the competition  is getting tougher. 

  116. I dont know how ANYONE can beat up Apple right now, new computers, laptops, phones, and tablets, all beautiful and powerful

  117. But pricey Angel… Unless you are in top 1%, a $1700 computer and a $500 7" tablets are expensive especially when there is competition for 1/2 that price. Not Apple but I am sure families are making compromises…


  119. MLNX/Rob – That's a shame, I warned on them being too dangerous last Wednesday.  March $115s are just $1.10 and the stock is at $70 so this is a pretty dead thing.  You can sell Dec $85s for $2 and use that money to roll to the June $85/105 bull call spread at $4 so .90 out of your pocket to roll down $30 is not a bad deal and you have the callers covered for $20 but, if they fail to hold the 200 dma at $70, where they are currently resting from their $40 drop, it's a long way to the bottom for these guys.   

    AAPL tanking the markets – hopefully not a preview of Thursday evening.  

    AAPL/Newt – I feel good about earnings but people wanted a lower price but it's silly because they will sell out at any price and they can always drop it later or put in specials like give people $50 ITunes cards with a purchase.  

    Free upgrades/StJ – Yes, very nice of them.

    SQQQ/Gandhjo – That's always a good one and they are up .86 today at $41.70 on a 1% drop in the Nas so figure 2.5% more takes you to $44 and the Nov $40/44 bull call spread is $1.50 so 166% upside on a big Nas drop and, assuming you have $15K in AAPL like we do and you want to hedge a 50% loss, then you need to put about $5K into the spread and hopefully your upside is more than that and, if AAPL goes up, hopefully you can pull this hedge with a 50% loss and so you sacrifice the first 15% of your AAPL gains to the hedge if all goes well.  

    Beating up AAPL/Angel – Apparently investors can.  Being punished because new device does not turn water into wine. 


  121. Might have to revise that detailing deal with the iPad mini prices Angel…. Might have to wash the car twice!

  122. Imac: I did all of my trading on my old 2005 IMac until it crashed 5 months ago. I waited very patiently for the updated IMac, but could wait no longer. I bought an Asus with an Intel I7, 8 gb Ram, and this thing is blistering fast running four monitors. The cost:   $699.00.   I plan to my another Mac, but too bad for Apple, probably only a mini for music, reading and photos. 

    range is between 329 and 659, depending on storage capacity and whether its just wifi or wifi plus cellular

  124. MNST should go public in Afghanistan, it's like crack to these people. All the bazaar shopkeepers ask for it and theyll give you a much better deal if you bring them a few cans before negotiating with them.

  125. whew Phil got caught with some /RB contracts and took me half a day to scale in and out —finally got out with tiny profit—thanks for the tutorial last year in Vegas
    now to AAPL yuck

  126. Comparison with other 7" tablets:

    The specs are very comparable except that the iPad has 2 cameras. And prices…

  127. All is not apple, I am getting a strong sell signal and anti-stick is looking to stick.

  128. AAPL, a ton of volume on that spike down. Hopefully flushing out and moving higher. Getting nervous for earnings if it's still in this range.

  129. Went up a little now that sell again, maybe it is for tomorrow?


  131. Samsung is having a Galaxy Note II World Tour event tmrow night in NYC featuring Kanye West.  As a proud Note owner, I signed up.  free to attend.    

  132. Guy on CNBC makes a good point – what happens to the guys who are pricing tablets at break-even when they get stuck with inventory?  The lose that money and they don't make it up with revenues on unsold units – what a stupid business model.  

    Pricey/StJ – They have only sold 100M IPads – the top 10% of 7Bn people is 700M potential customers who have proven since the $500 Motorolla Razr in the 90s (with inflation, over $1,000) that they're willing to pay for cool devices.  I remember my first Apple 2 was about $2,000 and my Dad's PC Jr was $3,500.  These are not meant for poor people – that's what AAPL understands – their market isn't everybody – just the people who can afford it and they design something those people really want.  They also make cheap cars and small TVs but the top 10% don't buy them.   These are very personal items – people will pay more and, frankly, they're not wrong – you're $200 Droid phone needs the same $100 a month data contract that the $399 IPhone does and, when I go to add a tablet to my account for another $30/month – am I really so dying to save $100 bucks that I'm not going to pick the thing that makes me happiest?  

