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Telling Tuesday – Earnings Season is Upon Us!

I love earnings season!

As a fundamentalist, it's a time to go over the data and get a better picture of how these companies we invest in are doing.  How each sector is performing gives us a clearer picture of the overall economy and, of course, there are tons of quick-trading opportunities as those crazy speculators are willing to pay us huge premiums on both sides any bet we're willing to take – we just have to play the role of bookies.

Take AA, for example, who report this afternoon.  Although the stock is just $9.10, we can sell the Jan 2015 $7 puts for .80.  That would, at worst case, put us into the stock at net $6.20, which is a 32% discount to the current price.  In fact, if we're willing to risk owning AA at net $7.70 (still a 15% discount), we can buy the 2015 $7/10 bull call spread for $1.50 and now we're in the $3 spread that's already $2.10 in the money for net .70 – it's up 200% at our entry and all AA has to do is hold $9.10 for 2 years.  Our maximum gain at $10 in Jan 2015 is $2.30 but that's a very nice return on our money (there is also a net .70 margin requirement according to TOS) and, if you REALLY want to own AA for net $7.70 as a long-term investment – there's not much downside.

I love trades like this on blue-chip companies.  Earnings tends to pump up the prices you can sell puts and calls for so it's a great time to take advantage and, as I'm reviewing the Income Portfolio for our Members, we're actually finding quite a few new long-term entries just like AA, which I've highlighted in blue under each relevant review.  

On ALU, for example, although we've already made 166% off our initial entry, we still have another 38% to go through the end of the year.  While 38% sounds very dull compared to 166% – it's so deep in the money now that it's attractive as a new trade – even with the lower rate of return.  I had mentioned our ALU play in our Morning post, way back on October 18th, when the stock was still $1.10 (now $1.73) yet there are still people who don't think it's worth less than $2 a day to have our morning posts delivered to their Inbox every morning before the market opens – go figure…

We're actually going to do an experiment this year and set up a virtual portfolio for the picks I make in the morning posts.  It will be tracked on an independent site that people can follow so, hopefully, we can get the great and powerful Mark Hulbert to rank us, as we'd be right near the top if he did and that would be great exposure for our newsletters.  

We have asked to be ranked before but no luck so we'll do a little self-promotion this year for the PSW Report (our twice daily Emails with site access), Stock World Weekly (our weekly, executive review of the markets) and Market Shadows, which is a new report we send out to Report and SWW subscribers kind of, sort of weekly

Our indexes are still wriggling around between the 4 and 5% lines we laid out last week at:  

  • Dow: 13,319 & 13,447 (finished 13,384) 
  • S&P: 1,442 & 1,456 (1,461
  • Nas: 3,028 & 3,056 (3,098
  • NYSE: 8,580 & 8,660 (8,636) 
  • RUT: 858 & 866 (875)

INDU WEEKLY So we still have 3 of 5 of our indexes over the 5% lines but those are previous spike lows, not our longer-term 5% lines, where we're waiting for the Nasdaq to confirm a move up and, of course, the Dow is still seriously lagging as they have yet to cross over their Must Hold line at 13,600 (see Dave Fry chart), which was our problem all of last year too but at least signaled us ahead of the big drop in October when the Dow failed right at that line.  That means we're going to have to take it very seriously but we're currently hoping the 3rd time will be a charm as the RUT topped out at 868 in September and they made it over now and that gives us a bit of hope – as long as they can hold it this time (866). 

We finished off our day uncovered on our AAPL longs as we got a dip right to our $513 target (again, the 5% Rule rules!) and finished right at our $523 target so now we're looking for $531 this morning but another failure there is going to lead to at least some partial covers on both AAPL and the Qs.  

Hopefully not, though, as we've got a rally to run.  Treasury has some short-term notes to pawn off today and we're not expecting any trouble there but tomorrow is a 10-year auction and Thursday is a 30-year auction and they are going to be tough sells, so expect a bumpy ride until then.  There's also an ECB meeting this weekend so more madness from across the pond next week.

MON had earnings this morning and knocked them out of the park with a .25 beat at .62 (67%) and a 10% beat on Revenue, just shy of $3Bn.  They are also raising guidance to $4.40 per $96 share for 2013 and that's got a good chance to push them over $100 this morning, where they'll probably make a nice short as it's a bit stretched with a forward p/e of 22.7.  If you want a real bargain – BA had an fire on a 787 and should be down around $75 again, where we can look to sell 2015 $55 puts for $5 for a ridiculous net $50 entry or maybe we can get $10 for the $70 puts and risk a net $60 entry in the Income Portfolio – we'll decide later during Member Chat.  

YUM is also getting crushed after serving China contaminated chicken, which is causing them to issue a warning that same-store sales will be off by 6% this Q but they had already forecast a 4% hit and they've held $62 on several occasions so this could be a good time to take advantage of a cheap entry, selling July $62.50 puts for $4 or maybe $5 if they get a good dip – just taking advantage of the bad news ahead of earnings.  The 2015 $50 puts can be sold for $5 for a net $45 entry (30% off current price which is already 15% off the pre-news top at $75) and TOS says the net margin on that is just $5 so you either make a 100% gain on margin in 24 months or you own YUM at it's lowest price since 2010.  

Mark Hulbert, eat your heart out!  

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  1. Oil Lines

    R3 – 94.45
    R2 – 93.90
    R1 – 93.52
    PP – 92.97
    S1 – 92.59
    S2 – 92.04
    S3 – 91.66

    Yesterday's high and low – 93.35 / 92.42

  2. Income Portfolio news:

    BA - An investigation is launched in the 787 fire at the Logan Airport in Boston. Stock looks to open lower.
    SHLD - CEO is resigning for family reasons.

  3. phil,
    if you get a minute this week would like your thoughts on this

  4. Family / Phil – Never looked at cannoli the same way after that…

  5. PSW Atlantic City Conference in April – Currently planning to be held over 3 days April 19-21, with live trading on that Friday and general seminar on Sat/Sun.  I'm working on getting discounted room rates for Thurs, Fri and Sat nights.  We could potentially move it back to April 26-28 if more people prefer that date and there is hotel availability.  It's a busy time of year with a lot of conferences there so I'm trying to get the main conference room booked pronto.  We need to get a count of interested people. Please post your interest or email me at:  Thanks!  James

  6. And next time these ungrateful bastards need bailing out …. let them die!

    The board of insurance company American International Group (AIG) may join a $25-billion lawsuit against the government for ripping off shareholders, the New York Times reports. This after it only just paid back the $182.3 billion that the Troubled Asset Relief Program (TARP) offered as a stabilizing fund in 2008, netting the government a $22.7 billion profit.

  7. stjeanluc
    BA good time to look for a new play

    I missed your call yesterday to sell the Jan 530 calls (I have 1) just reading posts now and  was wondering which way to handle that now? AAPL looks up but still alot of premium, or could roll out for a credit? Would like your input. Thanks

  9. Pharm
    on that THLD trad why not BCS the 2015 and sell the june puts for net 0.00.

  10. German seasonally adjusted exports declined by -3.4% in November M/M, worse than the -0.5% decline forecast and as opposed to an increase of +0.2% in October. The decline was the steepest in more than 1 year.

  11. BA / Yodi – Might want to wait to see what happened in Boston. And hope that it doesn't mean a design flaw that needs to be corrected.

  12. Oh my…

  13. Pharm
    how about CLSN

  14. Holy crap…..AIG's CEO has balls…..

    Rescued by a Bailout, A.I.G. May Sue Its Savior

    CLSN/williex – they are up there chart wise.  The technology is sound….I want to know how much is built into their price now.  Start slow to average in.

  15. CLSN – scratch that….sell some puts for an entry.

  16. THLD/williex – 2015?  Way to long to own a biotech with nothing to show for its revenues.  I like shorter strikes for these types of companies. 

  17. FYI, we have already sold $3775 of premium against that QQQ position.

  18. Stjean / AIG -
    The Treasury used AIG as a conduit to pay billions of dollars to the banks – Goldman etc. – They forced the company to pay out 100% on derivative contracts that were worth less than 50% on the dollar. 
    What pisses of shareholders is that bank shareholders got much more generous deals at the direct expense of AIG shareholders. 
    The government did ex-appropriate 92% of the company – they did not do anything this drastic with the banks. 

  19. YUM sell Jan14 62.5p for 6.30

  20. Heart Phil….heart….. second to last word is missing a letter. 

  21. The usual $10K daily swing in this portfolio!

    The MoMo portfolio is in cash.

  22. Good Morning!

  23. AIG / Samz – True, but they still got something out of the deal. No one put a gun to their head when they sold these stupid derivatives to the banks! And where would these guys be if it was not for the government? Can't feel too bad for them.

  24. Phil—I think your BA put prices are too high?

  25. Pharm/AIG  Actually, it's AIG's ex-ceo, the ingrate himself, Maurice R. Greenberg who brought the lawsuit in 2011….
    In the end, it does not matter how and why. AIG would not exist without the help of the American Taxpayer.
    FU Maurice!

  26. The smartphones of 2013 will be like the super computers of 2000:


    Qualcomm's Snapdragon S4 Pro processor has been blowing us away with its speed in phones like the Nexus 4 and HTC's Droid DNA, and that's why we can't wait to meet its big brothers. The Snapdragon 800 boasts a quad-core Krait 400 CPU, that can go up to 2.3GHz per core.

    To put that in perspective, the base-level Retina MacBook Pros come with a 2.3GHz processor (though, obviously, there's a lot more to performance than clock-speed). In other words, things are about to get very fast.

    QCOM is one of my bets for the future.

  27. Phil,

    Thoughts on Yum Brands?

  28. Gingbaum
    See my note above YUM

  29. stj,
    two q's
    how are you playing the qcom and
    what is your current vxx position….tks

  30. Good morning!  

    I forgot about BA in looking for news opportunities this morning.  They don't even know what happened but may have just been a defective lithium-ion batter pack that caught fire.  This happened to SNE on their laptops – ONCE.  There was another electrical fire about a year ago but not the same thing at all and last month a 787 diverted to a closer airport because of an electrical problem that was different from the other 2.  Of course, you don't want to have any problems ever but each time there's an incident like this, they look at them and put in redundant safety for the future.  The shakeout on 747s was done in the 70s.  A UA 747 flight crashed in 1989 due to explosive decompression – now THAT was a design flaw.  Still it was 20 years after the planes were launched and the put in new doors and that was that.  In 1996, a 747 exploded due to an exposed wire in the fuel tank – it took almost 40 years for that flaw to show up.   Anyway, the point is that you have to accept these little set-backs to invest in BA but it's a fantastic company long-term and you need to take advantage of these set-backs. 

    So, let's sell 5 BA 2015 $70 puts for $9 in the Income Portfolio.  The $60 puts are $5.20 so an easy roll if we have to on a bigger dip and 5 is small enough to DD on and you ALWAYS want to be able to DD on BA because this little dip is nothing compared to what can happen to them if there's a real incident (see 9/11/01 if you want a clue).  If you are properly allocated, something like that is an opportunity but, if you are over-allocated – it's a catastrophe!  

    Unfortunately, the Dollar popped up from 80.20 to 80.50 again and the markets are trading down a bit.  AAPL failed at $531 again so a bad sign and now $526 and we'll have to cover if they can't hold $523.  Indexes not looking so hot either but only down 0.25% so far so nothing to panic about as we had about a 1% cushion.  

    Gold got stopped at $1,660 but over $1,650 is fine.  Oil back around $93 after failing at $93.75 but if they fail $93 they can drag down the indexes too.  XLF failed to hold $17 – also a bad sign but don't forget the Treasury has about $120Bn worth of 3, 7 and 10-year notes to sell today through Thursday and "THEY" don't want the market to run too hot while they are begging for cash.  These little morning dips keep investors nervous enough to buy bonds (TLT now 119.23). 

    Other than really crappy Retail Sales (-4.2% but chain stores were up 2.1%), there's no really bad news to attribute this morning's dip to but let's keep an eye on our levels and think about what we can cover with.  MON was a good one, they topped out at $100.63 and are back to $98.76 already and the Jan $100 puts are just $1.85, which is only .61 in premium so a pretty good hedge but hopefully they test $100 again and those drop to about $1.50.  

    SHLD is getting hammered as people aren't reacting well to Lampert taking more control.  I like it but I'm a fan of his so let's grab 5 March $38.42/44.42 bull call spread for $2.50 and sell 5 March $35.42 puts for $2 for net .50 on the $6 spread that's $2 in the money to start in the $25KPA. 

