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Technical Tuesday – The Tide is High


It's not the things you do that tease and hurt me bad
but it's the way you do the things you do to me.
I'm not the kinda girl who gives up just like that, oh no.

The tide is high but I'm holding on. – Blondie

We passed our first major test yesterday.

I set levels for the expected pullbacks back on the 1st and yesterday, in our morning Alert to Members, I reminded our subscribers that it would take more than a 1% drop in our indexes before even our closest (the Nasdaq) was in trouble and that index is being dragged down unrealistically by a single stock (which will remain nameless) – so we cut them a little slack.  Our target levels were:

  • Dow 13,600 (finished at 13,880  +2%)
  • S&P 1,480 (finished at 1,495 +1%)
  • Nasdaq 3,150 (finished at 3,131 –0.6%)
  • NYSE 8,800 (finished at 8,852 +0.6%)
  • Russell – 880 (finished at 899 +2.1%)

sentiment_cyclesThis is why we have our 3 of 5 rule – one index breaking a bit below is no reason to go bearish.  Especially when a single stock that makes up 20% of the index drops 2.5% and causes 0.5% of the drop by itself.  The Dollar also ROSE 0.6% yesterday, so half of the losses for the day were nothing more than a currency adjustment and my comment to Members at the open was:

it would take more than a 1% drop in our indexes before even the Nasdaq gets in trouble and, since we need to see 3 of 5 levels fail, it's 2.3% to S&P 1,480 that we need to watch closely.  Other than that – how can we be bearish?  As Josh Brown pointed out on the weekend regarding our Market Euphoria chart and as I noted this morning, we're more likely just in the Optimism/Excitement phase of the trend than already past Thrills and Euphoria.  That puts us halfway through a massive rally, rather than at the very top of a medium rally. 

Still, even massive rallies have pullbacks and we'd love to miss one if it comes so we will be raising our stop lines (assuming they don't trigger) along with the market – but only after we get proper moves up, not one or two-day spikes.  Another reason to be bullish is a bottom on the stock which must not be named:  If AAPL refuses to go lower than $450ish, how is the Nasdaq going to have a proper sell-off?  

During the day, I tweeted out some new hedges we could take if the Russell failed to hold 900 as well as earnings plays on CMG and EXPE from our Member Chat while in Member Chat we had additional trade ideas for FB and AAPL and, on the whole, we ended up staying bullish for another day and this morning, we already had a long discussion about our overall outlook, which is still bullish

Obviously, values in 2000 were just silly but values in 2007 were not – in light of what we believed was a growing global market.  That, ultimately, is the future and unless anything in particular is going to disrupt that future – we can expect pretty steady growth (see "The Worst-Case Scenario:  Getting Real With the Global GDP!" which I wrote to substantiate my bullish premise for Members to start buying in the "crash" of June 2010).  

On the whole, the tide is coming in and the bears hate the water and every time a wave comes up short they shout: "See, I told you the water would never reach this part of the beach" but rationally, we can see the high water-line (2007) and we KNOW that the water has gone that high before and the tide has clearly turned so why would we bet that that part of the beach will never get wet again – even as the water is clearly climbing and has been for 3 consecutive years?  Oh yes, and there's the Fed.  And what are they doing?  Adding more water to the Ocean at a rate of $85Bn a month, which may not sound like much in a $16,000Bn ocean but they've been adding it for 3 years and that's about $2,500Bn more dollars floating around while the bears sit on their chairs under the high-water mark and tell you it will never get wet again this far from the shore-line.  

Our Big Chart is either toppy (and even a 5% pullback here would not be bearish – we haven't moved our Must Hold lines yet – as long as 13,600 holds, all is well) or we're now consolidating 5% higher than the last time we consolidated and we'll know that the same way we knew last time – the pullback won't violate our stops.

That's what kept us bullish in December and we called an audible and ignored the low volume spike down into Christmas (but we had very good reason with cliff nonsense scaring the sheeple) and yesterday we ignored the move down because it was Dollar-driven but we don't just go around trying to find excuses for the market – we need to not care whether the market goes up or down and the best way to do that is to have a PLAN for exiting that's just as good as your plan for staying – then you won't care which plan goes into effect, right? 

We're over halfway through earnings season and, so far, we're looking pretty good – with just 21% of the S&P 500 companies failing to beat either earnings, sales or both.  Of course, as we noted before the season began – expectations were set so low, it wasn't a big leap of faith for us to believe this quarter would come in BTE.  Guidance has also been soft (but forgiven, for the most part) and that sets us up for an easy beat of low-bar expectations again next quarter.  

Another thing that may give the markets more fuel is an increase in M&A activity, highlighted by DELL's expected $25Bn deal.  With that kind of cash looming to suddenly be injected into the markets – how can you bet against things?  $25Bn is over $10Bn more than DELL was trading at in November.  It's easy now to say that people who panicked out of DELL in November were fools who didn't know how to value a company but the same can be said for another now-$415Bn company I can think of…

Meanwhile, our plan is to continue hunting for sea-shells as we walk along the shoreline.  Our general plan is to try not to get wet but we're not too worried as we already have our stuff secured and we're ready to move to higher ground if the water comes in or quit the beach altogether if we don't like the look of the waves but plenty of time to have fun in the sun while we watch the bears scurry around trying not to get soaked.  

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  1. Oil Lines

    R3 – 98.76
    R2 – 98.15
    R1 – 97.10
    PP – 96.50
    S1 – 95.44
    S2 – 94.83
    S3 – 93.78

    Yesterday's high and low – 97.55 / 95.89

  2. Good Morning!

  3. PSW Atlantic City conference April 27-29 – We have 6 members paid in full, 2 likely to pay soon, and 3 maybes.  The deadline is Friday Feb. 22nd to get to 10 attendees. We need some more members to step up and sign up soon.  If we get to 10, then the conference is definitely on.  Email me with any questions.    

    Here’s the link to the main post for the PSW Atlantic City conference
    April 27-29. The group code for rooms at the Harrah’s Resort Waterfront
    Tower is SH04PS3. Email me with any questions.

  4. Terrapin22
    Just checking my stay in WPB before AC but 90% sure. Will finish this week.

  5. Yodi – that's great.  I have you down as likely.  thanks.  

  6. Shhh….PLX is up.

  7. Commodity ranges:

    Commodities have been range bound at best for quite some time now.  Oil, copper and platinum have seen the most strength recently, and all three are at the top of their trading ranges.  Interestingly, while platinum has moved higher, gold and silver have done nothing but trend lower for the last four months.  Wheat and coffee have also been trending lower.  

    Looks like oil is at the top of its range while gold and silver are trading in the middle of theirs. More at the link.