    AAPL – OK, I think we finally blew out the doubters and now the buyers step back in.  Be lucky to see $633 again though. 

    Twice/Angel, StJ – Just what I was thinking.  It's $125 anyway to do the car.  

    Mac/Jbur – I love my IMac.  Such an elegant piece of equipment.  

    Reviews/Angel – So AAPL is larger and weighs less has a 4x better camera (2 of them too) and has double the battery of the Kindle (same as GOOG) – seems worth an extra C-note to me.  I'd like to see the screen on the GOOG though – specs are better. 

    /RB/Savi – Good job sticking with it.  I thought $2.60 would hold – just didn't think we'd take such a detour.  Oil too – now $86.83. 

    All is not AAPL/Shadow – I think the Appleconomy would dispute that.  

    Transports have snuck up 1% today – so much for Dow theory…   SOX are green too – weird!  

    Chip stocks are outperforming a little following ARM's (ARMH +11.6%) pleasing Q3 report (III), in which the company reported a 16% Y/Y increase in Q2 unit shipments (from which Q3 royalties were derived). Beaten-down PC chip stocks are among the winners: AMD +3.8%NVDA +2.9%INTC +1.1%. Earlier today, AMD announced its Vishera desktop CPU line - AMD is counting on the 4 and 8-core CPUs, which are priced aggressively, to help reverse share losses to Intel's Ivy Bridge. Reviewers are reserved with their praise. 

    1:04 PM The Treasury sells $35B in two-year notes at 0.295%. Bid-to-cover ratio of 4.02, vs. a recent average of 3.73; indirect bidders take 33.5%, vs. last month's 27.2%. Direct bidders take 38.1%, vs. a recent 12.2%.

    1:12 PM Treasurys add to an already strong day after the two-year note auction sees an unusually robust direct bid; so that's where all the equity outflow is headed. The 30-year yield now -0.07 to 2.91%; 10-year -0.06 to 1.756%; five-year -0.04 to 0.75%; two-year when-issued -0.02 to 0.291%

    Treasury bond bulls as far back as memory goes, Hoisington and Hunt remain so, explaining how Federal Reserve actions serve to slow economic activity. Rising CPI during QEs I and II "had a devastating effect on workers' incomes," they write. Bernanke's wealth effect is a myth, they say, with zero benefit for those with incomes less than $130K, and negligible help for those over. As always, a great read.

     Ed Yardeni looks at global oil demand as a proxy for growth prospects: The growth rate of oil demand among non-OECD economies has stabilized ~2.5%, while the growth rate for the advanced OECD economies is up from -1.7% Y/Y during March to -0.8% during September. "That’s mildly encouraging and suggests the recent weakness in the OECD’s Leading Economic Index may be short-lived.”

    Interesting, Nas well above yesterday's lows now – down 15 from even very doable if we have a stick like yesterday.  

    AAPL/Real – No way we can keep naked Nov into earnings – potential suicide.  The roll I outlined earlier is still holding up though so no hurry. 

    Water to wine/Angel – I believe that would be called the iAM…

  133. Actually, down 2.3% – AAPL is responsible for all of the Nas losses today.  

  134. Pharm—I am in the Jan 10 Aveo calls —down more than 50%--would you roll down or add to the Jan 10 calls?

  135. PHil – is this stickable?  Maybe we see what we saw yesterday in the close…

  136. Phil / Inventory — I don't know Phil, they make it up on the razor blades, no?  How much does it cost to house an electronic book for download? 

  137. I actually think its brilliant it is a direct competitor to Amzn and Goog tablets at a slightly higher price but offering more

  138. AAPL/Phil – Would you consider a play on the weekly short 650 Calls here going into tomorrow on this break of 620?

  139. CVX, DD, XOM, IBM and MMM are responsible for 120 of the Dow's 209-point drop.    We know oil will recover and IBM comes and goes but DD (-$4.50) and MMM (-$3.50) are 64 points that won't come back very easily. 

    If they had put AAPL in the Dow when KFT came out – we'd be down another 1,000 points!  