  31. BA Income Portfolio/Phil:  We already have a fairly substantial BA position in the Income Portfolio.  Did you want to add the 5 putters in addition to the existing position?

  32. Dear Pharm: [the salutation is a tipoff]  – It is worth mentioning, I think, that my small, only 20% leveraged [on average] "Pharm" portolio is up 24.4%.  This year.  All eight days of it.  Thank you.

  33. QCOM / Mill – I have a calendar play, long the 2015 50 calls (deep ITM so little premium) and selling 3 months calls against it. I am currently short the Jan 13 65 and will wait until after they report on 1/30 to sell another set. I'll try to time them so that they expire before the next earning release date (I guess Apr something). I expect QCOM to be well over 70 by Jan 2015.

    As for VXX, that's really a gamble play and I still have only that one Jan 15 20 Put. Tried to enter when VXX spiked and I got a sell signal but could not get my price. I am not forcing that one. I'll buy only if I can get these puts for less than $6.00 or better on a big spike now.

  34. BA / Phil and Kinki – Indeed, we are already short 20 of the Jan 15 65 puts along with 15 65/80 Jan 14 BCS. 

  35. stjean:
    What do you mean by: "selling 3 months calls against it." THX.

  36. I am most definitely interested, as I am not able to make the November conferences due to work commitments and I was planning on visiting AC in April already.  I would not need a hotel room, and am certainly fine with any conference fee there is.  Would really look forward to meeting everyone after missing chances in Vegas.
    Please keep me updated:

  37. Calls / Dc – Sorry, I meant 3 months ahead. Sold the Jan in November and next I'll sell the Apr I guess after the earnings. QCOM has weeklies as well so you could play that game if you wanted to. But that's one position I don't want to micro manage.

  38. stjean:
    I like your call on QCOM. Are you selling an equal number of calls to your long position?

  39. ALU 38%
    I'm sure I'm just not figuring it out correctly, but how is there 38% left in the ALU trade?
    The trade is
    long 10000 ALU stock (no div) , short 100 Jan14C $1 at $0.50, short 100 Jan14P $1 at $0.35.
    Maybe I'm using the wrong margin calc for the inital trade….  

  40. BA
    Don't forget that Boeing will not begin to profit on the 787 for about 10 years WITHOUT additional problems.

  41. FYI, PCLN is the bomb.
    Just booked the Grand Hyatt (4 star) on PCLN for $75. has it for $199.  I've been doing 4*'s like that 
    for the last month travelling through the US.  Amazing……

  42. FU Burben!!!

  43. zero – :)   Thx.

  44. ;-)

  45. PCLN -
    Agree with Burrben,  I've been booking 3*+ hotels for $45/nite for years …

  46. Phil:
    Cover the AAPL's? Seems to be losing ground again. :(

  47. QCOM / DC – Yes, for now, one for one (short/long).

  48. Stjean

  49. dclark, I'm following along and he said if it fails 523 then cover

  50. Emerging markets/Mill – I agree.  We have a $16Tn economy, Europe about the same, Japan about $6Tn and China maybe $8Tn so that's $46Tn out of a $16Tn global economy so it doesn't take a lot of money on our part – say $1.6Tn or 3.4% of our GDP, to move into the emerging markets and pop them 10%.  Now that's if it were evenly distributed, but it's not – we're not building roads for them or buying groceries or educating their children – we're buying their land and commodities and only employing their workers if they will work for less than the Chinese so we create bubbles that are very negative as we drive wages down while competing with them for commodities and finished goods.  We also suck up all the available loan money at global rates so, if the local economy can't support 3.5%+ loan interest – tough.  This is all the result of "hot money" pouring into their markets – should we suddenly decide we're not interested in EM properties, there's no possible way the local economy  can support international prices and it collapses quickly.  I'd point to Spain as a great example but you can also just look at Miami or Las Vegas and see that this can happen to anywhere that builds properties for outside investors but it's a lot worse for emerging markets, where we're building homes for the top 1% at top 1% prices that can never possibly be supported by the locals should their country fall out of vogue.  

    PSW Atlantic City Conference/Terra – If people want this to happen they have to commit sooner than later.  I think offering two weekends is a mistake as you end up not knowing whether people are going or not until you finally pick one for sure.  Anyone who is interested PLEASE contact Terra – don't just say so in chat.  This is not in place of but in addition to Las Vegas in November because that one was packed so hopefully we can take a little pressure off by holding 2 this year.  

    AIG/StJ – This will be interesting.  

    Oil failed $93, AAPL testing $523 – not good.  

    AAPL/Jomp – At the moment, I think, we are naked on our longs so you didn't miss much.  If we are going to cover, it will be with maybe 5 (1/2) Jan $525 calls, now $10 but I really don't want to cover as they were $15 at the open so we can get killed very quickly if things improve, which I think they will.  

    Exports/Pharm – Data a little old at this point.  Retail sales were up and unemployment is down so mixed signals from Germany and exports could be influence by a lot of things but mostly seems to be EU weakness, which is not news. 

    AIG/Samz – Good points.  

    YUM/Yodi – Great price!  Nice job selling into the excitement.  

    Heart/Pharm – What word where? 

    BA/Jabob – Yep, not enough panic but prices in Income Portfolio trade are acceptable. 

    Superphones/StJ – What will we do with all this power at our fingertips? 

    YUM/Ging – Yodi's trade is great (short Jan $62.50 puts, now $6.10).  We've seen this company ride out many food scandals with Taco Bell – like their burritos, this too shall pass.  

    VIX 14.25 – not much panic in that reading.  

    BA/Income Portfolio, Kinki – Nope, my bad.  I forgot we already had BA in the Income Portfolio.  No changes than as we already have 20 short 2015 $65 puts at $7.50.  They are back to $7 now with BA just over $75 – still a great deal as a new entry but we'll stand pat on the current position – thanks for noticing.  

    Pharmboy Portfolio/ZZ, Pharm – Very nice, congrats!  

    ALU/Burr – Our net from the Income Portfolio buy/write is now net .72 and the max is $1 so we make another .28 if we stick with it for the year and 28/72 is 38% if you did it as a fresh trade.  We netted into it at just .27 so it's another 100% from that perspective but I'm talking about it as a new trade (and ALU dropped back almost 10% to $1.57 this morning) with a lower return but a bigger cushion than we had originally. 

    BA/RJ – And then for 30 years after that.  Anyway, they've already eaten the R&D costs so cash flow will be huge going forward.  That 10-year number uses the cost of the whole project to break-even without amortizing the costs over the life of the cycle.  

    PCLN/Burr – I always keep meaning to try it but I never get around to it.  

    AAPL/DC – Gotta give $523 a fair chance.  

    4% lines are 13,319, 1,442 (10 away), 3,028, 8,580 and 858 – it does not look likely the other 3 will fail but, if any of them do – we will need to take some aggressive covers.  As it stands, crisis over if the Dow or NYSE take back their lines.  

  51. good morning guys
    q from the new guy
    when calculating the risk/ position size …
    lets take LULU as an example, trading at $71.44 at open
    Calculate stop at 5MA (72.69 ) 
    Risk on Trade is difference between the two ( $72.69 – $71.44 ) = $1.25
    Delta for Feb 72.5 PUTS is .53
    Max Loss per option =  Risk on Trade x Delta   $1.25 x .53 = .66
    Total Risk ( 2% risk ) from portfolio is $4,100

    Contracts bought ( Total Risk ) / ( Risk per Option )   4,100 / (.66×100 ) =
    4,100 / 66 = 62 contracts
    So, I paid a penny spread and come out -%12.77 when LULU had hardly moved and I'm also fronting 23K
    I assume that all of this is based on pulling out at the 5MA
    My bigger question is how do you guys manage your stops. I understand that they are based on the stock and not the option, but literally what do you do ? DO you keep your info on an excel and eyeball it ?
    Do you set up a contingent multi-leg where the option drops .66 you close out ?
    Any help appreciated //

  52. FAS Money – People wanting to bail on the FAS 119 short calls can do so at $12.50 now. Lower than the $13 stop we had on Friday. 

  53. StJ/FAS – Thanks. I put a 13 stop. Hoping for a little more downside.

  54. UK FTSE -0.1%
    French CAC +0.1%
    German DAX -0.5%
    Spain IBEX +0.5%
    Italy MIB +0.3%

  55. Germany / Europe / mixed signals:  Agreed, but oil looks weak-kneed, with the Euro dropping today,  I also notice GLD and AGQ up. Normal fibrillation, perhaps.

  56. Here is an other YUM with very little cost
    Jan14 buy vertical 57.5/67.5 @ 5.33
    sell Jan14 put 60p @ 5.15
    cost 103.00 on three pays
    Potential at 67.5 Jan14 2880.00
    break even 58.95
    PM margin 706.00 at TOS

  57. For new members it is my suggestion to set plays given by members on paper trade. I still do this often and kick myself that I did not do it in my ports. But good exercise.

  58. Superphones/Phil – You can power a Gotterdammerung.

  59. Phil:  Looking for an entry into FAS Money.  XLF Jan14 13 Call is quite pricey as an entry point.  Should I wait for a pull back?

  60. Here is an other one Phil suggested to me last night on PETS
    I close this morning Buy stk @ 11.72
    sell Jun13 straddle 11.5 @ 2.00
    Stock yields 8.5%

  61. A little too much Tequila Yodi…. you are turning green!   :-)

  62. stjeanluc
    Sorry I prefer German Bier. Tequila would turn it blue!!!!

  63. stj,  …………..tks
    phil …….tks for the info re emerging bubble…….

  64. stjeanluc
    Maby the green is from planting TREES

  65. Risk/Wombat – You lost me at "risk on trade is difference between the two" – how is that?  What stops LULU from blowing through your stop and what does the price of the stock have to do with an option you buy?  Be realistic, if you buy an option for $4.30, you can easily lose half of it – just look at their historic pricing.  Never assume that can't happen to you.  

    Bottom line is the LULU Feb $72.50 puts are $4.30 and they were $2.75 last week and $5 yesterday so figure that's your range as they could come out with an earnings warning any time and crash the stock (we had several this morning already).  62 contracts is $26,660 on one position and you are paying $3.18 in premium or $19,716 not only betting that LULU will fall all the way to $68.20 just to get you even but that it will do it withing 38 days (expiration).  So you have 38 days for LULU to get to $68.20 and it's now at $71.40 so $3.20 or about .10 a day so any day LULU doesn't fall .10 – you will lose money and every day it moves up, you will lose lots of money.  This is exactly the kind of trade we try to teach our Members NEVER to make.  

    Also,  you say $4,100 is a 2% risk but that would indicated a $200,000 portfolio yet you seem to forget you spending $26,660 and, if LULU gets bought by NKE tomorrow, those puts will become worthless overnight.  I'm not sure what day they have earnings, but the value of those options will drop like a rock if LULU has good earnings as well.  All these calculations are fine in theory but this isn't a book – option trading is fast and risky and you are leveraging an extreme amount of risk on a trade like this.  The only thing that is certain here is that the premium you pay will evaporate over the next 38 days if LULU stays flat and the whole trade will be crushed if LULU goes higher (and it was 10% higher just last week) so you have 2 ways to lose and the 3rd way doesn't even give you a win unless LULU falls far enough, fast enough to hit your target – otherwise, that's a loss too.  

    FAS Money/StJ – Yes to killing those short $119 calls at $12.50.  We wanted to be done with them and that's about $500 cheaper than they were this morning.  

    Now that Europe closed (flat to down 0.5%), we'll see if it was them that was dragging us down.  They punched 119 on TLT but it didn't stick.  

    Congrats on getting a color Yodi, now people can find your tips more easily.  

    Interesting looking movie Scott, never heard of it.  

    FAS Money/Mjj – You don't need to get the $13s, the 2015 $15s are in the money by $2 at $2.90 so 10 of those is $2,900 and you can sell 2 FAS Jan $135 calls for $2.10 ($420) and that's 14.4% of your money back in 2 weeks with 106 more weeks left to sell/roll and only 1/5 covered so easy to roll to 2x (the Feb $150s are $1.20) and, of course, you can always add more longs.  Good way to get started. 