  8. Pharm / NVIV – do u like InVivo? 

  9. Would it make sense to sell some puts now? Even 1/2 of the calls. No margin cost. Might seem dangerous now, but selling calls has been dangerous for a month now. Phil?

  10. Might have been worth gambling on BIDU last night! Of course hindsight is always right…

  11. Iflan/ SODA roll down to March 50 calls is just 95c

  12. PLX
    Rumor Pfizer makes an offer below asking price for the company

  13. AAPL loss so far is $77K so basically if you didn't play AAPL in this portfolio you are doing well.

  14. st.jean/AAPL
    It's the gift that keeps giving! :)

  15. Good morning!

    CNBC went off the air for some reason.  Maybe the ratings finally went to zero.

    DELL halted and the deal seems to be on.  AAPL next on the block, hopefully.  Anyone got $500Bn?  

    Anyone got $1Bn?  HOV coming back to $5!  

    Ah, see – NOW BIDU shows us why I thought that a spread would be too dangerous to play.  Still should stay in bounds but close to $95 already means more headache than it would have been worth. 

    Dollar way up at 79.75, which makes the rally more impressive.  Oil $96.77 with inventories tomorrow, gold $1,680, silver $31.90 (not encouraging if they can't hold $32), Copper at $3.773, nat gas $3.318 can't hold $3.35 and gasoline shot up to $3.05 and is just under that line (and way too expensive but not a safe short if the markets are up). 

    The Euro is at $1.3505 and the Pound is $1.569 – just .215 apart.  Yen way up (weak) at 93.15 and that makes a happy, happy Nikkei at 11,210.  That TM report was dynamite, big raise in guidance but little reaction from stock, which is already up miles from the last time we liked them (low $70s). Not that they're not worth $100 but, now that they're at $100 – we're no longer interested.  Call us when there's another sale…

    At the open: Dow +0.54% to 13955. S&P +0.58% to 1504. Nasdaq +0.28% to 3140.

    Treasurys: 30-year -0.49%. 10-yr -0.27%. 5-yr -0.12%.

    Commodities: Crude +0.72% to $96.86. Gold +0.3% to $1681.45.

    Currencies: Euro -0.02% vs. dollar. Yen +0.76%. Pound +0.37%.

    10:00 AM On the hour: Dow +0.83%. 10-yr -0.3%. Euro +0.11% vs. dollar. Crude +0.8% to $96.94. Gold -0.13% to $1674.25.

    Market preview: Stock futures are looking rather tasty this morning as Europe recovers from yesterday's panic attack overpolitical shenanigans in Spain and Italy. The S&P benchmark is+0.4%. What's not looking tasty, though, is Yum Brands, which is-6.6% after it reveals the scale of the Chinese chicken safety scare on its earnings. Virgin Media is +16.3% on news of buyout talks with Liberty Global. Later: ISM Non-Manufacturing Index

    January ISM Non-Manufacturing Index: 55.2 vs. 55.2 expected and 55.7 prior (>50 denotes expansion).

    European leaders have succeeded in stabilizing the banking system, says Goldman President Gary Cohn, but they've still got work to do. "No one's given me an explanation of how we're really going to create growth in (the periphery)." One issue is the euro – too cheap for the core, he says, and too expensive for the periphery.

    One reason for the euro's strength over the past month – there's a lot less the currency floating about. The ECB balance sheet has actually been shrinking since the summer, with an especially steep drop since Feb. 1 when banks were allowed to begin repaying LTRO loans. FXE +9% in last 6 months.

    A 0.4% gain in December brought the 2012 jump in U.S. home prices to 8.3%, according to CoreLogic. Prices for non-distressed homes rose 0.9% in December. National home price prices are now down 26.9% from the April 2006 peak.

    The Yen Trust ETF (FXY-1.3% premarket after BOJ Governor Shirakawa steps down three weeks ahead of schedule. PM Abe has made it clear he wants someone on the job who will be bolder with monetary policy (the U.S. has a couple to offer). Currently speaking at a news conference, Shirakawa says he's under no pressure to resign early. Sure. 

    The RBA left policy unchanged overnight, but hinted at future rate cuts, saying the outlook for inflation means "scope to ease policy further." Last week's PMI report showed a sharp contraction in Australian manufacturing activity. The aussie slid on the dovish RBA statement, -0.5% to $1.0390. 

    China Imports Record Amount Of Gold In December On Price Drop

    ART CASHIN: Markets Are Ignoring Some Big Geopolitical Risks

    More on Arch Coal's (ACIQ4 results: Sales price declined $0.67/ton Q/Q, in part due to lower prices on export sales. Cash costs increased $0.66/ton, reflecting anticipated higher maintenance expense. Expects sales of 133M-144M tons for full-year 2013, with cash costs per ton similar to 2012 levels. Expects stronger performance in H2 than H1. Shares -4.4% premarket.

    At these prices?  MasterCard (MAapproves a new $2B share repurchase program. The new buyback will become effective at the completion of its current $1.5B program which still has $440M outstanding. In addition, the company doubled its quarterly dividend payout to $0.60 a share. MA +1.4% premarket.

    General Motors (GM) says its sales in China rose 26% Y/Y in January to 310,765 units with both of the automaker's joint ventures in the nation showing strong results. The company improved on December's pace by close to three percentage points.

    Shares of McDonald's (MCD) are treading water in premarket trading, up 0.1%, with the damaging report from Yum Brands on KFC sales in China not spilling over to scare off investors. Analysts are quick to note the issue with Yum is tied to chicken quality – not the overall restaurant sector in China. An under-the-radar pick to possibly benefit from the China chicken contamination issue is Tyson Foods (TSN) with its quality reputation in the region quite strong.

    Online sales threat to American mallsCredit market investors are falling out of love with US shopping malls as up to 15 per cent of the country’s suburban retail centres are forecast to close over the next five years in the face of online competition.

    legal action from a group of disgruntled J.C. Penney (JCP) bond investors just might have its roots in the bitter rivalry between Carl Icahn and Bill Ackman, speculates Zero Hedge. What smells funny: The law firm representing the ad hoc group is closely tied to Icahn and after the two investors duked it out on CNBC it's not totally unreasonable to assume Icahn wouldn't relish squeezing Ackman's large JCP position a bit. JCP -4.9% premarket to $18.44.

    Protalix (PLXsurges 14.2% following an Israeli report that Pfizer has shown an interest in buying the company after it hired Citigroup to start a sale process. Protalix is angling for $1B, double its market cap, although Pfizer doesn't want to pay that much, while an offer of $700-800M could be enough to sway Protalix's largest shareholders. The companies already partner for the marketing of Protalix's Elelyso drug for Gaucher disease.