    Stickable/Jerconn – Volume just 77M at 3:13 so, from that perspective, we're stickable but those Dow components are unlikely to recover quickly and AAPL is too expensive to stick if people are still selling it.

    Blades/Rain – I know that seems to make sense but I did the math a couple of weeks ago and it's a long, slow road for them to recover the costs of selling the machines.   The same argument that says people who don't want to spend money will buy the GOOG and AMZN tablets mean that their average customer is less willing to pay for Apps as well.  With a limited supply of tablets vs. demand – AAPL doesn't want poor people buying IPads – they want people who think nothing of dropping $100 into an ITunes account and statistics show that they get it.  

    AAPL/Opes – Tonight I'm inclined not to cover as we should be back around $630 tomorrow.  THEN I will like selling into a move up but, obviously, not as a hold through earnings under $660.  

  140. Phil / I've got the AAPL Dec. 630's naked long except a couple of Nov 645's for cover.  I need advice on my cover and roll.  I can wind up in the same April 635 / 700 BCS you've described with the same Nov. 665's for cover.  Is that what you'd do with my Dec 630's?  

  141. Phil
    OK it is an AAPL economy now but it is not the total economy yet, I am liking oil at $86, not for trading but hopfully I can afford to drive again!
    Is Apple paying you to say all that stuff?

  142. Phil,
    What do you think abouit playing oil long here with the USO $31.5 weeklies @ $0.72 with only $0.22 of premium?

  143. I'm not sure it's a competitor for either.  I think people who want a device to read books on are going to look at amsn first (remember, the kindle started out as a book reader and amzn as a bookstore).  The choice between Goog and Aapl is a religious one in my opinion and I think there is room for both.  Some like the closed ecosystem of aapl (non-techies in my observation, that just want it to work), hackers and techno's tend to dislike the closed system and lean toward goog (in my observation).  I lean toward goog because it uses standards like USB ports, HDMI, etc. and I can buy extra batteries and change them on the fly (great while camping/backpacking).  I've personally never owned an AAPL product though.  I'd suspect in addition, there will be room for MSFT for businesses that still have IT departments and likely room for Nokia in europe.

  144. iPad screens / Phil – The Apple presentation was very misleading. The screen in the iPad mini is 35% bigger than the Nexus, but the Nexus has 35% more pixels and ultimately it's what you see… The screen on the iPhone5 has a better resolution for cryin' out loud. I guess the retina display would have been a deal breaker! The Galaxy Note might make a better Mini after all – fits in your pocket and had also a better resolution.

  145. Savi – I can't add just yet.  Holding, waiting.

  146. AAPL….hey hey hey…good bye! 

  147. Phil / AAPL — I have a hard time swallowing that someone that just wants to read on a tablet will drop the extra money for an iPad.  I think they'd rather buy 10 books.  If AMZN is selling at cost, there isn't anything to make up for (they're not selling at a loss).  If they get a single book download, they've succeeded.  Game consoles sell at a loss and still make up for it with razorblades.

  148. Good Afternoon.     AAPL observations:   Earning report could create a significant move  in either direction, up or down.  Sure, they are on a tear with products, but that doesn't mean investors will reward them on Thursday evening.   If investors sense anything they can construe as weakness, then punishment could follow.  If they hit on all cylinders, then rocket time.  I just don't know which way it will go.  I've left the Jan 620 calls bare in the MoMo portfolio.  That's a virtual account, as you know.   Interestingly, it's not the way I'm investing in AAPL in real dollars.   I'm actually in April bull call spreads, 625/725, and I've sold a bunch of  Jan 2014 600 puts.    The spreads are presently about $35 and will yield a triple by April if AAPL over 725.  I think it will be.  So in real life I've chosen to sell puts over a year out to finance the spread purchase, the spread going through 3 earnings periods to get us over 725. 

  149. AAPL/Phil
    So no cover on the 10 Nov 640s tonight but probably roll to the spread you outlined tomorrow? Right?

  150. $25KP – Wow, this is pathetic.  We can't risk this getting worse so we have to sell 9 AAPL Nov $655 calls for $9 and take the Nov $640 calls ($13.50) and roll them to the April $630/685 bull call spread at $20.  