  66. Yodi,
    Regarding PETS, what are the reasons you are bullish? There profit margins are coming down from what I can see.
    Thanks for your comments

  67. Phil
    After hours
    How do you look up a option price for last week in TOS  ?
    REF:  Bottom line is the LULU Feb $72.50 puts are $4.30 and they were $2.75 last week and $5 yesterday so 

  68. Phil – "Mark H…….Eat your heat out"  Don't care for the site, but at SA, might want to update!!!

  69. Thanks Phil.  I was eyeballing the $15's but had the 2014 date in the sights.  Good prod.  

  70. option pricing/qcmike – when looking at an option quote, such as in Analyze > Add Simulated Trade, right click on a price and you have a couple different charting options. I have my Charts > Flexible Grid page "linked" to it's own color and to look at option price chart, i right click on a price and "Send To" that color.

  71. Thanks Scottmi
    I am also in mi north of GR

  72. Ging,
    The play is set to give you a downside protection to 10.64 at present. Over a two year period the stock has a range from 13.67 to 7.75 aprox. from Aug last year the stock climbed from 8.20 to 11.80 staying well over the 20, 50 and 100 day average. The revenue of PETS has increased from Mar11 to Mar12 even that the cost of revenue has gone up a bit.
    The negative cash flow has been bettered, as of Mar12.
    In general it is a small play with view on div. of 8.5% as well credit on the option play. Your capital out lay is 2922.00 and looking for a return of 513.00 if the stock will stay at 11.50 until Jun13

  73. qcmike – mi? oh, not my location. i'm in the great Pacific Northwest!

  74. scottmi
    mi was for michigan

  75. LULU – Gee, Phil, why don't you tell the Wommer what you really think?  Wombat:  Get used to it, you're not the first, and won't be the last. We're all amateurs here [except for Him] or someone else would be paying us to do it.   So cheer up:  "It ain't what you don't know that hurts ya, it's what you know that ain't so."

  76. What happened to BA @12:49?  Some news?

  77. Prices/QC – Just right click on the contract and click Quick Chart and it come up as a gadget on the left – then you can adjust the time-frame etc.  If you want to really play with an option contract, copy the contract # (in the box in the top left of Quick Chart) and paste it into the Active Trader graph.  Then you can do all sorts of detailed studies.

    Another BA plane has trouble – looks like a fuel leak this time.  $73.99 now.  

    10:00 AM On the hour: Dow -0.32%. 10-yr +0.21%. Euro -0.24% vs. dollar. Crude -0.01% to $93.18. Gold +0.54% to $1655.15. 

    11:00 AM On the hour: Dow -0.48%. 10-yr +0.19%. Euro -0.38% vs. dollar. Crude -0.42% to $92.8. Gold +0.46% to $1653.95.

    12:00 PM On the hour: Dow -0.49%. 10-yr +0.16%. Euro -0.35% vs. dollar. Crude -0.25% to $92.96. Gold +0.67% to $1657.25. 

    The IBD/TIPP Economic Optimism Index rose by 1.4 points, or 3.1%, to 46.5 in Jan, vs. 45.1 in Dec.

    NFIB Small Business Optimism Index: +0.5 to 88.0, vs. consensus of 87.9

    The U.S. apartment vacancy rate fell to 4.5% in Q4 from 4.7% in Q3, and 5.2% a year ago, according to Reis. Rents increased 0.6% from Q3. Even with apartment completions expected to "accelerate substantially" in 2013, the market should remain tight, says Reis, expecting a continued decline in the vacancy rate.

    Remember the EU? Its permanent rescue fund – the ESM – completes its first debt offering, raising €1.93B through the sale of short-term bills. Investors – with Japan being a major one – paid the ESM for the privilege of lending to it, as the paper is priced to yield -0.0324%. 

    Struggling to meet its budget targets amid disappointing tax revenue, Brazil changes the rules, calling about $20B of spending, "investments," and excluding it from the budget goal.  EWZ - dominated by Petrobas, Vale, and the big banks – fell nearly 5% last year even as the central bank furiously cut rates. Small caps (BRF) fared better, up more than 15%.

    Deutsche Bank (DB) slashes its forecast for WTI crude by 10% to $90/barrel, with the key being increased supply from U.S. shale production. Toss in minimal OPEC production curbs and slowish economies, and "implied inventory builds … could be sizable."

    The average fuel economy of new vehicles purchased by consumers improved 6% to 23.8 miles per gallon in 2012. General Motors (GM) led the charge to fuel-efficient powertrains by becoming the first American automaker to sell over one million vehicles in the U.S. that earned an EPA rating of 30 mpg or better.

    Baker Hughes (BHI -1.9%) is downgraded to Neutral from Buy at Sterne Agee, on concerns about profitability in Latin America, uncertain profit margins in the U.S. and Canada, a cloudy outlook in the Eastern Hemisphere, and better risk-reward among rival companies. Also, RBC cuts shares to Sector Perform, forecasting BHI's top line up ~7% in 2013 vs. peer average estimates of 12% growth.

    Goldcorp (GG +0.8%) shares hold steady despite disappointing production and cost guidance, as analysts say the bad news was largely priced in. TD Securities notes GG still has one of the best five-year production growth profiles among senior gold producers, and "should remain a below-average cost producer as the next generation of mines enter production over the next three years."

    A number of luxury stocks trade higher after a solid holiday sales report from Signet sets the table. Recent economic news on Chinese luxury spending has also helped tipped sentiment in the sector. Advancers: FOSL +2.9%COH +2.3%KORS +1.1%, RL+1.1%.

    GameStop (GME) says holiday sales fell 4.6% at comparable stores with U.S. stores declining 3.5% and global stores falling off 6.4%. The company says strong digital growth and the launch of the Wii U was more than offset by sluggish traffic at stores – prompting it to set the expectation for Q4 profit at the low end of its current guidance range.

    No comment. That's the initial response from an executive at Best Buy (BBY) to Target's year-round online price match program. Eventually push will come to shove for the company with its own matching price program on 20 online retailers set to expire on Jan. 31.

    More on Target's (TGTprice-matching initiative: The retailer will include local competitors' printed ads in the program along with the online prices of big retailers. It will also allow products that are out of stock on for the first time. Analysts are quick to note the psychological impact of being branded the bargain seller stands a chance of outweighing the actual costs of customers who actually stand in service lines prior to purchases to receive their discounted prices.

    Is there more to McDonald's (MCD -0.7%move to test selling chicken wings that meets the eye? Hedgeye's Howard Penneynotes the traditional business model of the restaurant operator will be under margin pressure with beef prices set to soar to record highs in 2013.

    Shares of Boeing (BA -1.2%) slip today on the back ofyesterday's Dreamliner fire at Boston's Logan Airport. The fire is just another body-blow to the Dreamliner program on the back of last months groundings. BB&T cuts the shares to hold on yesterday's incident, saying that although electrical problems with new aircraft are common, fires are not. Key aspects of the aircraft's electrical architecture appear to be faulty, and the firm thinks it's time to step to the sidelines until the problem gets resolved. 

    The 2% fall in Boeing's (BA) share price yesterday following a fire on a 787 jet was overdone, says Jefferies analyst Howard Rubel, who notes that there has not been another similar incident. Wells Fargo sees the weakness as a buying opportunity, saying that any costs associated with the fire are unlikely to be material to near-term results. BB&T, however, downgrades the stock. Shares -1.4%premarket

     Looking Beyond The JPM Global Healthcare Conference 

    Cell Therapeutics (CTICrockets 24%, although it's hard to work out why. The stock's been fairly volatile over the past few months, and often seems to receive a big lift on news of Pixuvri, its treatment of aggressive non-Hodgkin B-cell lymphomas.

    Cisco (CSCO) intros its Videoscape Unity software platform for pay-TV providers, Combining its traditional Videoscape platform with the offerings of recently-acquired NDS, Unity enables a slew of Web-based TV features, including cloud DVR, TV Everywhere support, and the ability to send IP video streams to non-traditional devices. It acts as a hedge against the threat posed by pay-TV platforms that eliminate the need for Cisco's set-top boxes – just yesterday, Intel and Comcast announced one such solution.

    Telecom equipment stocks are having a rough day. The group has rallied in recent weeks, and (in spite of some encouraging signs) worries about wireline capex haven't fully dissipated. ALU-7.8%ERIC -4.8%JNPR -2.2%CIEN -3.6%INFN -2.3%FFIV-1.8%RVBD -3.3%ALLT -5.4%. 

    AT&T (T -2.5%) remains negative after reporting it sold 10M+ smartphones in Q4. One concern: smartphone subsidies will depress AT&T's Q4 margin, and since much of Ma Bell's base already owns a smartphone, the service revenue benefit might not be huge. Apple (AAPL +0.1%) has given up its early gains. With research firms having reported the iPhone is doing very well in the U.S relative to Europe/China, sales concerns mostly revolve around international markets. Meanwhile, Tim Cook is paying another visit to China – is he there to nail down an elusive China Mobile deal? - So T is selling so many smart phones that people are worried thier subsidies will hurt the bottom line but AAPL, who gets those subsidies, is still trading down.  It's a lose-lose scenario

    Nokia's (NOK) Chennai, India plant has been raided by Indian tax officials, reportedly over allegations the company has avoided paying 30B rupees ($543M) in taxes. The raid comes as the Indian government mulls rules that would require a large % of tech hardware sold in the country be locally manufactured, potentially threatening the local sales of everyone from Nokia to Dell to IBM. Cisco's John Chambers and other tech execs have lamented the challenges of doing business in India.

    Tax Increases and Bull Markets (Economix)

  78. LULU looks like a MOMO to me
    Einstein " questions makes you wiser"

  79. Phil "green" I rather take a discount for aging members

  80. I guess we sold the BA put to early now there is a Jap dreamliner pulled in, leaking fuel

  81. BA may be they need to buy a couple of German Eng. from Airbus 8)

  82. Virtual Short Strangle Portfolio – Happy New Year!
    With the RUT at a high and VIX at a low, it's dangerous to sell shorts.  However, we shall march on and sell the following:
    - Sell 5 RUT Feb 935 calls for $0.925, Sell 5 RUT Feb 750 puts for $1.175
    - Sell 5 SPX Feb 1540 calls for $0.875, Sell 5 Feb 1300 puts for $1.625
    This is a virtual $500k portfolio on PM.

  83. I am in the BA 2014 65/80 Bull Call spread at net $6.82, selling the $65 puts for $6.51.  The spread is at $7.92 (up 16%) and the puts are down to $4.10 (up 22%).  I am obviously on track but should I take advantage of this negative news to close out the spread, taking my profits and rolling the Jan 2014 $65 puts to the Jan 2015 $70 puts for another $5.65 in my pocket, which would net me in at $60.83 worst case versus $65.30 in my current scenario?

  84. Virtual Short Strangle Portfolio – more sells:
    - Sell 10 SPX Feb 1330 puts for $2.65, Buy 10 SPX Feb 1310 puts for $1.9
    - Buy 5 SPX Feb 1280 puts for $1.15, Sell 10 SPX Feb 1270 puts for $0.975
    - Buy 5 SPX Feb 1525 calls for $1.675, Sell 10 SPX Feb 1535 calls for $1.35
    - Buy 5 RUT Feb 775 puts for $2, Sell 10 RUT Feb 770 puts for $1.8
    - Buy 5 RUT Feb 925 calls for $1.625, Sell 10 RUT Feb 930 calls for $1.25
    These are initial positions and we'll sell more if we get a big move either way, or we just happy to get the credits and wait until next month.

  85. Phil –

    I'm simply following the summary strategy provided by PSW ( to the letter ) on how to calculate position and size – other members that have looked at the post say I'm doing it correctly but you nailed my question on the head.
    How do you stop-out the option if the 5MA is a stock indicator ? 

    I gleaned the trade off the virtual swing portfolio 
    I've also read time and time again that PSW swing trades are front month ATM and never traded more than a month, so yes, I have 38 days to the Febs.