    After crunching the numbers on broadband usage during the weekend, it appears Netflix's (NFLX -1.2%House of Cards series drew a strong response from its streaming audience. On at least one network, a quarter of all viewers powered through the entire 13 episodes over the weekend. If the binge-viewing trend holds, it could have a major impact on the streaming model. - I did that with "24" when I had the flu – watched a whole season in a few days.  

    Dell (DELL) enters into agreement to be acquired by Michael Dell and Silver Lake for $13.65/share, or $24.4B, a 25% premium over the Jan. 11 price before rumors began. (PR) 

    More on Dell's LBO: Microsoft (MSFT) will provide a $2B loan rather than an equity investment, as had been reported. Michael Dell will remain chairman/CEO. The deal is expected to close before the end of the July quarter. Dell will have a 45-day "go-shop" period to solicit alternate bids; a $180M termination fee applies. Look for disgruntled shareholders to challenge the deal, particularly given Michael Dell's conflict of interest. But finding a higher bid could be easier said than done. DELL halted. (PR) 

    BlackBerry (RIMM +5.7%) continues its roller-coaster ride, rallying again today on optimism about early Z10 sales. "We believe BlackBerry’s Z10 is off to a better start than the Lumia 920," saysBarclays' Jeff Kvaal after conducting U.K. store checks. That might not be an ideal comparison, since the 920 was supply-constrained at launch time. Deutsche's checks indicate U.K. carriers aren't actively promoting the Z10. (yesterday)

    Three breakfast reads: 

    Amazon: When Will This Bubble Burst? 

    Herbalife: Examining FTC Data And Potential Action 

    eBay: Our Little Auction Site Is Growing Up

  16. Phil/ for Income TWO is a dead trade, right? Even if there was some volume I don't think you'd see anything like $2 for the calls since the stock pays such a high dividend.  But I am thinking it does look good, just not as good as first glance – might get $1 for the calls and $2.40 for the puts – pretty good return when added to the $2 dividend…

  17. AAPL "Anyone got $500 BILLION" – Maybe you should give Timmy a 3 month trial.

  18. NVIV – don't know much about them.  Appears that they have a sustained release steroid for spinal chord injury.  The drug is injected or placed into the site of injury and helps control the damage to the tissue.  I need to look to see if this is feasible from a IV or oral form of steroid, and what the percent recovery is….how long the injury has been in place, etc.  If Iflan or a doc can comment, but my first premise is it would be superior to oral treatment, but not sure of the local issues to nerve tissue.

  19. LOL Diamond – So the Conspirator at TheStreet looks at the Conspirator at CNBC and says "looks good to me".  I agree with him about Siri – I said long ago that AAPL is playing for a Siri future and the next big iPhone change will be no phone at all – just a link to Siri you keep in your ear that tells you whatever you need to know and runs your life for you (unless IBM beats them to it with Watson, of course).  

    Commodities/StJ – That's why our short oil/long gold trade worked on Friday.  Rare when that happens. 

    Speaking of oil – having trouble getting back over $97 is a big sign of weakness.  

    FAS Money – $17.54 on XLF is $146.10 on FAS so yawn…  As to selling puts, support for XLF at the 50 dma is $16.50 so down $1 is 5.7% and that's 17% on FAS and that's $121 and the March $121 puts can be sold for $1.45 so let's say if we can get $1.50 for them, then we could certainly sell 3 and see how that goes.  

    AAPL Money – Still thinking we should kill the SQQQ protection but too close to call means caution wins out. 

    $25KPM – All looks well.

    $25KPA – Fine but crowded.   Good point about AAPL – our other trades are doing great.  Of course, $15,250 of the negative is the April $430 short puts and that goes back to the same old thing – you have to learn to ignore paper losses you don't believe can actually happen (not all loss, but we fully expect to collect the whole amount).  So what we've done is we've taken the $20,000 in profits on other positions and all of our margin and we've levered it into a massive (for this portfolio size) long position on AAPL – which is our "One Trade" for 2013.  If AAPL goes up 10% by April, we should erase all of our losses.  If AAPL is up another 10% (to $550) by next Jan, the $425 calls go from being a $7,000 loss to a $64,000 gain and the portfolio will be up 100%.  Will an all or nothing strategy be the right one for 2013?  Too early to tell but we wish we did it with BAC last year when they dipped back to $6.70 in May (or $6.88 in July).  

    Back to not talking about AAPL…. 


    TWO/Income Portfolio, REXX – Yes, if it's not filling it's a dead trade for the purposes of the portfolio.  Still not a bad spread but we have better things to do with our money (assuming we're patient).  

    Timmy/Rexx – He don't got $500Bn.  Ben perhaps…

  20. Hey guys, what's your take on ZNGA? 

  21. ZNGA – Anybody have the expected move according to options?

  22. MoMo trade:   Adding to EBAY.   BTO  10 more Mar 55 calls for 2.80

  23. You are looking at a 15% move on ZNGA Lolo… The average move is 19%. Not for the faint of heart!

  24. rexx TWO there are no dead trades try buy stk 12.44
    sell Jan14 12 straddle for 2.10 if they do not sell in a straddle sell them sepperate

  25. ZNGA/Lolo – According to TOS, the Market Maker Move is $.43  which is 16% of the $2.67 stock price.

  26. ZNGA/Lol – Way too crazy to guess.  No way to know how their revenue flows (or how they choose to book it). 

    And what StJ said. 

  27. Actually, even with that 10% drop, yesterday's BIDU short spread is netting $4.08 now, down from $5 so up about 20% despite the 11% drop in BIDU.  ZNGA may seem like less fun but you can sell the March $3 calls for .20 and the April $2.50 puts for .24 and that's a range of $2.04 (down 23%) to $3.44 (up 29%) before you are in trouble so, like BIDU, it's a nice trade but too risky for our Portfolios – just fun to watch and learn from.  

  28. FU PCLN!!!!

  29. Love that analogy today—tide coming in and the bears hating water!!!
    tug boats, hole in the pool, selling 100 VWs, bears hating water…
    Phil's Phantastic Phanalogies--got to learn them and love them!!!

  30. PHil – I know you're long-term bullish, but I'm expecting a correction any time…I have Feb DIA 139 puts, now down 50%, debating whether to double down or roll to March…any advice?

  31. My BIDU trade of the day. down 11.28
    Jan14 vertical buy 85/97.5 for 6.55
    sell jan14 80p for 6.70
    small credit .15c
    PM margin for 3 of 670.00
    wait to sell short month caller until stock has recovered!!!