  151. Dow only about 140 points from the 200 DMA. Might not post the Big Chart tonight and wait until morning. Don't want anybody having nightmares.

  152. /ES 1406 looking for this to hold

  153. 25KP / Phil – Don't know that we can have 9 short AAPL calls in the 25 KPM. That's $70K of regular margin. I think that margin is already stretched with the 14 AMZN short puts which consum $48K of margin. We want to keep margin requirements lower in the KPM. The KPA is a different setup as it uses PM margin.

  154.   AAPL// last 3 days down -23., +24, -21 for largest company in world…so dumb
    spain sov cds +15%, italy +10% today
     i think the real problem is the ipad 3q miss
     the price is just a mild negative i think

  155. APPL/Phil
    Managed the rolls but couldn't sell the shorts because it was over margin.

  156. Both RUT and NASDAQ bounced off their 200 DMA! I think we need to hold that line because it seems that people are looking for a reason to sell. And who has been blamed for bailing out at the 200 DMA especially fund managers!

  157. AAPL reolution, to see a serious difference the 30 inch is minumum full HD. My laptop 15" has full HD but mt line speed is marginal so HD stops to buffer, I kick that off and the problem goes away and the picture is still good without the stops, also think about the cost for data you can't see and get out of town be ready for buffering that sucks. Spec freaks made CD perfect sound forever but it wasn't natural. 7" screen? Are you guys kidding?

  158. AAPL/2Can – Yes, I think that general area (see above) is the best place for a roll.  In the $25KP, we actually took $2.50 off the table but we'll likely spend it again when we need to (maybe stop out a few calls) so we're in the $55 spread for net $30 and, hopefully, we'll be able to do some more sales to reduce our basis down the road.  

    AAPL/Shadow – This is just me pounding the table on a cheap stock.  If we could reasonable DD in the $25KP – I certainly would.  We go through this with AAPL every year or so – some panic – everyone thinks they are worthless and then, a few months later, they are making new highs.  Even in 2008-9, when they were back at $85, it only lasted until March (5 months) and by Oct 2009 there were $200 but you're not going to make 100% if you aren't willing to buy on the way down.  

    Oil/Button – In the $25KP, we went with the USO Nov $33s, now .58.  Weeklies are a bit much of a gamble as a wrong turn leaves you no time to recover.  It's fine for a day trade, where you can stop out but overnight is very risky.

    Room for both/Rain – Of course.  As I pointed out with AAPL desktops – they only have a 6% market share – it's not like they need to get to 40% to do well.  With tablets and phones – it's a little more Coke and Pepsi but KO and PEP have done all right for the past 50 years with their respective shares.

    Display/StJ – That's what I want to see.  I can't use it if it's fuzzy. 

    Cost/Rain – It's not cost – it's the cost to manufacture.  They lose on distribution and marketing, warehousing and shipping – down about $20-30 per unit when it's delivered.  AMZN's margins are 5% but assume they make 20% on book and app sales – they still need at $100-200 in sales before they are seeing profits and $200 is as much as the average tablet user spends total, not to mention, for the most part, that AMZN is simply cannibalizing on-line sales for Kindle sales so it's not even new revenue.  Game consoles sell $50 games, not $15 books where $10 goes to the publisher and another $3 goes to a discount and AMZN maybe gets $2 less expenses for distributing the book and running the overall company.  

    Well that was a crap close – glad we covered AAPL – very pathetic overall. 

    AAPL/Lflan – Yep same conclusion I had, better to be in a spread we can work off. 

  159. NFLX beats on earnings (big) and revenues (not much) but guides lower and gets taken out to the woodshed AH. I guess rolling out to all these countries is expensive!

  160. AAPL/Zip – Good timing, had to pull the trigger as it was turning very ugly – can't take a break below $600 if it happens.  

    Big Chart/StJ – Yes, very scary-looking now.  

    Nas 2,990 very, very bad. 

    $25KPM/StJ – I'll figure out an alternate play this evening but that one is the proper play to make and, if unmakeable – then probably better off taking the loss that taking on further risk just to fit it inside margin restrictions.  