    Risk/Wombat – You lost me at "risk on trade is difference between the two" – how is that?
    I simply meant the "risk on the trade' is the 'current price' minus the 5MA – from the strategy summary
     What stops LULU from blowing through your stop and what does the price of the stock have to do with an option you buy?  Be realistic, if you buy an option for $4.30, you can easily lose half of it – just look at their historic pricing.  Never assume that can't happen to you.  
    Nothing – LULU could blow right past this and I could lose most of my option value – thats why I dont understand this whole 5MA stop loss discussion. This is what I've been asking in the forums for days. How does the 5MA rule on the stock apply to an option ? How do you stop it ? The answers Ive recieved are 'eyeballing it to the 5MA on the stock. My question still remains - I understand that they are based on the stock and not the option, but literally what do you do ? DO you keep your info on an excel, mark the 5MA where you bought and eyeball it ?Do you ride the 5MA like a trailing stop? Do you set up a contingent multi-leg where the option drops .66 you close out ?
    Bottom line is the LULU Feb $72.50 puts are $4.30 and they were $2.75 last week and $5 yesterday so figure that's your range as they could come out with an earnings warning any time and crash the stock (we had several this morning already).  
    My cost $4.76 – now at $4.90 ( cashing out +.24 )
    62 contracts is $26,660 on one position and you are paying $3.18 in premium or $19,716 not only betting that LULU will fall all the way to $68.20 just to get you even but that it will do it withing 38 days (expiration).  So you have 38 days for LULU to get to $68.20 and it's now at $71.40 so $3.20 or about .10 a day so any day LULU doesn't fall .10 – you will lose money and every day it moves up, you will lose lots of money.  This is exactly the kind of trade we try to teach our Members NEVER to make.  
    Since this was one of the only trades on the Swing portfolio that hadn't been closed out (and the stock was higher than when you placed the PUT ) I decided to place it. I still dont understand what I did differently.
    Also,  you say $4,100 is a 2% risk but that would indicated a $200,000 portfolio yet you seem to forget you spending $26,660
    Thats correct, 2% risk on a 200K portfolio. The way the strategy summary is set up with the 5MA is for the stop to calculate a max loss of $4,100 ( or max loss per option, based on Delta of .66 )
    and, if LULU gets bought by NKE tomorrow, those puts will become worthless overnight.  I'm not sure what day they have earnings, but the value of those options will drop like a rock if LULU has good earnings as well.  All these calculations are fine in theory but this isn't a book – option trading is fast and risky and you are leveraging an extreme amount of risk on a trade like this.  
    You're preachin at the choir my friend. I know this – thats why I am so insistent on understanding how your protecting yourself.
    The only thing that is certain here is that the premium you pay will evaporate over the next 38 days if LULU stays flat and the whole trade will be crushed if LULU goes higher (and it was 10% higher just last week) so you have 2 ways to lose and the 3rd way doesn't even give you a win unless LULU falls far enough, fast enough to hit your target – otherwise, that's a loss too.
    I can't disagree with any of this – then how does your system work. Buying PUTS ATM no more than a month out ? Am i missing something ?

  86. Scottmi
    Where in Michigan?

  87. wombatcreative:  LULU

    if you are patient and have a high pain threshold just start scaling into selling some calls.  LULU will likely move up from here but eventually the pe will compress to reflect there is no "moat" around this business model in what is becoming a pretty crowded market. TGT, Marshalls, NKE now sell the same quality stuff.  key words are 1) scaling, and 2) eventually :)

    my $ .02

  88. Wombat,
    Don't think Phil is taking it out on you, he is using you as a teaching tool for all of us.  He really does want you to learn and sometimes the lessons are painful.  As you know, you can lose a lot of money really fast trading options and no one here (especially Phil) wants to see you lose any money.  Hang in there it will start to make sense over time and then you will see there really is a method to this madness.  Best of luck.

  89. wombatcreative – You seem to be getting Phil's PSW board mixed up with Optrader's board on PSW. Two completely different trading styles, therefore you cannot take from one and apply it to the other.

  90. dclark – i don't live in michigan… i'm a bit north of Seattle.

  91. rperi
    BA in principal you are in a tree growing position!  Setting up your play on one option only if you close now you would have a gain of aprox. 385 to 400$. Even if the stock holds 75$, no more wings falling off , at Jan14 you would take 1085$,
     max profit at 80$, remember the stk was already at 77.75, you would get 1,525$. So do not cut the tree before its time. Instead of rolling I personally would rather set up a new play possible Jan15.
    Look at Herbelite From 25 or so people have already forgotten the pyramite scheem

  92. BTU/phil – i've been in a BTU buy write for a while now, and is doing very nicely. the $20 puts are for Jan14 and are fine. The Jan13 $22 calls are coming time to roll..   I'm considering the following:
    1/ rolling to next month, same strike (Feb $22s, and repeat, repeat, etc); or
    2/ next expiration that offers a credit and one up in strike (June $23's); or
    3/ roll to furthest expiration (Jan 2015)…but not sure what strike to choose.
    What would you roll to?

  93. HOV $5 Jan calls only $1.25 for anyone who wants to play possible return of the rally (the underlying is down to $6.30 now),   Feb $6 calls only .55…

  94. Lincoln
    Thanks – I'll keep that in mind – but he's a new yorker right ? I've got thick skin and I'm very persistent.
    What is bothering me is no one is answering my questions.
    can you say more about this ? I'm unclear as to the difference.

  95. BA:  It will take either a serious incident or another couple of 787 cock-ups to drag the stock much lower, IMO.  I definitely want to own BA, but not quite enough of a sale just yet.  I've been setting some near-month put traps hoping for a 1x entry, but still no fill.  Yodi, et al, I am just not a BCS fan…more of a traditional Buy/Write for this one.

  96. Now that's a tablet we can really do work with…

    Wow. Panasonic has just dropped a bomb in the form of a 20-inch Windows 8 tablet sporting a whopping 4k resolution. Our man on the scene liveblogging, Mat Smith, said it "looks like a photo" in person, with great viewing angles, and it sports a touchscreen display and stylus, to boot — with super-detailed stylus manipulation of images also possible according to Panasonic. 

  97. AAPL is moving, so sell 10 AAPL Feb 430 puts for $2.0 and buy 10 AAPL Feb 410 puts for $1.035 in the Virtual Short Strangle Portfolio.  This is a small-ish play as we have other portfolios for AAPL.

  98. Wombat, Opt trader basically buys premium, Phil sells it!  The 5dma is always moving and it is your stop in Opt traders system.  Where as Phil sets up lots of spreads and basically sells way more premium than he buys.  Two different styles on the same site.  There is a lot of knowlege here but it takes time to get a lay of the land.  Just don't confuse the two.  Hope that helps, I had written a response earlier but somehow lost it and as Phil says it was "brilliant" but it is floating around cyberspace now. 

  99. AAPL / Peter – You know that they have earnings between now and Feb expiration? Not that I think that you strikes are in danger, but just in case.

  100. wombatcreative – Optrader has his own trading style and his own tab near the top of the page. The same for Sabrient, All About Trends, Pharmboy, etc. Phil owns PSW and his trading style is different than all of the others. On PSW, you need to find a trading style that makes sense to you, that works for you and that you are comfortable with. PSW is not a one size fits all, but a compilation of many styles that when matched correctly to each individual, helps them to become better traders.

  101. jr_Mints
    jesus, i wish i could have read it. if you find it again, send it along.
    OK, so the strategy summary, you are correct – this is OpT. 
    It helps quite a bit. Thanks.
    My question still remains, both for you and Phil.
    OpT – how do you protect yourself or set up stops using the 5MA. I've read everything – it doesn't answer the question. You're using a stock indicator to signal an exit for an option. Makes no sense.
    Phil – I see why you were confused. Now, YOUR  trades reside … in the newsletters ? income portfolio ? Who owns what over there ? Jesus this is confusing.

    StJ — 20 " ?? what would you do with a 20" tablet ?

  102. Peter D
    What R U looking at – I see no sig movement  

  103. Pharm SGEN very impressive move since the start of the new year. Are you cashing out a bit here?

  104. wombatcreative – Optrader very rarely visits Phil's board. If you have a question for Optrader, you need to post it to his board.

  105. Wombat, you need to ask Opt Trader the question you have for him on his site.  Phil you ask here. Over on Opt's site I see where scottmi has a long answer for you so you need to go over there and read what he has to say.  This is why they don't want anyone trading for a least a month until you see how all this works.  At first it seems confusing to say the least but with time it all makes sense.  Many people trade with Phil and Opt Trader while others prefer one or the other.  It is like what diamond says, there all many different styles available here one size does not fit all.  If time is a problem for you you should look at Phils Income portfolio because it is basically a set and forget with only minimal amounts of time required.  Hope this helps. 

  106. jr_mints
    thanks – I'll more than likely use both depending on my activity level and free time. I did read Scottmi's answer but it deosnt cut to the point. Phil said it best – how on earth are you going to protect an option with an equity indicator – still not answered. I'll take it up with OpT.

    Speaking of Phil's charts – is there a tutorial or something I can dig into to explain the charts. I, obviously tried to engage with one and got flamed, so an explanation of the color scheme and layout would be helpful.

  107. Wombat- what, you have  been here a few days, right? What may be confusing is your trying to digest and absorb perhaps 100's of years and untold thousands of hours of trading knowledge and experience which is represented here- all at once. 
    Relax, have an herbal tea, decaf coffee, a smoke if you gotem; take a walk. In a word- chill. 
    Observe, read, ask ; make a few trades. Many of us have been here for years and we still learn something new frequently. Surely you will have something of substance to contribute and we anxiously await your input. For now- sit back and enjoy. :)

  108. Heat/Pharm – Oh, now I get it.  Didn't publish on SA today anyway so no harm there but thanks for catching.  

    LULU/ZZ – Well he's new so I have to at least go over the basics.  

    BA/Grant – Yet another 787 "incident".  

    Aging/Yodi – That won't work, you were old when you started.  As a percentage you've barely aged….  8)  

    Happy New Year Peter!  

    BA/Rperi – The thing is to take advantage of the dip and the $80s are down to $3.45 from $5.25 (34%) last week while your $65s are $11.30 down from $14.70 (23%) so it hurt your caller more than it hurt you but I'm sure it doesn't feel that way.  You can spend $3.50 to roll your $65s to the 2015 $62.50s ($14.80) and you can get it back by rolling the caller to the 2015 $80s at $6 so the whole thing costs you net .95 to drop your calls $2.50 further in the money and widen the spread by $2.50 and you can get the .95 back by rolling the 2014 $65 puts ($4.25) to the 2015 $60 puts at $5.85 so the whole thing is a credit of net .65 and you do have to wait a year but consider it a year more for BA to get to $80.   Your roll works too but it's very aggressive and you don't need to be and what if BA really does have a serious problem?  Since we don't know, I'd go more conservative.  

    How/Wombat – Well if it's from the Swing Portfolio, you should really talk to Optrader about it, not me.  His system is different than what I do – it's not some grand "PSW Strategy" that is the same under all conditions.  I don't even believe in the LULU short in the first place but, as a swing trade, the rules are different because you won't be in it long enough for the premium to expire if you do it right.   You are asking me about a 5MA discussion I never had – that's why you are confused (and why I was confused too).  Learning Swing Trading is a whole different discipline to what I do and takes a hell of a lot of practice as well as learning all those nuances you are asking about.  You are simply asking the wrong person – my trade ideas tend to be based on fundamentals and we are opportunistic in our entries – looking for mis-priced securities that we don't mind taking long-term positions on and scaling in over time.  

    And what Diamond said.  

    BTU/Scott – You want to look to do a roll BEFORE the last 25% of the premium is gone – you get better rolls that way.  No biggie though as the Jan $22s are $4.80 and the 2015 $27s are $6.10 so you pick up $1.30 and $5 in position – a very good deal.  You can go Feb, Mar, Etc or June $24s at $4.60 but then you get no $1.30, pay more broker fees and only move up $2 in 6 months vs. doing the one-time move for $5.  The real question is whether you want to stick with the whole trade in the first place but I think it's worth it as you get that $5 (assuming they hold $27) and you can sell 2015 $23 puts for another $2.85, which is good money for another year.  

    HOV/Jerconn – The 50 dma is $5.50 and the 200 dma is way down at $3.50 so I wouldn't be adding longs here.  Just hope for a nice pullback to establish something later.  

    20" Tablet/StJ – Unless it's more than $2K, I think I'll be buying one of those shortly.  That's perfect for travel (assuming low weight).  

    TGT/Angel – How many items does Target actually have vs. AMZN?  I think what they are doing is very dangerous because AMZN people aren't going to run down to TGT to get the same price after waiting on line but TGT customers will quickly learn they can knock 10% off their bills by looking items up.  If I were AMZN, I'd make an app that makes it super-easy for TGT customers to match prices – just to stick it to them. 

    Opt question/Wombat – You have to go to the Optrader tab, click on his most recent post and ask that question in his chat room.  We are both so busy during the day we rarely go in each other's chat rooms.  

    And, once again, what Diamond said! 

  109. Stjean, yes AAPL earning is slated for 1/23, so I only sold the put side.  10 contracts vertical that is over 15% OTM is very recoverable in case AAPL decides to go below $400.  Some excitement to manage.  Premium will evaporate after earnings, so it's a toss up between selling now and selling later.
    wombat – AAPL has been on the slide in the past few days, so not sliding is a positive!