  32. WAG – I have two account and my smaller one I do add 3% to it per month and it's set up with 4 2014 buy write plays. They are all over their maximum profit strike but one of them is WAG and I'm starting to feel the heat on the extra naked short call on it. They are going up today on good sales numbers, which from what I see are not as good once you look under the hood. The stock is also overbought (not overvalued). My play, once I put the money I made with monthly plays into those avg., is:

    100 WAG @ 33.84 (now 41.32)
    2014 35.0 call @ 2.29 (now 6.95)
    2014 30.0 put @ 2.15 (now 0.65)

    Feb 39.0 call @ 0.49 (now 2.45)

    I can add 1 put for now, and I will be able to add a couple more after Feb expiration, also notes that there will be earnings before Mar expiration.

    I was thinking to roll my 39.0 Feb call to 40.0 Apr call + 33.0 Mar put for a credit of 0.30, or to 41.0 Apr call + 37.0 Apr put for break-even on the roll. I could also roll to the 40.0 or 41.0 Apr call and add the 35.0 2014 put since all my plays are well in track and I don't mind to be a little more aggressive.

    Any thoughts on that?

  33. More fire wood on the AAPL trade pleeease!

  34. Phil,
    What would you recommend to hedge a position in emerging mkt equities ? I looked at EEV but verrry lightly traded, wide spreads in options and only out to Sep. EUM – no option chain

  35. PLX….sweet baby Batman…..

  36. projectwise
    WAG roll Jan14 30p to Jan14 37p
    roll Feb13 39c to Jul13 42c
    and you are smiling with another credit in your account!

  37. Did anyone saying BA is flying again? the stock is

  38. 25KP – The AAPL 455 calls are now $2.45 for a 35% win…

  39. Pharm—u taking half off on PLX or letting it ride—thanks very much for the trade

  40. Bears hate water funny I see them always standing up stream catching dumb fish with out a rod!!!!

  41. WAG/Yodi – Thanks for the input I like that roll, it only makes me be wary of the 'small range' (still a good 10%) for which both will expire worthless, for a long period like that (including 2 earnings). But then again I will have some premium on top of that range and… there is no magic so I'm might just do that roll.

  42. ….and let's not forget the polar bear…good swimmers…. :)

  43. Savi….u know me and PLX.  It is a love affair…..I am letting this one ride.  Selling $7 puts in Aug and Mar.

  44. Prof from Sterns School of business on CNBC has a good take on AAPL—sees value around $600—this guy has been pretty good —it follows what Phil has been saying—-oh I forgot this is the stock we should not talk about

  45. Bought back PLX Feb 5 Ps for 5c.

  46. Pharm--forgot your love affair --I do have some covered but did it before the pop so not helping--will keep the rest uncovered—thanks

  47. Since we have covered 1/2 our stock with Aug 7 Calls (or at least I did, I am using the Aug 7 puts to pay for that difference on the buyout price and the 'loss' on the Calls if PLX is bought out.  Fabry's disease trial also started, and this will be a boon for them and hurt SNY and BMRN.   PLX technology is rock solid.

  48. TSRX is next on the rumor de'jour mill. :)

  49. projectwise
    When rolling short term callers on a long term play try not to exceed 1/2 of your long term play as it looks you only hold 100 stk there, as well do not wait to long and always try to roll to a profit. If no profit to save the day sell an aditional putter but the putter should be further out or your margin will be to high!

  50. I say MOOOORE firewood on AAPL

  51. WAG/Yodi – Yes only 100 shares so couldn't do 1/2 but it's what I usually do on the bigger account when playing that kind of plays (not as often there). I went with your rolls but with the 41.0 july call and margin isn't a big issue there so I will sell some put between now and july. For Feb I had 2X 37.0 put and 1X 38.0 sold to 'pay for the roll'. Thank you !

  52. Guy on CNBC made a good point:  LBOs like DELL are a great example of how the markets give investors all of the pain of underperformance and then robs them of the gains.  It's true, it's a great trick. 

    Thanks Jabob – maybe we should keep them all in the Wiki somewhere. 

    CNBC asking "What is AAPL worth" and all the answers are TA-based.  They couldn't find anyone to say AAPL has more value than the current price?  Finally one realistic guy at the end but he's a professor, not a finance guy with an agenda.  

    DIA/Jercon – Well it's too short to DD on so you should roll for time.  If you bought them for $1.70, now .84, why not sell the $138 puts for .53 and add another .50 and roll yourself to the March $139 puts at $2?  You still have a $1 spread and lots of time to roll and, once the short puts expire, you can, for example, sell the March $137 puts (now $1.35) and either roll yourself up to the $142 puts (now $3.70) or wait and see about maybe an April roll if you need it.  If you always plan on selling (and if you had sold this month) you have a much less painful time holding the hedge long-term.

    WAG/Project – No biggie (you do need to indicate shorts but I get it) as you are in for net $29.40 with a call-away at $35 so you have $5.60 in profits and you sold the Feb $39s for .49 and now you are down $2 on that trade but loads of time to roll so the Feb $39s ($2.37 now) can roll to the April $40s at $2.10 for about .27 and you gain $1 in strike on the caller – that works find.  If you do that every 3 months and WAG has to be over $43 before you have trouble so a good play if you think move up won't last.  If you want, you can also cash your stock ($4,132) and pick up 4 2015 $37s at $6 ($2,400) and you can roll the 2014 $35 calls ($6.90) up to 2x the $40s ($3.40) for .10 and then you have $1,695 back in your pocket which leaves you in 2 2015 $37/2014 $40 bull call spreads and short the April $40s with one open long which you can cover if they go down or use for a 2x roll of the April $40 caller and the July $43s are $1.10 so a nice spread there if WAG keeps going up or you'll sell another short call for $200 and still have 18 months of sales to make (and half your cash off the table).  

    Emerging markets/8800 – You know I love my EDZ's.  It's been a long time since we played them as we've been bullish on Asia most of the year but back at $9 is a good spot to buy a hedge (but note I don't see problems in EM's looming – so it's just a hedge) like the July $8/12 bull call spread for $1, selling the $8 puts for .70 for net .30 on the $4 spread that's $1.14 in the money.   You can put off the put sale unless EDZ fails $8 and then you should be able to get .70 or better for the $7 puts – still a 3x profit potential on the bull call spread without hedging it out.  Also, CHL had a nice dip and you can sell the 2015 $40 puts for $2 to pay for the whole thing as CHL is a great buy at net $40 (now $55, was $59.73 last week). 

    BA/Yodi – How silly that they sold off so hard over a battery.  Especially while Airbus has only now (a year later) figured out why their wings are cracking (maybe a double-decker plane is too heavy?).  

    AAPL/$25KP, StJ – Good but not great.  Another day like this and we get last week's loss back.

    PLX/Pharm – Don't you hate it when stocks you like get bought out early?  