    AAPL/Zip – Well the idea is to raise $10,000 shorting AAPL but you spent it so you are in $55 spread for net $40 – still make $15 if they head up but not much point to the trade if you can't sell calls to reduce basis.  As I said yesterday – "if you can't afford the next move – NOW (then) is the time to stop."  You can't afford this move – why make 1/2 of it?  AAPL was $20 higher this morning – you could have cashed out and been done with it. 

    FB's .12 per share being taken very well. 

    NFLX/StJ – I'm no fan but that's a pretty silly reason to sell off.  

  161. Grant Williams presentation re bubbles. "It's NEVER different."

  162. Netflix analysis:


    Netflix saw a return to profitability and more than half a million new US subscribers in the second quarter of this year, and it's now announced that it's added a full two million more streaming members worldwide for the third quarter. That brings the company's global base of streaming subscribers to 29 million, 25.1 million of which are in the US. It's also announced another bump in profits to $8 million in net income, with global revenue of $905 million. It's unsurprisingly a different story when it comes to DVD subscriptions in the US, however, with the company reporting a drop from 9.24 million total subscribers in Q2 to 8.61 million in Q3.

    In terms of usage, Netflix says that its streaming members have now consumed over three billion hours of content, and that TV shows now account for about two thirds of that viewing activity. The company has also reiterated its commitment to original programming in its letter to shareholders, although it notes that commitment comes with some front-loaded expenses that will result in negative free cash flow for the next "several quarters" beginning with Q4. The company further adds that it believes "investment in originals is wise, and we will evaluate the performance of the slate next year to determine at what level we should fund additional original." You can find the full letter and all the numbers at the source link below.

  163. I love these Fast Money guys going around talking about Romney being more pro-business than Obama. Like GW Bush for example:

    At that would be such an improvement over that Socialist Obama!

  164. AAPL Market / Phil – Looking at this chart, it looks like we will achieve saturation soon on the high ticket items:

    I can see the top 10% in the first quarter, but then top 1% in the next and then top 0.1% in the one below gives us about 137 million possible customers! Obviously some products like the phone will spread wider because they are "subsidized" when you buy them. That still a big market but there are limits I think. In my neighborhood, all the somewhat techie people have an iPad already but they are not the Apple fanboy types looking to upgrade with every new model. I still use the original iPad and it works well for what I do. 

    Not saying that Apple is doomed (I am sure they will still make a ton of money), but like VCR, DVD players, etc… eventually you reach "possible" market saturation and growth has to slow down as well as margin.

  165. AAPL/Phil
    Woulda, shouda.

    I had been moving into the April spreads you've mentioned to me before during the morning but waited to see if I could get a good price on the 640s which were about 24 at one point. I thought they would pop a little more with the news announcement and I would get a better price. And as you pointed out I let the chance slide twice.

    As it is, this is where my AAPL adventure has left me as I am all in spreads now. I will have some margin to sell some calls along the way to April but have to be careful not to exceed margin limits.
    This is what they are and I've put in what I believe would be the profit it all goes well. Does this look OK?
                5             Jan 19 2013 630/650 for $10.28 — possible gain $20 ($10,000)
                2             Apr 20 2013 635/685 for $26.18 — possible gain $23 ($4,600)
                2             Apr 20 2013 630/685 for $23.07 --  possible gain $32 ($6,400)
                4             Apr 20 2013 630/700 for $22 — possible gain $18 ($7,200)
    The April sets were bought as I sold the 640s and obviously lost money on that transaction.
    Even without selling calls it looks like I the spreads should bring in $28.2k. Not going to make me rich but should pull me our of the fire somewhat. If I can sell calls I will and, you mentioned about doing things to widen the spread, which on the Jan one I will do if I can.
    So that's the story right now. Any comments/advice?

  166. Global economic calendar


  167. Stj:   With all due respect,  I don't know what you can conclude from that chart on each president's "stock market performance," other than that the stock market has risen during the tenure of 16 out of 19 presidents.  Clinton was arguably one of the better Presidents, and it dropped. A more serious criticism is that, since it is not inflation-adjusted, those percentages are utterly meaningless.  One thousand dollars in 1900 — the beginning date of your chart — is now worth, in commodities or income, @ $27,000.  A perception of future inflation will tend to push buyers into stocks, so all your bar chart may prove is which Presidents scared the crap out of investors with their inflationary policies.  That would tend to explain why Clinton suffered a stock market drop — he actually reduced the deficit.  Just saying.