  110. Meanwhile, weak but not too weak market action, the key is holding our levels.  Dow back over 13,319 and NYSE back over 8,580 so the 4% lines hold for another day and we're still more likely consolidating for a break-up than a break-down.  

    AAPL refuses to lose $523 as well (other than briefly).  

    Dollar still 80.49, TLT 119, VIX 13.82 – not much worry here.  

  111. BA/ Phil: ins't it true- great to remember== so it hurt your caller more than it hurt you but I'm sure it doesn't feel that way. And thanks for the help yesterday of FCX and TZA.

  112. SGEN/kust….yes, my Jan $25 calls are gone.  Buying back Jan Puts at 5c…otherwise, sitting pretty.  My March $30 Cs are still under water.

  113. phil,
    im in the gdx jan 15 35-45  bcs …im also short the jan 15 35 puts…… question is how would you go about selling calls vs the position.  it seems good to wait as the gdx has been pummeled.  but that aside would you provide some insight as to the month or weeklys and the strikes…….or at least what i should be thinking about as i approach it……..after hours would be fine………tks

  114. Wombat, Just looking at all the correspondence on the subject of option trading, I wish to put my two cents to this.
    Your name is to long and your writeup to long to read it all. Seeing you trading 60 odd options at the time you must have at least a 10,000,000.00 portfolio.
    In my three ports I sometimes trade up to 40 and 50  option plays a day. Today I have 20 filled. But my standard trade is 2, 3 and 5 options. If you lose it does not heard that much. I would not even dream of playing 60 odd options in a paper trade.
    Sincerely start small with lots of patients in paper trades. There is not one on this board who got rich here overnight!!!!

  115. Nicholas Walewski of Alken, one of the better equity managers I know of, is going long Spanish domestic banks.  BBVA came in as a recommendation for trading on the NYSE, because it's listed, although not strictly domestic.  It's cheap, that's for sure.  I bought some straight up, will start to examine the options, FWIW.

  116. Phil – you're correct reg the HOV long calls (the 50 and 200 day ma's are way below), but this stock only stopped rallying with the current market selloff, so I was assuming that if we've bottomed for the time being, HOV would resume its uptrend as the market resumes its trend…not a good assumption?  Thanks for your advice!

  117. zeroxzero 

    was SAN on the list  ?

  118. ARNA having a nice day, thanks again Pharm!

  119. You're welcome Newt.  

    GDX/Mill – I'd just keep in mind that you are in the position for net $1.80ish so your goal is simply to get the $1.80 back, then to make the $3.70 back for the put so you don't "need" it anymore as an offset so let's say you want to make $5.50 and you have 24 months so your goal is pretty much to sell .25 a month.  Since GDX is currently low in the channel, you don't want to sell much but it doesn't mean you can't sell anything.  Just selling 1/4 the Feb $46 calls for $1 gets you your .25 and you can keep a stop at $1.50 and then you'll sell 1/2 x the March whatevers are .75 (currently the $48.50s but should be the $50s by the time you have to stop out the Feb $46s).  By the time you would be worried about the March $50s, your long spread would be $5 in the money at 2x.  The key is to remember your job (make .25 per month per long) and to not be greedy.  It's a little dull but grinding out .25 24 times $6 a nice additional return if all goes well. 

    Patience/Yodi – The hardest thing to teach.  

    1:05 PM The Treasury sells $32B in three-year notes at 0.385%. Bid-to-cover ratio of 3.62; indirect bidders take 28.4%. Direct bidders take 26.4%.

    2:00 PM On the hour: Dow -0.51%. 10-yr +0.19%. Euro -0.28% vs. dollar. Crude -0.03% to $93.16. Gold +0.96% to $1662.15.

    3:00 PM On the hour: Dow -0.54%. 10-yr +0.19%. Euro -0.24% vs. dollar. Crude -0.04% to $93.15. Gold +0.85% to $1660.25. 

    November Consumer Credit rises $16.04B vs. an expected $12.75B and $14.08B previously. The strong gain came all from nonrevolving debt, i.e., student loans, auto loans. Revolving debt was about flat for the month.

    The usually bullish Tom Lee unveils a chart (via) on Bloomberg to back up his new-found caution (previous). The percentage of NYSE stocks above their 200-day moving average is nearing nosebleed levels.

    "Everything looks like a winner when the losers keep disappearing," writes Jack Hough, noting the worst-performing 25% of mutual funds are 3 times more likely to be merged or liquidated than those in the top 25%. It's also tough to judge luck from skill – just 5% of funds ranked among the top half of their peers for the 4 consecutive years ending in Sept. 2012.

    The world’s oil market should eventually see a glut of crude oil and a fall in prices given non-OPEC growth in production, especially from unconventional and deepwater North American sources, and steady demand growth, Global Hunter says. As for natural gas, the overabundance in supplies has led to a "severe cratering of prices on the one hand, but has set in motion a variety of longer-term demand drivers on the other."

    What a whacked out sector!  Solar stocks are rebounding from yesterday's drubbing after a Chinese government official states the country wants to add 10GW of solar capacity this year, after growing its base by 4GW in 2012 to 7GW. However, skepticism exists about the government's ability to achieve this goal, given financing challenges. Last month, the government announced it wanted to encourage solar M&A activity and reduce its support for the industry. LDK +9%YGE +6.5%TSL+8.3%SPWR +7.4%JASO +6.9%. (previous) 

    Schnitzer Steel (SCHN -7.2%) is shaping up as one of the day's biggest losers after reporting a FQ1 loss, weighed by worse-than-expected respective revenue drops of 32% and 27% in its metals recycling and auto parts businesses, as well as restructuring costs. The market was expecting at least a small profit.

    Coverage of Westport Innovations (WPRT -3.2%) is launched at Lake Street Capital with a Buy rating and $54 price target, suggesting a near double from current levels. The firm says partnerships with engine OEMs such as Cummins, Volvo, Weichai and Caterpillar, its technology advantage with HPDI, and a new engine launching in 2013, position WPRT to benefit from the shift to natural gas from diesel fuel. 

    Execs with Toyota (TM -2%) are showing off some of the bells and whistles it can offer in the future with autonomous driving features at the CES electronics show. A research vehicle based on a Lexus LS can scan objects around it, self-park, and determine whether a traffic signal is green or red. Technology to help prevent accidents and a self-driving car's ability to take over a vehicle in the case of heart attack or sudden incapacitation of the driver will also soon be selling features. 

    Electric vehicle roundup: 1) The NHTSA says vehicles traveling slower than 18 mph must make an audible noise that can be detected by bicyclists and pedestrians. The agency thinks the measure will only add about $35 to manufacturing costs. 2) Year-endsales totals for Chevrolet Volt (GM) indicate the model saw sales grow 206% to 7,671 units, below some early sales targets but above dour estimates from notable EV critics. 3) Chatter on the Tesla (TSLA) Forums indicates the automaker saw a surge of activity late in Q4 which could tip off it met its quarterly production goal.

    The problems continue to pile up for Boeing's (BA -3.2%) Dreamliner, as another 787 operated by Japan Airlines returns to Boston's Logan airport terminal prior to takeoff due to a fuel leak. The cause of the leak is not yet known, and the aircraft's 178 passengers, – who were bound for Tokyo – still remain on board.

    United Continental (UAL +0.1%) weighs in on Boeing's (BA) Dreamliner problem as operators of the new jet inspected their 787 fleets in the wake of the electrical fire. The airliner noted that it found an improperly installed bundle of wires that connect to the APU battery, a unit that Japan Airlines and fire officials say ignited the blaze on the Dreamliner at Boston's Logan Airport yesterday.

    Monsanto's (MON +2.6%improved profit forecast for the year, by $100M to $7.65B, reflects a gain of $200M-$300M despite deciding to omit profit from Roundup Ready soybeans in Brazil because of the legal dispute over patent expiration, CFO Pierre Courduroux said on today's conference call. MON may be more aggressive in returning cash to shareholders, CEO Hugh Grant added.

    McDonald's (MCD -0.7%) saw its same-store sales in Japanfall 8.6% in December to add to a multi-month streak of slipping sales. The company blames a tough restaurant environment in the nation as well its decision to hold off on becoming too promotional.

    Retail Geeks digs out a disturbing note on Family Dollar's (FDO) FQ1 after dissecting the retailer's earnings release andconference call with analysts. The Tiburon Research Group blog notes Family Dollar's sharp decline in gross margins could have been even worse if not for a freight expense benefit that cycled in during the quarter – an item that according to the firm should have been laid out more transparently. 

    Activist investor Robert Chapman promises "big news"regarding Herbalife (HLF +2.7%) sometime today or early tomorrow, tweets Charlie Gasparino of Fox Business News. Gasparino questions whether the news could be a lawsuit against Pershing Square's Bill Ackman. Chapman – who made news last week when he said Ackman will lose his fight against the company – has made HLFhis largest long position. 

    Universal Display (PANL -7.1%) slumps after top customer Samsung (SSNLF.PK) announces it sold ~63M smartphones in Q4. With Strategy Analytics having estimated 56.9M smartphone sales for Q3, investors may have been hoping for a bigger number for the year's strongest quarter. The decline comes as SamsungLGSony, and Panasonic show off (costly) OLED TVs at CES – a 55" LG model will be available for a mere $12K in March. Skyworks (SWKS -2.2%), another Samsung supplier, is also lower. Samsung fell 1.3% in Seoul.

    Netflix (NFLX -0.4%) is going 3D: the streaming site is now providing a limited number of 3-D titles, and has rolled out a higher-quality 1080p format it calls Super HD. With Netflix recommending at least 7Mbps connections for Super HD streams (compared with 5Mbps for traditional 1080p), expect the company's bandwidth bill to go up, and for ISPs to become even more frustrated. Separately, Cantor is estimating Netflix's Warner Bros. deal will cost $100M/year, and CNNMoney's Paul R. LaMonica argues shares are now overvalued, given limited earnings and huge content obligations.

    Verizon (VZ -3%), MetroPCS (PCS -2.8%), and Leap Wireless (LEAP -3.2%) are selling off after AT&T announced it sold 10M+ smartphones in Q4. Verizon ticked higher yesterday after announcing it had 2.1M net wireless subscriber adds in Q4.

  120. QC:  SAN was not, being the other Spanish foreign-exposed money center banks.  I did, however, question the issue of moving away from purely domestic banks per Walewski's comments,  and receive the following answer: "… BBVA looks better than the domestic banks because you are also getting their Mexican exposure at a very cheap price. And with the Mexican new president and etc…, it seems like Mexico could do better than Spain in the future. The local banks still have a lot of “dilution effect” of convertibles and preferred shares that they have issued and will be converted into stock."

  121. take VXX puts at almost any price. The "stock" was 1800 (that's EIGHTEEN HUNDRED dollars) per share 5 years ago. It's a dog with fleas if ever there was one.

  122. yodi
    there seems to have been a misunderstanding. i wish i had that cash to play with. and i only make a few trades a day ( if any )
    i dont think theres anything unusual about 'buying' that number of puts if you have a proper exit, but the irony is I was following the OpT strategy summary and only risking $4,100.
    When I was calculating the number of contract to buy I came out with more, and scaled it back.
    I need to figure out what happened with OpT
    Bottom line is / I had no idea these were literally separate sites
    Still trying to work out where it went wrong. I got lucky, cashed out +.24
    My name is too long ?

  123. THLD…..why oh why…..

  124. Thanks Phil, and yodi also.

  125. Herbalife:  My experience, dating back to the '80s, was indeed that it was "pure Ponzi", in which the "new distributors" who were forced to buy inventory were the only real "customers" of the stuff.  But they've been around so long I assumed they started making something useful that people actually bought.  Possibly not.  I'm on the sidelines, but if the stock soars, based on my limited experience they are an American "Muddy Waters" gangnam-style shortpick.  Anyone know anything?

  126. Steady as she goes Pharm, thanks.

    INTC looks weak.

  127. Wommer:  Don't worry, everyone's name ends up in a kind of consensual stasis.

  128. zz – "American "Muddy Waters" gangnam-style shortpick"
    that's the most creative pick name I think I've ever heard

  129. phil………tks for the tutorial………..

  130. Phil/StJ – The new Panasonic with 4k resolution has me confused.  What's the big deal with 4k?  Isn't 4k = 4,000?  Or is k the new million? 