  53. I trust you still remember my little AMZN play of the 23rd Jan13 set to gain if the bubble pops but also a winner if the stock goes higher.
    Jan15 buy 260p @ 43.98 now 44.57
    Jan15 sell 220p @ 27.03 now 27.07
    Jan15 sell 145p @ 8.35 now 7.85
    and just to feel good
    Feb13 sell 260p @ 6.30 now 2.85
    Just about ready for the new putter!
    you work the numbers and see where we stand
    Any one plaid this play???

  54. Phil BA at least you can pack an other battery with your luggage just in case a wing I am not so sure, possile one from MCD.
    There are at least 100 people of BA working on that battery problem. Normally you just put a fuse or a breaker before the input of the battery, not to blow the battery, so you only pack a fuse with. But if in daught just fly one of the 100 men to China there is one city where all taxis use electric cars with a range of over 350 Km per charge. Or you could call on TSLA they would surely lend you a battery for a fast take off!  (8

  55. WAG/Phil – Thank you, Ill make a kind of roll like that to cash out some and roll to 2015 if they are still over my naked call around July, I'll ask again if we get there !

  56. Not only is PFE in the mix, so is NVS and MRK.  Valuation by largest shareholders is 7-800M?  With ~100M shares outstanding, that is $8/share.  Genzyme went for, um, 20B.  So, any takeover for PLX is in the 1B range is low IMHO.  I see it 1.5-3B.  Let's start the bidding war.

  57. When we hired JPM for the buyout of our company, the price doubled…..and we did not have ANY approved products.

  58. projectwise
    Re WAG and Phil's idea You find a synthetic play is always better if the div. is low as with WAG 2 odd % you can make this up on your short term callers all the time and at the same time you save a lot of cash outlay. Sometimes with a good stock I set up a double play, stock write and synthetic, just to see who runs faster.

  59. AAPL / Phil – Close to a double now on the weeklies but we'll need 3 days like that to make up for the losses from last week!

  60. Good long valuation article on AAPL.  Very simple to me.  They have $135Bn in the books and worst case is they make $40Bn this year and even if business declines and they make $35Bn in 2014 and $30Bn in 2015, that's still another $105Bn for $240Bn with no debt over 3 years.  Company cap is $424Bn so, over 3 years, you're paying $180Bn for the business and the rest is cash back.  At $180Bn, $30Bn in profits is still a p/e of 6 – that's with a 25% decline from current earnings vs. current, conservative estimates of $42Bn this year and $45Bn next year.  

    Now, as I said the other day, if AAPL buys back 10% of it's stock at $440 ($40Bn) that leaves them with 800M shares and still $135Bn at the end of the year as they make another $40Bn ($50 per share) and if they then take another $44Bn and buy back another 100M shares next Jan, they would have $95Bn in cash on $700M outstanding shares and still making another, let's call it just $35Bn – still $50 per share plus you have $135 per share in cash left on the books from the $131Bn they still have in the bank.  That's almost a worst-case for AAPL over 3 years….

    I know I'm trying not to talk about them but I spend my day looking for bargains and I keep seeing AAPL at these prices and it's still the best bargain in the market.  The last time I felt this way about something was not SVU, not HOV, not WFR, not RIG, not VLO, not HCBK, not BAC, not ISRG, not GOOG, not JPM, not HMY, not MCD, not CAT, not OIH, not HPQ, not TASR, not CIM ($3.09 now), not TSLA…. but it was AAPL at $85.  It's like looking for diamonds and the floor is covered in glass with a few gems around but, in the middle of the room is the hope diamond and we're supposed to ignore that one.

    BA/Yodi – Musk already offered to help BA.  I saw him on TV, it seemed to me he knew exactly what was going wrong from experience they've had with their own densely-packed batteries.  As you note – many ways to fix it but BA is correctly going for the "right" fix that is good for the next 30 years of service – not just a work-around.  

    Good plan Project.  

    JPM/Pharm – That's why guys like that are worth it.  

  61. Phil — Any thoughts on KORS?  Stock at $54.50, but Feb 55's at $3.20 (earnings on 2/12), seems like a lot of premium. Would you suggest selling them against a lower BCS?  

  62. CNBC is filled with idiots today.  First, if anyone in the world had the money to buy Apple, it would be worth a ton more since the individual parts could be sold off at much higher valuations.  And even if you didn't, you would be making money on your initial investment from income in 10 years if not less.
    They also had some moron who was predicting the dow growing at 7% per year for next 20 years giving us 28,000 on the dow in 10 years and 56,000 in 20 years.  These are the same morons who predicted we'd be at 25,000 now with the Nasdaq at 10,000 in 2000.  Within the next 10 years, with the treasury buying back notes and interest rates rising, this market is far from clear sailing and it only takes one bad year to totally screw up his 7% a year valuation.

  63. EW – start watching them for an entry.  $70 is a very nice place to start selling puts.  But, don't catch the knife just yet.

  64. Obama on the way (webcast).  

    ISM/StJ – And I don't consider an inventory draw to be a negative – it shows that they underestimate the strength of the economy.  

    KORS/Esco – A bit on the expensive side overall and luxury lines are questionable so I'd stay away.  Premium is due to earnings but, to take a bull call spread, I'd have to like them more than I do (or hate them more) to make a trade here.  

    Idiots/Rustle – Just today?  



    It never ends. 

  65. aapl/ Phil:  Why buy aapl for $500 billion when you can buy MSFT for only $230 billion, fire Ballmer and make a hefty profit?
    Now, I only need someone to loan me the other $229.99 billion and we are in business!

  66. Phil et al: If one had $100,000  that he needed to keep safe- as in no loss of principal over a 5 year period- could it be done using options?

  67. VIX – the indexes are getting worked, Up Down at 3x normal ATR and what does the VIX do..? nada.

  68. Now we are cooking with AAPL – these 455 calls are $5.35, up close to 200%! Good for $3500.

  69. China - Kevin Freeman article from last year about China's "war by other means" against US. Markets are one of the battlefields.  

  70. Newt
    That depends. Is the 100k all cash? Then guard against inflation by investing in TIPS. Or Put it in a CD yielding 3% or more a year. Principal protected. BUT if that 100k is in the market, like a 401k or something then you could potentially build a box option strategy to limit potential gains and losses. Buy put and Sell call (Syntheic short against the equities you own)
    You can darn near do anything with Options. It is why I am addicted to learning all I can about them and why I love this site over any of the others. Phil knows his stuff and applies option strategies in a very genius way. Getting leverage when he wants it, making price targets, getting income, protecting/hedging other investments. Soooo many things to learn!!

  71. A quick thing.
    All of you with money in mutual funds/ETFs that are charging % AUM fees kiss those goodbye by just using a synthetic long with options! Buy call ATM sell Put ATM and there is your synthetic long (best to go longer term with these spreads) but no Expense ratio! Just two commissions. You could even get really bold with it and Sell a OTM call for some leverage in between the spread. 