  168. Stj II:  Looking at your "income categories" chart led me to look in world population growth in general.  One of the more surprising conclusions I reached is that it's very difficult to project, because it is [unsurprisingly] very sensitive to fertility rates, which is turn is very sensitive to urbanization. The moment more children picking corn in a rural context  [good] turns into more money for education [good] in an urban context, fertility rates fall off a cliff.  Yet predicting the rate of urbanization is a can of worms, because it varies greatly by region, and once urbanization reaches a certain threshold, the population density in rural areas will tend to stabilize.   Of course all this is moot if global warming creates famine or touches off a nuke.  My takeaway — population growth cannot be accurately predicted.

  169. Guys- Do you know of any website that would allow me to build an excel sheet with values of technical indicators for my chosen symbols. I just want to set up a sheet with a view of tech indicators for my holdings and watch-lists. Thanks in advance.

  170. Phil / COST – any interest in the 2015 Costco Short Puts?  9% off the recent high, Currently 16% to the 80 strike, 23% discount if put to you at 73.30.  Premium collected for the 80 strike is 6.70.

  171. Presidents / Zero – That was somewhat humorous given what we hear these days about the fact that a Romney presidency would be so beneficial to businesses… The fact of the matter is, presidents are also victims of the macro environment. So even a "free market" guy like Bush saw a stock market decline in his first 4 years and a "socialist" like Obama got some of the better results. Look back at idiots like Kudlow trying to time the market based on who wins elections – short when Clinton took office, long with Bush and short with Obama. But I do believe that Dems have shown themselves to be better steward of the economy of the last 20 years. And maybe the market results are not completely an accident!

  172. Population / Zero – Let's hope this chart doesn't come true:

    Well except for China, we would be truly screwed! And China doesn't have a choice, it won't have enough food or water!

  173. Nothing like a couple 200 points drops to cure an overbought condition:

    While five sectors were overbought last week at this time, no sectors remain overbought after today's big market decline.  Just three sectors remain above their 50-day moving averages — Health Care, Utilities and (surprisingly) Financials.

  174. Who could have predicted that the high flying NASDAQ would be the first index to fail it's Must Hold line (the Dow never made it). It's also the closest to its 200 DMA. 

    At the same time, no reason to panic yet, we tested the 200 DMA back in June and bounced back. We went up 400 points after that in the NASDAQ. So a correction was not unexpected. But gotta be careful now!

  175. Heard an interview with Charles Nenner. He feels cycles, are a President's greatest ecomomic allies….
    The interview is audio only – click the "weekend market wrap" and go to the -24:00 mark where the interview begins….

  176. ….For the interview, the "published date" was 10/20/2012….

  177. ….and so was my anniversary….  :)

  178. Donald Trump is now basically just a clown. No an inch of credibility left… And yet they have him on CNBC almost on a daily basis:

    “This is the worst foreign policy in history,” the reality star opined. “I got a kick before when he was saying, he’s the more experienced person, meaning Obama. It’s the worst foreign policy in history. The Middle East is crumbling down and they hate us. We’ve spent trillions of dollars — we spent 1.5 trillion in Iraq and Iraq is going to hell. They all hate us, not to mention the lives that we lost. The lives that we lost in the Middle East, it is the greatest disaster.”

    So now the Iraq war was Obama's war! They are revising history rather quickly these days. It was so much fun when Obama skewered him at the correspondent dinner in DC last year.

  179. Oil lines for the nigh owl and the members down under:

    R3 – 92
    R2 – 90.45
    R1 – 88.76
    PP – 87.22
    S1 – 85.53
    S2 – 84
    S3 – 82.30 (Wow and 82 handle)

    Yesterday high and low – 88.92 / 85.69

    Good night and good luck!

  180. Good morning!  


    Great Daily Show summary of the last debate: &

    Also, a good summary of Obama's "outrageous"  "not optimal" comment: & – Conservatives may feel free to share with their friends….

    The Futures were doing well until the Euro got massively rejected at $1.30 at 3am but we're recovering back to slightly up now.  Dollar at 80.17.  Oil testing $87 (/CL) so good long play over that line with tight stops.  