  131. Rolling/Phil – "roll when 25% still left" even for covered calls? What if the call is going to expire OTM? i'd generally think you would let it, and then sell a new call.. 
    I have an expiring GLW Jan13 12.50 call which is about ATM today. Calls were sold for .45 and have approx 38% left. Roll these too when at 25%? Remaining premium should rapidly crush, and drops faster than premium in a further strike… so i don't see where the 'better price' is available? Once this expriation closes, do all further expriations take some sort of corrective hit as the front month rolls forward? What if i'm rolling out 6 or more months?  Still working toward more finesse in rolling…

  132. Yodi- congrats on your colored box. 
    I just hope that you will not now feel compelled to shower us with your political viewpoint as seems to be a common ailment amongst those so adorned. 

  133. wombatcreative
    I agree, the site is confusing at first.  I recommend clicking on "Strategy" near the top of the main page to learn Phil's "main" strategy for long-term investing. The New Members Guide is also good, altho some of it may no longer apply (ie JRW seems to have disappeared?)  Questions that come up for you while reading this material you can then ask in Chat.  There is A LOT of material.  I doubt anyone here follows all of it…I sure don't.  Hope this helps…oh, and WELCOME, by the way  :)

  134. Peter D,
    Question re your AAPl 430/410 vertical: by recovering (if AAPL drops <400) what strike would you roll short 430p to  ?
    Also, why did you pick 430/410 vs something else? Could you explain your mechanics/rationale for risk/reward?

  135. 4K / Grant – 4K is the new TV standard that they are pushing to replace the 1080p HD we now have. They are supposed to go to 4096 × 2160 resolution (therefore the 4K). That's on heck of a desktop on a tablet! Plenty of space to run your browser and TOS!

  136. PSW Atlantic City Conference April 26-28 – The prior wkend does not work as all conf. rooms at Caesars/Ballys are taken for labor union event.   I'm negotiating with Ballys/Caesars and looking to reserve a 1900SF conference room at Caesars that will fit 50 people with plenty of outlets and extension cords available if necessary and WiFi.  I'm also working on reserving a small block of rooms at Ballys for $517 total for those 3 nights (thurs, fri, sat).  We can increase the number of rooms at same rate later on.   Nothing finalized yet until I get more people to sign up.  Caesars just so you know runs about $773 for same nights.  Ballys is connected to Caesars so easy access to the conference room. Let me know if you are interested by emailing me:  The cost for conference estimated at around $100 (includes conference room for 3 days, 2 projectors, 2 screens, WiFi, beverage and some food (danish, muffins, bagels etc…)) if we get 20 people.   You will be responsible for booking your rooms at the above stated conference rate.     
    So far i have:  Aaron, bar2, Denis and DA.  

  137. “I think gold is a great thing to sew into your garments if you’re a Jewish family in 1939 in
    Vienna, but I think civilized people don’t buy gold.”
    — Charlie Munger,
    Chairman of Berkshire Hathaway, May 4, 2012
    The Gold Quote For 2013

  138. BBVA/ZZ – It sure looks cheap enough but you still have to assume Spain is "fixed" and not be bothered by 20% unemployment.  Not the same thing at all but BPOP is very attractive at $21.89 if you are looking for a nice bank play (and at least they speak Spanish).  

    HOV/Jerconn – We're going to get winter housing numbers and the Fiscal Cliff BS (not to mention upcoming debt ceiling BS) may lead to some disappointments.  Also, HOV is a northeast builder (which is why we like them) who may have suffered hurricane losses last Q so I'm just saying I'd rather wait and HOPE (not a valid investing strategy) that they disappoint and then jump on them than to play them so close to the top of a great run.  

    Dow closing volume lame again at 115M.  So very low volume on our two down days is a good sign if we have an up day with good volume.  

    Name/Wombat – Doesn't bother me, I cut it down to 6 letters anyway.  Optrader is not a separate site but a separate section on this one but our strategies are night and day to each other but some traders like one and some the other so we make good partners.  You need to paper trade more and find out which style suits you best – there's no one way to trade.  Peter D (comments above) runs a short strangle portfolio and that's a whole other style and Lflantheman has a Momo portfolio for momentum trading and Yodi concentrates on long/term buy/writes.  There's no one right way to trade – we all have our preferences but the one thing we all share is that we know it takes 10,000 hours of hard work and practice to become an expert at something (see Gladwell's Outliers)  and, try as we might – there are no shortcuts to putting in the time and learning.  

    That's what we're all here for – to learn from each other and become better traders.  

    You're welcome Rperi, Mill.    

    AA with nice earnings, that should help tomorrow.  

    4K/Grant – I don't know but they said it looks nice so I'll probably get a couple to take on the road.  

    Rolling/Scott – I mean if you feel you are going to have to/want to roll, then don't wait until they are buried.  If the call is out of the money, then it's all premium.  I mean if you are going to roll a call, do it before it's all intrinsic because, by then, the calls you want to roll to will probably be more than 50% intrinsic and you're not selling enough premium.  Selling premium is the only sure thing we have – we KNOW the premium will expire worthless and we keep that money – it's the intrinsic that we're gambling on.  

    So, for the purposes of this discussion, with GLW at $12.48, the short $12.50s are 100% premium, regardless of the fact that it's less premium than what you originally sold.  The Jan $11 calls, on the other hand, are $1.50 and have just .02 of premium and look how hard they are to roll while you can roll your .18 caller to the Feb 13s, which are .26 and are even further out of the money.  At some point, someone likely could have done the same with the Jan $11s (roll them up $1 to the Feb $12s for even or better), but now the Feb $12s are just .75 and nothing close to an even roll.  Just an example of course, but keep an eye on those relationships over time and you'll see what I mean.  

    Great Terra – Getting more organized already.  

    At the close: Dow -0.38% to 13334. S&P -0.3% to 1457. Nasdaq -0.41% to 3086.

    Treasurys: 30-year +0.39%. 10-yr +0.21%. 5-yr +0.11%.

    Commodities: Crude +0.12% to $93.31. Gold +0.73% to $1658.25.

    Currencies: Euro -0.25% vs. dollar. Yen -0.8%. Pound +0.35%.

    Market recap: Stocks slipped for a second straight day ahead of what is expected to be a weak earnings season. S&P 500 firms are expected to post meager earnings growth of 2.8%, but thelow bar could set the stage for stock gains later on. Telecom stocks were notable underperformers, even as AT&T reported selling 10M-plus smartphones during Q4.

    "Returns in 2012 were better than they deserved to be," says Jeff Gundlach, opening his 2013 market outlook presentation entitled "Year of the Snake." He notes stocks, bonds, and commodities all had positive returns last year thanks to the "success" of the central banks.

    The ferocity of the recent reversal in the VIX (VXX) – from 20% above its 10-day moving average to 20% below within a month -has occurred just 4 other times going back to 1990, writes Adam Warner. is it a tell? Unfortunately not likely, says Warner, as no pattern is evident from the previous instances.

    Alcoa (AA): Q4 EPS of $0.06 in-line. Revenue of $5.9Bbeats by $0.29B. Shares +1.6% AH. (PR)  More on Alcoa's (AAQ4 results: Says it ended 2012 in a strong liquidity position, with record results midstream and downstream. Sees global aluminum demand growth of 7% in 2013, up from 6% in 2012 and ahead of the 6.5% required to meet its forecast of a doubling in global aluminum demand between 2010-20. Shares+0.6% AH.

    WD-40 (WDFC): FQ1 EPS of $0.69 beats by $0.13. Revenue of $95.3M.  (PR)  More on WD-40 (WDFC +1.2%): FQ1 beats across the board as sales of its multi-purpose maintenance products – considered a primary focus for the company – grew by 15% Y/Y. For 2013 the company expects net sales of $356M to $370M and earnings per share of $2.31 to $2.40. The Street view is $361M in sales and earnings of $2.34 per share. Shares -0.4% AH.

    Apollo Group (APOL): FQ1 EPS of $1.22 beats by $0.24. Revenue of $1.1B (-8% Y/Y) beats by $0.07B. Shares +4.7% AH. (PR) 

    National Oilwell Varco (NOV -2.8%) is downgraded to Sector Perform with an $80 price target, lowered from $88, by RBC Capital, which says NOV's share price is heavily tied to rig equipment orders. The firm believes a near-to-intermediate term lull in orders may begin in 2013 as the industry digests the influx of equipment ordered in recent quarters.

    Occidental Petroleum (OXY +2.3%) shares are strong after the company reports it is ahead of schedule in its cost-cutting efforts, which CEO Stephen Chazen says should be noticeable in OXY's Q4 results and become "very visible" in Q1 2013. OXY plans to achieve $300M in cash operating cost cuts this year and up to $450M in actual savings vs. 2012.

    Seagate (STX+1.9% AH after stating it expects to report FQ2 (Dec. quarter) revenue of at least $3.6B, above prior guidance of $3.5B and a consensus of $3.53B. Gross margin is expected to come in at 27%, down from FQ1's 28.4%. Seagate adds it bought back a whopping 30M shares in the quarter; it repurchased 20.5M shares in FQ1, and 139M in the whole of calendar 2012. WDC +2.4%LSI+1.2%MRVL +0.8%. Seagate's recent rally seems to be tempering the market's enthusiasm. (PR)

    More on Netflix: 1) Piper's Michael Olson notes unique visitors to Netflix's (NFLX -2.1%) site fell 4% Y/Y in Q4, per NPD. There's a good chance the total number of unique Netflix users still rose thanks to growing TV/mobile use. Unique visitors to (CSTR +0.2%) fell 13% Y/Y. 2) As part of the buildout of itsOpenConnect CDN, Netflix is installing servers on Cablevision's network, thereby lowering bandwidth costs and reducing Cablevision's traffic burden. OpenConnect stands to diminish Netflix's use of CDN services from AKAMLLNW, and LVLT.

  139. Pharm/SGEN: Great run lately! I am also u/w on Mar$30 calls – what do you see from here? BTW, thanks for your SGEN tips – it has been a great horse so far!

  140. AC conference/Terra,
    What time does the conference begin on Friday and when does it end on Sunday?  I'm trying to look at potential flights,   thanks!

  141. Phil – please email me at  I need to send you the audio visual rental and services list so you can give me some guidance as to what you need and I can finalize pricing.   thanks!

  142. pstas
    Politics No not for me. But I wish they would have given my a black background so my German English spelling mistakes do not show up that much

  143. Phil: Agree BPOP, but I was asked to salt something away for my European portfolio, and Fidelity cheaper and quicker than doing it over there. I was buying BPOP [pre-reverse split] at $1 [it's low], since it's run by a buddy, R.Carrión. 
    Puerto Rico was in a somewhat revolutionary mood back in the '70s — against all logic, since they are the largest percentage beneficiary of federal transfers — and Richie wrote his Sloan School thesis on electronic fund transfer systems (and implemented the bank's ATM systems when he joined BPOP [founded by grandpa]). When I asked about his choice of theses, he smiled and said "because if the revolution comes, I'm going to push a button and the only thing they'll get is the building." We both ended up having a base in Barcelona, quite by accident, and he won't eat anywhere but Cal Pep, and I suspect you would agree with him.

  144. Wombat – not to worry on name if you don't mind us shortening (because we will). Also, unless I am mistaken (which I probably am and if so, no offence intended!), I think I heard that for his first few years on the site, Yodi used to be: 
    but, whew!, he just goes by Yodi now.  ;-)
    Welcome and Cheers! 

  145. Wappler – I have the room booked for 8am to 5pm on Friday and Sat/Sun 9am to 5pm.  I may extend it to 6pm or 7pm now that I think about it to give us some cushion on those first two days.  Friday will be full day trading the markets.  We have not finalized the schedule for Sat/Sun yet.  perhaps the Vegas attendees can give some feedback on how late things ran on the nontrading days.  I assume people may want to leave mid afternoon Sunday to start heading home.  

  146. Black background/Yodi,
    LOL on your wish to get a black background.  It reminds me of Otto Walkes' joke about the flag of Ostfriesland:  White lion on white background.
    On a more serious note:  You mentioned above that you are doing 40-50 option plays/day.  I assume they are different from the plays you discuss on this board, right?  The trades you post here seem to be mostly long-term buy/writes.  Just curious. 