  72. Is Altucher german for "a douche"?

  73. AAPL/$25KPs – Sadly, the correct thing to do, at $5.35 is take the money and run in both $25KPs as we lost about $2 last week and this position cost us $2+$1 so we're very lucky to get even and, especially in the $25KPA – we're already bullish on AAPL.  So, I'll have to call the weekly $455s closed – even though I really think we'll miss them.  

  74. Sometimes its good to remember they're a tech company:
    Apple's solar cell multitouch panels may harvest energy for future iPhones:

  75. Phil/AAPL
    Thanks for the AAPL weekly trade. I was out at $5 with a nice gain. Got in the trade late and out early. It's nice to finally say something positive about AAPL!

  76. Dplatt: thanks.  There are so many ways to skin the cat. Its cash.

  77. dplatt
     Buy call ATM sell Put ATM and there is your synthetic long
    One question what do you do if the stock goes south and I do not mean Mexico!!???

  78. Pharm
    CLDX announces $75 mln proposed public offering of common stock
    CLDX Are you in  ?

  79. Phil Did you set up the BRCM  May bear put 33/30 play I hold that with 1.83/.83 now 2.20/.98 and I do not think BRCM will go further down so it will be losing steam?? TIA

  80. Phil
    That SQQQ is burning up with AAPL finally turning around. Switching to TZA a better option if AAPL keeps charging up?

  81. Phil – here is a blog entry by the NYU prof good read on trading/investing in AAPL .. 

  82. CLDX/qc – absolutely.  Does not sway me away from them.

  83. Pharm
    CLDX  would you add  ?

  84. sell Ps sure, not stock.

  85. CLDX – we r in the Aug 8/12 BCS for about 90c, with the Feb 7 Ps STO.  Net was 70c or so. I am going to let those Ps go to 0 and sell the Aug 7 Ps which will make it a free or small credit trade.

  86. MSFT/Arivera – Because I don't have to fix AAPL – it's fine as it is.  Ballmer is like a tumor – you have to cut him out but then there will be a lot of damaged tissue that will take time to heal.  

    Safe/Newt – Well, unless you have millions and can get special options underwritten (like Buffett did), 2 years is the most you can go out at the time.  Most strategies like that (collars, etc.) are used to lock in dividends and, with the VIX so low, it's going to be hard to net out more than a 3% note.  Take CIM, for example, you can buy the stock for $3.09 and sell the 2015 $2.50 calls for .70 and buy the $3 puts for .60 and you net in at $2.99 with a $3 put so you can't lose and HOPEFULLY, you collect the .36 dividend (assuming nothing happens to it) and make 12% a year.  That's a decent collar – find a few like that and you can deploy $30K of cash and $10K of margin for 1,000 shares which will drop $3,600 into your account (if all goes well) while the other $60K goes in the bank and gets 3% for another $1,800 and now you've got 5.4% interest without putting it all in the market.   

    Financial warfare/Scott – Do you really think the breeding ground of vicious psychopaths we've been breeding on Wall Street for generations would lose in a war with China?  If they let Lloyd and Jamie off the chain, it would be over faster than the '67 Arab-Israel war (6 days) – maybe even shorter if it starts on a Monday or Tuesday but there would be no reason for our guys to cancel their weekend plans just to destroy China's ability to function in the Global Economy.  This is like writing an article about a really tough-talking 5th grader who has an elaborate plan to take over the high school and subjugate all the students.  The only way it makes any sense at all is if you focus on the 5th grader and ignore all the capabilities of the high-schoolers.  Journalistic ignorance is bliss – or at least a good excuse to fill up a few pages with nonsense.  

    ETFs/Dplatt – Good idea.  

    Altucher/Rexx – He's an interesting guy.  Sold a company, invested in tech in 1999 and lost it all, kicked around a lot and then started another company that he sold to Cramer, had a fund of funds that I think went bust and now he's got a hedge fund that I guess is bullish (judging by his Dow 20K prediction).  I guess based on the old "broken clock" theory – he's kind of due for one….

    Solar/Deano – Good stuff. 

    Great exit DC – you are very welcome.  

    BRCM/Yodi – I would not have called a bear put on BRCM, I like them too much.  

    SQQQ/DC – Yes, we knew that would happen, which was why we wanted the offsetting long AAPL.  Now that we've cashed the weeklies, we have to decide tomorrow whether to add more weeklies or kill the SQQQ.  Likely we'll cash the $36s and leave the naked short calls.  

    Link didn't work Partha.  

  87.  AND THIS…never seen money manager sentiment this bullish


  88. Phil,
    1 -Thx for the cmnts re emrg mkts – my  interest in hedging stems from your counsel to seek protection when it seems   the least needed – and also the cheapest.
    2- Re "the stk whose name shall not be spoken' – at least not that much, with AAPL up almost 20 pts today and approaching resistance/the recent hi @  462ish, would this be an appropriate place to sell some next wklly calls ?
    Thanks again

  89. Utterly ridiculous.

  90. Phil BRCM it does not make sense to me eather so I am closing it with a moderate profit. Thanks for your comment

  91. Phil: Thanks.

  92. Insiders/Angel – They also sell to meet tax obligations after having such a big year last year and, of course, portfolio rebalancing.  I'd take that with a grain of salt.  Money manager mania is crazy, though – I posted this last week.  

    Of course, sometimes, when 100% of the people are making the same bet – it's because someone betting on the other side would have to be an idiot not to see what the rest clearly do…

    AAPL/8800 – I'm still worried about $20 pops so I'm still disinclined to sell calls under at least $475.  

    CNBC AGAIN parading out people to dis AAPL.  Keep in mind there's no news on AAPL today – they are clearly on a mission to quash the rally.  "I don't see the chart getting healthy any time soon" – what an idiot.  That's this guy's reason for not liking AAPL – squiggly lines?  

    Wolverton - Cagle Cartoons - Guns in Perspective COLOR - English - NRA, Terrorism, Gun Deaths, Gun Control, Gun Laws, Firearms

    Nate Beeler - The Columbus Dispatch - Power Outage COLOR - English - gop, republican, branding, superdome, dome, power, outage, blackout, light, bulb, head, idea, politics, super bowl

  93. This must be a special idiot edition of CNBC.  They just had Bill Gunderson on there who said Apple still should be falling and compared it to Netflix and that happens to be a stock he likes now.  They earned .13 a share and went up over 5 billion in market cap and almost doubled in price and now he likes them.  Apple will earn roughly $45 a share and he likes NFLX better.  Similar valuations.  This is why his whole firm only manages 31 million under management.  Not a lot.