    NFLX hammered to $56, down about 20%!  I really disagree with their move to have original content – big gamble and I don't think much benefit – even if they end up finding a hit.  

    Williams/Scott – Good presentation, that's a keeper.  We should save informative things like this for the Wiki.

    Saturation/StJ – While I think that's a reasonable way to look at it, clearly it doesn't reflect the reality of 100M IPads sold in 36 Months, does it.  Therefore, somewhat flawed assumption and I'd suggest maybe 300M would be your target consumers for high-end items.  Even that may be low as 400M PCs and 650M smart-phones were sold this year (I assume tablets are included in PCs) so SOMEONE is buying 1Bn "expensive" items.  You can buy a non-smart phone for $19 now – so why doesn't everyone do that if saving money is the point?  The same reason every car is not a Yugo – even in poor countries.  

    You can't underestimate how much people will spend to make themselves happy.  In fact, didn't you ever get a job BECAUSE you needed to pay for a car?  If not, many people do in High School and you don't NEED the car – you can keep borrowing your parents or let your friends drive – it's a pure luxury item for teenagers but damned if they don't all work JUST to have that one item they desire.  

    AAPL makes products people desire.  So far, GOOG and AMZN make products that are "almost as good" – the same way a used Camry is "almost as good" as a new Mustang convertible – not everyone will pick the Camry.  

    AAPL/Zip – You are still banking very much on AAPL having good earnings.  You say "possible gain" but AAPL has to gain almost 15% to hit your levels.  We're in the $630/$685 spread in the $25KP BECAUSE we sold calls for $10 and we are only worried about the upside.  If AAPL drops $50, then we can expect to drop to the value of the $680/735 bull spread (now $13) and that spread, of course, can be rolled down $50 by selling another $10-15 worth of calls and we WANT to be in the $580/635 bull spread with a few more months to sell.  So we can see a path to making money whether AAPL goes up or down 10% – you will simply lose 50% if AAPL drops 10% and, if you can't sell offsets to make a roll – you're stuck with either taking a loss of praying for a miracle in which AAPL rises 20% to cover your April position.  

    You can sell AAPL Jan $665 calls for $20 and the 2014 $700s are $60 but there's a margin issue ($35) so maybe you need to be in the $665s at $73.  So that's net $53 and you can afford about $6 and I AAPL goes up 10%, that's $680 and obviously you can roll the short calls and your $700s probably are worth what the $630s are, which is $87 so up 6x $14 = $8,400 and you have a whole year to make more sales of, hopefully, around $6,000 a month.  Flat is obviously the same deal and down 10% should drop your longs to about the price of the $725s, which is $53, so down just $20 x 6 and all you have to do is sell something else and roll down and wash, rinse repeat until AAPL comes back.  So, using the calendar spread, your loss is a little less to the downside (and much less if not a big downside) but the more important point is that it's recoverable – whereas the bull call spreads effectively freeze you because, for the same reason you can't afford the margin to sell short calls, you can't afford to buy back your caller and roll down, right?   This is very much like chess – look a few moves ahead and make sure you are not backing yourself into a corner.  

    Another options (and this goes for all AAPL players) is to get out of AAPL entirely and switch to the QQQ 2014 $65 calls for $6 and sell the Jan $66 calls for $1.95 so now you're collecting 33% on a bullish net $4.05 calendar spread.  If the Nas falls 10% to $60, the 2014 calls should be rollable to the $59s for about $3 and, since you collected $2, your net loss is just $1 (20%) on a pretty big drop back to 2,700, which it held in the June crash.   If the nas is flat into Jan – it's a home run and you have a year to sell more and if the Nas goes up 10%, the Jan $66 calls can be rolled to the March $68s (now $1.80), hopefully even and that creates a $3 calendar with 9 months left to roll.  

    If that were the case, it would be best to roll the callers to 2x the $72s and spend another $4 to cover in 2014 so that would require keeping 1/2 on the sideline so let's say you converted 15 AAPL spreads at about 20 ($30,000) into 40 of these spreads ($16,200) that gives you a very reasonable chance of getting into a position where you can generate $3,000 a months in income ($36,000 for the year) by selling 30 calls a month for $1 and again, it doesn't make more money than the AAPL spreads but it does have a higher percentage chance of not busting you.   