  147. Scott some other thougths on rolling and I do have to roll a lot sometimes. I always look at the difference of div paying stocks and non div paying stocks. If a stock pays say .35 cents of div. during a given or even one month out and you have only 20 to 30 cents of premium to burn, you better roll if you still wish to hold on to the stock. In case of no div paying stocks I many times trade in synthetic calls, further out in time for the long call. Yes the short term caller will have to be rolled. In both cases if I can not roll for a credit but do better than I sold the previous month call I sell further out in time and in cases add some short puts so I do not have any cash outlay. Phil made a very good point in respect to intrinsic value, if you only have 5 cents left of premium it is hard to find a positive call sale for the next month. Extreem good point.

  148. Phil

    thanks guys, actually wombat is fine. I'm here for the duration, and my real name is JJ if you so wish.
    Yes, seeing all the separate styles. Sorry about posting to the wrong board and pissing everyones flow – not intentional.
    Figuring it out with OpT and Laddoo's comments – very helpful , thank you my man.

  149. oh, and before i sign off for the day
    a small reminder of what 20 inches really is.

  150. wappler
    I hate to tell you how many plays I have, Phil called me once crasy. Yes I have got a large garden and do a lot of weeding.
    Lets see today ARCC rolled in three accs and sold new puts. PETS new play, SCCO roll and sold  puts, Yum two diverent plays,
    BA 70p sale, SHLD new play, HCA sold missing puts to the Jan14 play, NBR rolled, closed JNJ Mar13 62.5 put play for .08, That makes TOS happy and increases my cash bal. 20 orders 24 filled. And that is for me a small day's run.
    Hope this answers your question

  151. Rolling/Phil – thank you and good reminder to always check the extrinsic premium…

  152. yodi,
    Thanks for walking me through your trading day.  One more question:  What's your average holding period for a trade?

  153. 8800/AAPL,
    Recovering – How much we can roll the Feb short 430 puts down depends on a number of factors, including time to expiration, price, volatility.  As a guideline, we can look at other strikes closer to the money to see how much could we roll. For example, if AAPL drops $40-$50, the 430 puts would be like the 480 puts now.  Looking at the Feb 480/460 put vertical, it is $3.92, while the Feb 455/435 is $2.02, so we can roll $25 by doubling up (from 10 to 20 contracts).  As a second check, we have 515/495 put vertical at $7.82, i.e. we can roll $35 from 515 to 480 by doubling up.  This range will get narrower the closer it gets to expiration.  Since earning is 2 weeks away, the possibilities for rolling would be decent.
    Picking a strike is more of an art.  How much did AAPL move on last earning?  How long does it take for AAPL to move 10%, 15% and 20% in the downward direction? Did it take more than 6 weeks?  What are the support lines?  How greedy should we be?  How's their P/E?  Are the iPad and iPad mini doing well?  What level would the big boys be buying? What if AAPL drop $50 on earning and we have the whole night waiting for the options to open the next day? The 430/410 put vertical is $0.9-$1 credit, versus the 450/430 vertical at $1.72.  Should we take less money, or more money with more risk?  My answer was to take less money.  Your answer may be different.
    Well, it's a lot going into one trade, not just selecting a magic strike.  Since we sell short, things can blow up on us.  If it does, what should we do differently when we do the postmortem analysis?  Thinking ahead helps to make present trading decisions.  It takes a while to be comfortable in making these decisions.  Moreover, when the market moves against our positions in a fast and furious fashion, we only have a short time to make these decisions (cut loss, roll, or change direction, etc.), so the more we practice all these thinking the better.  Whew, that's a lot for a Happy 2013!

  154. wappler
    You welcome.
    It is difficult to state an everage holding period. In principal I like to milk the penny ot of a trade. The shortest once are very few CC monthly trades possible running in to rolling over to the next month. CCP trades are mostly 3 to 6 and 12 month out.
    Back/ratios 3 to 4 month. One of my latest experiment. Besides some gambling trades, try to stay away from them, my main bulk are longer plays running to Jan14 and 15, With the longer plays I mostly chip in some short play callers without any extra margin, sometimes you win sometimes you need to roll to avoid assignment. My longer plays normally run in to verticals with put plays, if div is low or no div.. Hold as well a good amount of stock plays which pay aditional div. All of the later are so called growing trees, where you pay very little to start possible even a small credit and hopefully they grow in to a big tree, increasing your portfolio as you go along.
    The stock plays I compare with a car rental business. You buy the car (stock) and rent it out for a month, every month, for six month a year or more, the premium is your rental income. Now the difference between car buying and stock stock buying is, the car 100% loses on value, contrary the stock even can and mostly increases in value, capital gain, such as buying a Mercedes or a BMW (just kidding they also age). The div of the stock is your pocket money. Yes I even have stocks with three wheels only and I still rent them out. Mexican style.
    I trust this is all for today, as Phil will not give me a senior discount in any case as they say here in Mexico he has a lot of codo!!!

  155. Phil/Income Portfolio
    Since this portfolio is low touch, I am curious if we could make it a more viable training tool. In a portfolio such as this where "people like your mom" are trying to supplement their incomes for I believe $5k per month, it would be useful to actually take out the $5k per month. It would be interesting to see how the decision would be made on which securities to sell or buy to actually supplement an income. If we were cashing in $5k per month, then the total return we currently have would have been reduced as profits were taken. To make up for this taking of profits, more positions would have to possibly be added. I understand that the portfolio is ahead of schedule and could just be cashed, but we will not always have an upwards market and it would be interesting to see how we take the $5k during down times that are sure to come. Anyway, just a suggestion. Thanks!

  156. Don't worry Pstas, a couple more years of being a member here and im sure Phil could hook you up with a bright red republican color… BTW Phil,  what happened to Matt? Seems like its been ages since he posted. I feel like I'm one of the senior members on here now! Lol

  157. Here one more thing on rolling.
    Holding stock ARCC purchased in Aug 10 for 14.75 (old clonker car, but still running) now 17.77
    Holding Jan13 15 putters sold for 1.35 now .02
    but my Jan13 17.5 caller was coming to close to the fire I sold it in Mar12 for .44 cents now the value of the caller is still .35 cents left only with .08 premium. Pls observe the Mar13 div will be .41 cents so even that Mar13 is still way of some one could call for the stock, so I paid .32 cents to buy the caller back and rolled out to Jun13 19c for a credit of .17 paying the piper .15 cents. So in total I received .41cents and .17 cents .58 and pay .32 back leaving a credit of .26. But here I am gaining 1.50 $ in stock value! However for good measure I sold as well the Jun13 15 putter for .25.
    Hope this does not give you a headake but this is part of a days work. Obviously it is easier to sell an AAPL Jan15 put for 68 @ and be done with it but you can not have all eggs in one nest.

  158. Hey Yodi, are you back near Cancun now?  It's great to trade while sitting by the pool in a warm place.  Is it a good retirement place?  Just asking, not retiring yet.

  159. Peter D
    Hi Peter, Yes back in Cancun. In deed have to be trading to pay the high fees!!! At present yes the temperatures are in the 28 Centigrade. But looking forward to my next visit to Europe. There I do my trading in my RV travelling the country. All day you free to do your thing as trading only starts about 4PM.
    So here we are. Dam pool site trading!!! 8(

  160. Yodi,
    Thanks, I really appreciate the detailed walk through.  Hasta manana!

  161. Peter D,
    Thanks for the terrific (and thorough) response to my AAPL vertical question which I will do my best to process.

  162. Guys for rolling callers I have found it very helpful to do some ratio rolls of the 2 to 3 or the 3 to 4 variety. If you augment this with some patience and a willingness to add a putter or two if the stock is not crazily priced, I find its relatively easy to execute most rolls even if you get a little behind. I have found this advantageous over rolling too far out in time and putting up with months where you cannot sell. Be careful though!

  163. deano,  would you mind giving a brief walk-through of a typical ratio roll.  I'm not sure I understand the mechanics.  Thanks in advance.

  164. Not too much damage so far!

  165. I guess it's time to start cranking out the earnings stats again for some interesting plays. We had some good ones last time!

  166. jr_mints – example – Let's say you had sold 3 CSCO Jan 19 callers, which are well in the money now with CSCO at 20.31 and the callers are ~ 1.33. Your current position is 3×1.33 or $399 – you could roll those to 4 Feb 20 callers for 4x.96 or $384. Small difference. Small debit but you're well up on your calls and still well covered, and you didn't need to sell any puts to do it, although you might want to on a dip depending on your long position. Hopefully that makes sense – let me know.

  167. Yodi – Congrats on getting color!  I have been on the board almost a year and have not seen any color change.  So, impressive what you have been doing!  I look forward to your posts.

  168. Behavioral Macro — USTreasuries and the shifting effects of QE policy on future yields.

  169. Yodi/ Like jfawcett I would like to congratulate you on your new color.
    For some reason, I have always pictured you as being a very small statured old green man.
    Your box color seems like a perfect match!

  170. jfawcett, lionel
    Thank for your interest, I got the green color I think because  Phil does not like to give any discounts! Normally I keep quite weeding my own garden which is a hand full, always promise to myself to reduce position, but there is always an other opertunity around the corner. In membership time I have much more than one or even two years. Not small but I am trying to shead my pounds again I picked up in Germany. Just GREEN vegetables.
    To all good trading

  171. Just to add to what yodi said, there is always another opportunity.  So, when placing trades, do not give the spread to the MM.  Go with your price and if doesn't fill, so be it.  FWIW!

  172. deano
    Your so called back ratio, Good and well but you are exposing yourself to a nacked caller, not only do you underestimate the stock going higher but all new callers are already .31 cents in the money. I would like to look at the following options.
    sell Feb 13 19c for 1.64 with an extrisic value of .32 or sell Mar13 21c for .61 cents and sell 2x Mar13 19 p for .41, giving you here 1.42 gain against your 1.33.
    In the first state you would be bearish on the stock in the second case you increase your stk value by 2$ and hope your putters will be worthless. My two cents.

  173. BA – From seeking alpha this morning:
    4:44 AM A bad week has deteriorated for Boeing's (BA) 787 as brake problems force All Nippon Airways to cancel an internal Dreamliner flight in Japan. Boeing's shares have sunk a combined 4.6% this week following a fire in Boston and a fuel leak in the same city. [Top Stories, Breaking News] Comment!

  174. BA / Jfaw – You better believe that they are now going to look for every single problem with that plane! As Phil calls them, hyenas will start attacking – I guess good if you want a new entry in BA as it will surely be on sale now.

  175. yodi – Thanks, valid points and options, but all based upon your view of the stock. On CSCO, I think it grows, although slowly from here. If you look at the last two years, it always has trouble at $20.

  176. also, I would not call the suggestion a back spread based upon my understanding, but I am sure Phil will have some input.

  177. Good morning! 

    Whole lotta nothing going on this morning.

    Asia was up a bit, Europe flat so far, Dollar 80.65 holding things down a bit but all about holding the 4% lines now. 

    Here's a discouraging (but true) quote from Lacker (the Fed dissenter):

    "We’re at the limits of our understanding of how monetary policy affects the economy," says Jeffrey Lacker, the most persistent internal Fed critic of its uber-easy policies, with 13 out of 24 dissents at FOMC meetings. "Just throwing money at the economy is unlikely to solve the problems that are keeping a 55-year-old furniture worker from finding a good competitive job." 

    Wednesday's economic calendar:
    7:00 MBA Mortgage Applications
    10:30 EIA Petroleum Inventories
    1:00 PM Results of $21B, 10-Year Note Auction

    4:13 AM Asian and European shares are broadly higher after Alcoa provided a strong beginning to U.S. earnings season, predicting that the growth in global aluminum demand will accelerate. "Traders braced themselves for the start of an expected weak earnings season in the U.S.," says trader Jonathan Sudaria. Now they're "scaling back on the pessimism." Japan +0.7%, Hong Kong +0.5%, China flat, India-0.1%. EU Stoxx 50 +0.4%, London +0.4%, Paris +0.4%, Frankfurt+0.3%, Milan +1.1%, Madrid +0.8%.

    6:00 AM Overseas: Japan +0.67%. Hong Kong +0.46%. China-0.03%. India -0.38%. London +0.31%. Paris +0.04%. Frankfurt-0.04%.

    6:23 AM U.S. stock futures are flat and not joining the celebration seen in Asia and Europe earlier following Alcoa's upbeat Q4 results. Europe's still mostly green but down from earlier highs. Dow +0.1%, S&P flat, Nasdaq -0.1%. EU Stoxx 50 +0.1%, London +0.3%, Paris flat, Frankfurt -0.1%.