  94. Guys //
    I got burned last night on the TWO buy/write.
    Warning – never use the 'automated tools' on Fidelity. 
    It filled my caller at the 'ask' – so, in other words I sold the 10 covered calls at .23, which wasn't even within the spread.
    Long story I argued with Fidelity, they gave me a $500 cash credit to the account but that doesnt help me with position.
    My premium doesnt even cover the strike, so the best case you'd these get called away now and I take Fidelity's $500 and shove off to TOS for a couple hundred in losses. But they are 2015's – so …
    But I still have to fix this somehow. I'm sitting on a -670% loss at open, just can't figure out a solution …
    anyone ?

  95. Phil / Is there a general rule for when you should buy back calls? TIA

    Phil / Members
    After hours
    What is the best way to track upgrade/downgrade?
    On ToS?

  97. I gotta quit watching FAS…it is like trying to parent a child in the middle of a tantrum….  

  98. last post // sorry – i meant it filled them at 'last' – not 'ask'

  99. CMG – what are your thoughts guys?  Thanks again.

  100. womb
    boy no details how can one work through this and you pick on me for more details?????
    did you see my play this morning 10.59???

  101. You're welcome Yodi, Newt…

    Gunderson/Rustle – He must have started with a Billion to have $31M left. 

    Warning/Wombat – Never use Fidelity…  You can just leave it at that.  Would be nice if I knew what strike etc but I assume you bought TWO for $12.44 and sold the $12 calls for .23.  I wouldn't accept the $500, I'd tell them to unwind the calls.  Unless you put in a market request, they have no right to do that to you and that's their own market-maker, most likely, pocketing the money.  Of course $500 is .50 so now you sold the calls for .73, not as terrible…

    Calls/Amalfi – 20% and 50% are decision points.  There's no "rule" though because, like our short FAS calls, if you expect a pullback, the amount doesn't matter – it's where you think the stock will finish, how much premium you want to sell, how much protection you think you'll need, etc…

    Upgrade/Downgrade – QC.  We're getting a new thing from OptionMonster in the near future that does that.  Lots of site have some sort of tracker – depends what format you like.

    OPEN going down and down.  

    corporate profit margins

    CMG/Lolo – We covered our Income Portfolio bull call spread with March $320 short calls at $9 – too much money to turn down on what we assume is a weakish report. 

    88M on the Dow at 3:40 with Dollar at 79.55, oil $96.63, gold $1,673, silver $31.83, copper $3.776, nat gas $3.41 and gasoline $3.04.  $1.358 for a Euro, $1.566 to the Pound, 93.53 Yen to the buck with the Nikkei just under 11,300.  

    Phil – Havent posted a link before – lets see if this works …

  103. SLV – Weekly 31 calls….for a pop!

  104. Do they gap it open tomorrow and leave an island bottom? You know who.

  105. Phil hate doing this to you But AAPL is it time to sell some weeklies or just enjoy the ride?

  106. PLX…huge gravestone doji or shooting star.  Tomorrow will be key!

  107. Sure looks and feels liek a pumped up day. Are there no more bonds to sell this week?

  108. Rejected into the close!  

    Gotta have something to shoot for tomorrow, I guess. 

    That one worked Partha, thanks. 

    AAPL/Yodi – They don't pay enough for weekly calls to short them.   For $11 you can buy the $465 puts and lock in the gains less the $4 premium but it's cheaper to have faith and a long-term perspective.  

    Bonds/Scott – Next week.  

    VIX back down to 13.62 but TLT just $116. 

  109. Altcher is such a tool. A few years ago there is a clip of him saying he's dumping all his money into UNG and it proceeded to lose another 2/3s and do a reverse split. I don't know how he keeps getting on TV

  110. Thanks Phil AAPL my thoughts as well

  111. PCLN way up because of EXPE?

  112. CMG +$10 on earnings.  I like Mexican food, but still PE of 35 seems steep even with 15% sales growth. Meanwhile YUM down $2.  Its not like the chickens were catching fire at 30,000 feet.

  113. You're welcome Yodi. 

    PCLN/Jaobob – Yes, people don't differentiate business models.   PCLN will be fantastic short if that pop holds ($710). 

    EXPE with a nice pop on earnings – testing $70, which is the top of our range (sold March $65s for $4 covered by $5 spread.  Fortunately, we have 6 longs at $5 for $3,000 and just the 4 shorts for $5 for $2,000 so, if $70 sticks – still a nice profit as we started with a $400 credit.  Most likely, we'll need to roll though so no easy win on this one.  Fortunately, we like EXPE,  so no big deal buying more. 

     Expedia (EXPE): Q4 EPS of $0.63 misses by $0.02. Revenue of $974.9M beats by $45.06M. Shares +3.6% AH. (PR)

    CMG with small miss but up anyway.  $327 so far and we sold $320s for $9 but covering big spread that's now 100% in the money so no regrets there.  

    Chipotle (CMG): Q4 EPS of $1.95 misses by $0.01. Revenue of $699.2M (+17.2% Y/Y) in-line. Shares +4.1% AH (PR)

    More on Chipotle's (CMG) Q4: Comparable restaurant sales increased 3.8% Y/Y for the period as the restaurant operator puts in another quarter of subdued growth. Chipotle added 60 new restaurants to brings its total restaurant count to 1,410. Looking forward, flat to low single digit comparable restaurant sales growth is forecast for 2013. CMG +4.2% AH. (PR)

    ZNGA also up 5% on earnings….

    Zynga (ZNGA): Q4 EPS of $0.01 beats by $0.04. Bookings of $261.3M (-15% Y/Y) beats by $50.2M. Expects Q1 bookings of $200M-$210M and EPS of -$0.05 to -$0.04, below consensus of $240M and -$0.01. Expects 2013 adjusted EBITDA margin of 0%-10%. Shares +5.5% AH. CC at 5PM ET (webcast). (PR)

    Overall, it was a very good day! 

    At the close: Dow +0.65% to 13970. S&P +1.02% to 1511. Nasdaq +1.29% to 3172.

    Treasurys: 30-year -0.58%. 10-yr -0.23%. 5-yr -0.12%.

    Commodities: Crude +0.56% to $96.7. Gold -0.15% to $1673.85.

    Currencies: Euro +0.48% vs. dollar. Yen +1.24%. Pound +0.69%.

    Market recap: Stocks snapped back from yesterday's tumble, as investors eyed steady economic readings in the U.S. (III) and Europe, and worries about Europe’s handling of its debt crisis seemed to fall away. Techs, which sold off a day ago, enjoyed strong support from Apple, +3.5%, and going-private Dell. Prices of 10-year Treasurys fell to yield 2.012%.