  181. Thanks, StJean!  

  182. Calendar/Kustomz – Wow, way too much information!  

    Stock market/ZZ – Actually you can thank Nixon for inflation – before he took us off the gold standard, it wasn't much of an issue:  

    So FDRs gains came against flat to down prices.  How did he do it?  STIMULUS (and war).  Giving jobs to actual citizens – not "Job Creators" is the best way to create prosperity.  You're very right regarding Reagan and Bush – they deserve zero credit for coming into office with a CPI of 50 and finishing in 1990 with a CPI of 125 so they'd better have a combined 150% gain in the market and, oops, only 71% – total failure!  CPI under Clinton went from 125 to 175 (appproximations) so up 40% and his market went up 88% – my, that's much better than crap Republicans by about 100 miles.  Bush the 2nd had real good inflation – up another 50 points (28%) but his markets lost money and Obama has had essentially zero inflation but the markets are putting in a Roosevelt-like 67.9% in his first term.  So stimulus works and imagine how well it would work if we spent $3Tn on people and $600M on banks instead of doing the opposite – as we have so far.

    Excel/Chakra – Sorry, not my thing. 

    COST/Jfaw – They have come down nicely but I think it might be early to call a bottom.  Would be nice if they test the 200 dma at $92 but $95 not too bad and you can sell the 2015 $80 puts for $7 for net $73 and that's about their 2-year low so a very fair entry. 

    Speaking of fair entries.  AMD may be good for the same reason INTC is bad – the landscape is changing and INTC doesn't dominate the new spaces.  It's risky but at $2.14 it's a reasonable gamble. The way I'd play a stock like that is to sell the 2015 $2 puts for 0.72 and buy the 2015 $2.50/4 bull call spread for .30 so you have a net .42 credit and, at $4 you make $1.92 (the credit plus the spread price) and worst case is you own AMD at net $1.58, which is a 26% discount to the current price. Think or Swim says the net margin on the puts is just $50 + $30 (for the spread) per contract is all you have to tie up to make up to $192 – a very nice 240% ROI in 2 years if it works out!  We can certainly afford to add 100 of those to the Income Portfolio (net credit of $4,200, using $8,000 of margin and committing to buy 10,000 shares at net $1.58 ($15,800) – so if it drops to .50, we DD and we're in 20,000 shares for $1 and sell 2017 calls for .50.  

    Very telling charts Diamond:  


    It's just stunning to me how undervalued AAPL is but I guess we'll see tomorrow….

  183. Population/StJ – That's messed up in China – If their population drops like that is will be 950M very old people…

    And who ordered 600M more Nigerians?   Better print more money!  

    Overbought/StJ – Be careful drawing conclusions from that.  While the short-term indicators look oversold, the longer-term NYSE Summation Index is not at all oversold yet:



    Note it's the long-term indicator that is a much better predictor of market bottoms but the short-term does indicate when it's a good time to begin bottom-fishing.  

    Big Chart – Ahhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!  All about Nas 3,000.  If we can't hold it (get it back) and especially if we then fail the 50 dma at 2,971 – it's time to aggressively short.  Unfortunately – it is ALL up to AAPL tomorrow night.

    Happy anniversary 1020.

    Trump/StJ – Isn't today the day he's going to unveil his shocking information that will destroy Obama?  I bet he found some Doctor in Kenya who says he delivered Obama….  The GOP loves their October surprises.  

    Time to go to work.

  184. I hate to say it but if you like penny stocks, UBRG is finally back to a penny and they were 0.09 last year so kind of fun to buy 100,000 shares for $1,000 but it's a total gamble and you should pretty much have a sell in at 0.02 for 1/2 as soon as you buy it.  They went up 76% yesterday and that should bring in some buyers today and then, maybe, on the weekend the story will be picked up but this is a total crap shoot in the kind of company I usually hate (just a few guys at a desk moving money around under the guise of being an energy company) but they've got some good revenue growth (no profits) and last earnings they shot up to 0.026 (and fell back to 0.003!) so it could be fun.