    The Bipartisan Policy Center estimates the U.S. government could default on its debt as soon as Feb. 15, two weeks earlier than expected – meaning politics could take center stage again sooner than we were hearing last week. “It will be difficult for Treasury to get beyond the March 1 date in our judgment,” the center’s senior director of economic policy Steve Bell tells the Washington Post.

     MBA Mortgage Applications: +11.7% vs. -26.1% last week. 

    Goldman Sachs' 23 best stocks for fat dividends and big buybacksAIZUFSVRCCEWYNHFCLOWAMPMPCNSC,AXSFITB


    Gundlach: His best idea remains long Japanese stocks and short the yen, though he expects a nice correction after big moves in both. The Nikkei could easily go up another 10% without being close to overvalued. He adds Chinese stocks to the list as well, though as with the Nikkei, Shanghai has had a big recent run and is due for a correction.

    Gundlach: Weighing in on one of the world's more hated asset classes, he says Treasurys aren't terribly overvalued on a relative basis. If you've got to short government paper, make it that of France, he says, where the 2-year note yields 0.13% and the 10-year 2.11%.

    Gundlach: By at least one measure - comparing the Merrill Corporate Index to the Treasury Index – corporate paper is as overvalued as it's ever been in the history of the data (going back to 1985). Another relatively overvalued fixed-income class is emerging market debt (EMB). "I would not be putting any new money into that."

    Gundlach: The chairman (Bernanke) is still in charge, he says, and markets are making too much of the recent FOMC minutes showing a bit more than expected dissent on QE. The dissent's always been there, reminds Gundlach. There's little to no risk QE or ZIRP is ending this year

    A year of stagnation continued in 2013: Andy XieBoth developed and emerging economies will see lower growth.

    German industrial production +0.2% M/M in November vs -2% in October but below consensus of +1%. German Economy Minister says Q4 will probably come in lower than Q3, although bookings and improved sentiment should bring a more upbeat outlook for output this year.

    Merkel Economy Shows Neglect as Sick Man Concern ReturnsGerman Chancellor Angela Merkel’s economic machine is beginning to show signs of neglect. As the continent’s growth engine and self-appointed fiscal paragon orders budget cuts for its peers, investors, economists and policy makers are starting to warn Germany is turning a blind eye to its own weaknesses. Joerg Asmussen, a European Central Bank board member nominated by Merkel, has gone as far as to predict a return to the status of “Sick Man of Europe” should they go unfixed. Without Merkel and a largely supportive German electorate ready to back over 300 billion euros ($393 billion) in bailouts and guarantees, Europe’s debt crisis could have already broken up the single currency. At the same time, the drive to rescue Europe has distracted her from signs of economic drift at home as labor costs rise at the fastest pace in a decade, erasing most of the progress made under predecessor Gerhard Schroeder. 

    U.K. Wage Growth Slows to 21-Month Low as Spending Power Falls. Take-home pay growth at Britain’s largest publicly traded companies slowed to the least in 21 months in the fourth quarter, reducing Britons’ spending power, VocaLink Ltd. said. Incomes after tax and other deductions rose 0.4 percent from a year earlier, compared with 0.9 percent in the three months through November, the London-based group said in a statement today

    IMF Concerned With the Pace of France’s Economic Reform


    Italy's Q3 public deficit falls to 1.8% of GDP from 2.5% a year earlier; Jan-Sep gap shrinks to 3.7% from 4.2%. The Q4 data, which is published in March, will show whether Italy will have met Mario Monti's fiscal targets. Milan shares +1.1%.

    The Bank of Japan will reportedly consider adding to its ¥101T ($1.2T) asset-buying and lending program, and doubling its inflation target to 2%, when it meets in a couple of weeks. While the 2% goal is expected, thoughts of further easing this month are a surprise. But the BOJ, which is under severe political pressure, hopes to forestall threats to its independence.

    Button-Down Central Bank Bets It All. Switzerland, for decades a paragon of safety in finance, is engaged in a high-risk strategy to protect its export-driven economy, literally betting the bank in a fight to contain the prices of Swiss products sold abroad. The nation's central bank is printing and selling as many Swiss francs as needed to keep its currency from climbing against the euro, wagering an amount approaching Switzerland's total national output, and, in the process, turning from button-down conservative to the globe's biggest risk-taker.

    Finra to Shine Light on Dark Pool Trading. A top U.S. regulator plans to shine a light on dark pools, private trading venues that allow buyers and sellers to post orders that are hidden from the rest of the market. Richard Ketchum, chief executive of the Financial Industry Regulatory Authority, said in an interview Tuesday that the regulator is expanding its oversight of the dark-trading venues, with an eye on whether orders placed in public exchanges are "trying to move prices or encourage sellers that may advance their trading in the dark market."

    Bank Hacks Were Work of Iranians, Officials Say. The attackers hit one American bank after the next. As in so many previous attacks, dozens of online banking sites slowed, hiccupped or ground to a halt before recovering several minutes later.

    Illinois legislators ended their 2012 session yesterday without taking any measures to deal with the state's $97B unfunded liabilities, which are rising by $17M a day and which could lead to more downgrades. "I think we may learn from Wall Street very shortly about the importance of doing this quickly," says state Senator Daniel Biss. "We all look like idiots." (previous)

    Here's research that should be music to Washingtonian ears: the government could save over $500B in Medicare and Medicaid costs over the next ten years by better coordinating medical care, UnitedHealth Group (UNH) estimates. For example, $150B could come from integrating treatments between the 9M seniors and disabled who are enrolled in both programs, up from an expected 2M this year.

    What People Who Live to 100 Have in Common (Yahoo News)

    Ow, my wrist!  Goldman Sachs (GS), Morgan Stanley (MS), HSBC (HBC) and Ally Financial could reportedly reach a $1.5B deal with regulators this week to settle allegations of foreclosure abuse, and end a costly and ineffective review of individual repossessions. The agreement would be similar to the $8.5B+ deal that ten other banks reached earlier this week. 

    Prudential (PRU) is initiated a Buy at Deutsche Bank with price target of $67. Fears regarding being designated a SIFI, and concerning the variable annuity business are "overblown," says Deutsche.

    The AIG board has 3 options, says the company in a statement: 1) Take over the Starr (Greenberg) lawsuit against the U.S. 2) Stand in Greenberg's way (and likely face a lawsuit by him). 3) Allow Greenberg to move forward on AIG's behalf. "The (board) has fiduciary and legal obligations to the company and its shareholders to consider (Greenberg's demand) and respond in a fair, appropriate, and timely manner." (earlier)

    MGM Resorts (MGM) sees its Chinese arm win government approval in Macau to build a second casino in the Cotai region. The major gaming players are adjusting their Macau strategies after revenue growth cooled to 14% in 2012 from 42% in 2011 but are still in a building mode. 

    Oh look – more oil:  The use of non-conventional drilling techniques in places like North Dakota and Texas has created an explosion in U.S. oil production, to the point where it's expected to surpass Saudi Arabia in crude production by 2020. The government now predicts the U.S. industry could pump 14% more oil this year alone, rising to 7.3M bpd in 2013. That's 300K more than its December forecast, and 900K bpd more than what was produced in 2012.

    Sterne Agee believes the recent pullback in North American precious metals producers presents a buying opportunity. The firm likes Newmont Mining (NEM) as underpriced based on its solid assets, commitment to cash flow and margin focus, project initiatives, and balance sheet strength; and Gold Resources (GORO), whose assets hold significant value relative to current share prices.

    Asteroid mining 2022 a $1 trillion bet for Earth (MarketWatch)

    Hedgeye says current employment trends show a potential deceleration of employment growth in the casual dining restaurant sector as compared to the broader economy. According to the firm, the data suggests a possible slowing of casual dining sales as a result. 

    Morgan Stanley upgrades Brinker International (EAT) to Overweight on a valuation call. The restaurant operator struggled last quarter to generate momentum at its Chili's and Maggiano chains, but new upgrades with the aging brands are expected to help lift sales in 2013. EAT +1.9% premarket. 

    Wow!  A bad week has deteriorated for Boeing's (BA) 787 asbrake problems force All Nippon Airways to cancel an internal Dreamliner flight in Japan. Boeing's shares have sunk a combined 4.6% this week following a fire in Boston and a fuel leak in the same city. 

    Confessions from flight attendants (Los Angeles Times)

  178. As alarmed executives and engineers at Boeing (
    BA) scramble to deal with the problems plaguing its flagship 787 Dreamliner, the stakes are high for company to get the problem fixed and fast. The combined two-day carnage from these two incidents (I,II) has already meant a 4.6% drop in BA’s share price, which translates into about a $2.6B hit to its market cap. And now, every time a 787 has a little glitch, it resets the confidence clock, which affects anyone considering flying on a 787, any airline thinking about ordering one and anyone thinking about investing in BA stock.

    United Technologies (UTXreaffirms its 2013 EPS expectations in the range of $5.85 to $6.15 per share on sales of $64B to $65G. Today's earlier announcement that Embraer (ERJhas selected its Pratt & Whitney PurePower PW1700G and PW1900G engines as the exclusive power for its new second generation E-Jet aircraft family is expected to have no impact on it's 2013 financial outlook.

    Clearwire (CLWR) has resumed trading after disclosing Dish Network (DISH) has made a complex $3.30/share offer for the company. Shares +9.3% AH to $3.19. The fact Sprint (S) owns a majority of Clearwire shares and (given its rhetoric) might legally contest any agreement with Dish could be limiting Clearwire's gains.

    Clearwire (CLWR) has received an unsolicited $3.30/share buyout offer from Dish Network (DISH). That easily trumps Sprint's (S) $2.97/share offer. The proposal requires Clearwire sell Dish 24% of its spectrum for $2.2B and use the proceeds to pay down debt, as well as (with extra financing) agree to build a 4G network for Dish. Sprint has responded to the proposal by calling it "not viable … in light of Clearwire's current legal and contractual obligations." Clearwire's board will "engage with Dish;" shares are halted. Sprint -2.5% AH. Dish -2%.

    The Justice Department and the Patent Office are against imposing product-sales bans for IP infringements except in very rare cases, the agencies said yesterday. They also appealed to the ITC to give the public interest – i.e. that "exclusion orders are inappropriate" – the top priority when deciding sanctions for patent breaches. The comments come against a background of the global IP war between the top mobile phone players. 

    Broadcom's (BRCM) CES product launches include: 1) An IPTV set-top box reference platform that includes support for the high-speed 802.11ac Wi-Fi standard. 2) A video decoder chip supporting the UltraHD (4K) video standard, which is finding its way into high-end TVs. 3) A 1 Gbps home networking chip based on the MoCA 2.0 standard (new competition for ENTR). 4) A cable modem/gateway SoC that supports 1 Gbps downlink speeds. Broadcom also notes its set-top SoCs have been designed into boxes from Samsung and Comcast. 

    Leading EU telecom operators, including Deutsche Telekom (DTEGF.PK), France Telecom (FTE), Telecom Italia (TI) and Telefonica (TEF), have reportedly been discussing pooling their infrastructure to create a regional network as they look to better compete amidst the bloc's economic worries. The talks come at the prompting of EU Competition Commissioner Joaquin Almunia. 

    ChannelAdvisor clients selling on Amazon (AMZN) and eBay (EBAY) saw major growth slowdowns in December, though growth rates are still impressive: Amazon's same-store sales (SSS) growth fell to 29.8% from 43.7% in November, and eBay's to 22.2% from 27.4%. comScore has also reported of a December slowdown. Google (GOOG) is seeing a migration in e-commerce ad dollars from paid search to a revamped Google Shopping, something that could lead to ad price volatility: SSS for search traffic fell 18%, while comparison shopping rose 15%. (previous)

    Apple (AAPL) is working on a cheaper iPhone that could launch later this year, the WSJ reports. One source says the device could resemble the regular iPhone, but "with a different, less-expensive body." The cheapest iPhone currently sold (the 8GB iPhone 4) goes for $450 unlocked, putting it out of the reach of many emerging markets buyers, as well as some prepaid buyers in developed markets. The fact low-end Android phones sell for much less (sometimes less than $150 unlocked) has done wonders for Android's international share. 

    Apple’s next iPhone to reportedly feature larger screen and ‘brand new exterior design (BGR)

    The American Academy of Neurology has published new research suggesting that drinking sweetened beverages, especially diet drinks, is linked to an increased risk of depression in adults, while drinking unsweetened coffee was tied to a slightly lower risk. The study,released today, will be presented at the Academy's 65th Annual Meeting in San Diego, March 16 to 23, 2013.

  179. deano,  Thanks for the explanation.  Yodi, thanks for your comments as well.