    France and Germany are at it again as French President Hollande's call for a managed exchange rate (lower euro) is quickly rebuked by German economy minister Rosler who says the eurozone's top priority must be "strengthening competitiveness, rather than weakening the currency." FXE +0.5%.

    Bank of America (BAC +2.9%) and Citigroup (C +1.8%) both have 30% upside this year, says Guggenheim's Marty Mosby, with big dividend hikes – BofA to $0.05 quarterly from $0.01, Citi to $0.25 – a major catalyst. Oppenheimer urges caution on capital returns. "The banks (will) get let out of the penalty box only very slowly." - Same exact target I gave on BNN.  

    The intense smog situation in Beijing forces the government in China to curb the usage of state cars and appears to be increasing dialogue on broad policy changes regarding fuel emissions. How bad is it? Areas around Beijing saw only five smog-free days in January with auto emissions blamed for over 25% of the pollution in the air. The issue plays into the strength of foreign manufacturers (GMF,VLKAY.PK) able to produce modern low-emission vehicles in the region at a steady clip.

    Solar stocks are spiking. The move may be related to a news item dated Jan. 30 and released today about a tax ruling that would clear the way for solar farms to be clasified as REITs. FSLR+6.8%SPWR +6.3%TSL +5.2%YGE +4.2%STP +3.8%TAN+3.5%.

    When one coal miner coughs, they all catch cold. Peabody (BTU -2.5%) dragged the sector down last week when it reported its quarter, and Arch Coal’s (ACI -9%Q4 is having the same effect: ANR-1.6%WLT -1.2%. Like BTU, ACI says it sees signs of a possible recovery in domestic coal during H2 2013, but those signs will evaporate unless natural gas prices move closer to $4/million BTUs.

    Supervalu (SVU +0.4%names Sam Duncan as its new CEO to replace Wayne Sears in a move which was signaled by the company about a month ago. Turnaround specialist Duncan will preside over a slimmed-down Supervalue with several of its grocery store chains sold to Cerberus.

    Coinstar (CSTR +2.3%) and Verizon's (VZ +0.2%) Redbox Instant streaming JV has struck a deal with Microsoft (MSFT +0.5%) to make the Xbox 360 its exclusive console platform. Redbox Instant, whose launch has been delayed from Q4 '12 to the end of Q1, will presumably get some free marketing as part of the deal. Netflix (NFLX-0.7%) is available on all three major home console platforms.

    Hard drive industry sales will fall 12% in 2013 to $32.7B, IHS predicts, as both slumping PC demand and growing solid-state drive (SSD) adoption take a toll. The low valuations given to Seagate (STX) and Western Digital (WDC), as well as controller suppliers Marvell (MRVL) and LSI, makes it clear the Street sees an industry in long-term decline – all four are working to grow their SSD exposure (III), but competition is intense. IHS thinks WDC could eat into STX's 50% share of the high-margin enterprise HDD market thanks to its helium drives.

    LinkedIn (LNKD +0.3%) is underperforming ahead of Thursday's Q4 report even though Piper has launched coverage with an Overweight and $150 PT. The professional social networking giant has surged to new highs since delivering a strong Q3 report, and now trades at 94x 2013E EPS. A recent WSJ survey highlighted LinkedIn's growing popularity with small businesses as a marketing platform.

    Netflix (NFLX -1%) is in line for inclusion in the Nasdaq 100 Index with Dell set to go private. The company is currently the largest in the Nasdaq-Q50 Index, which serves as the waiting room for the Nasdaq 100.

  114. 9to5Mac digs through iOS 6.1 (
    AAPL) and discovers what it believes are the building blocks of a much speculated but never confirmed streaming radio service to compete with Pandora (P), Spotify & co. P gives up earlier gains, now +0.35%. AAPL +3.35% on the day to $457.15.

    Apple (AAPL) bulls might be interested/relieved/concerned to know the stock's decline was enough to shake Whitney Tilson out of his long position (annual letter). Into 2013, his fund's largest holdings show a decided tilt towards financials – with BRK.BAIGC, and GSmaking the top 5. He's also an investor in Kyle Bass' fund making a big bet on a weaker yen and higher Japanese interest rates.

    Apple's (AAPL +3.4%) sell-side fans are beginning to insist the company needs a bigger iPhone. Barclays' Ben Reitzes sees the market for smartphones with 5"+ displays growing to 230M units in 2015 from 27M in 2012, and thinks a large iPhone could boost ASPs by ~5% and 2014 EPS by $7. Sterne Agee's Shaw Wu offers a similar take. "We believe AAPL is leaving money on the table by not participating in larger touchscreen form factors." Wu adds he's seeing evidence of a strategy change in supplier checks. (Blodget) (Wozniak)

  115. Wiki Updates/Phil/wombat/Anyone
    Last week you asked me to place a copy of "wombat's cheat sheet" in the Wiki "if I could".  Well, I tried, and apparently "I cannot (at this time)". 
    I was not aware that all wikis are updated in a special (non-intuitive) way.  
    Soooooo, below is the text I wanted to save in the wiki.  If anyone else would be so kind to put it in the wiki, that would be great. 
    If anyone wishes to direct me to a Wiki for Dummies, that's OK too :)
    SELL HIGH PUTS ( CASH +++ ) OTM ( higher strike )
    BUY LOW PUTS ( CASH — ) ITM ( lower strikes ) 

    SELL HIGH CALLS ( CASH +++ ) OTM ( higher strike )
    BUY LOW CALLS ( CASH — ) ITM ( lower strikes ) 

    BUY HIGH PUTS ( CASH — ) ITM ( higher strike )
    SELL LOW PUTS ( CASH +++) OTM ( lower strikes ) 

    SELL LOW CALLS ( CASH +++ ) ITM ( lower strike )
    BUY HIGH CALLS ( CASH — ) OTM ( higher strike ) 

    VERTICAL SPREADS – same everything, just different strike prices.
    HORIZONTAL / CALENDAR SPREAD – same everything, including strike, but different expirations
    DIAGONAL SPREADS – different strikes, different expirations 

  116. Thanks Laddoo – I too have not yet bothered to figure out Wikis.  

  117. New wiki page for the spread definition as spelled out by Laddoo and Wombat:

    Can be edited by whomever wants to add more information. I'll also check what else we can add to the Wiki and try to organize some of the information. A lot of it is under the Book project page but some could be moved to the main page.

  118. Speaking of verticals, there is a good article about them in the TOS magazine. I'll try to summarize the information and add it to the page I just created.

  119. Warning/Wombat
    All you say is true. I followed the trade as it is on the Income portfolio. When I used the 'option' for the 'buy/write' it gave a net debit but I was assigned as I described. It came up with a net debit of 'x' – I didn't do the math immediately and assumed it would fill within the spread close to the 'ask'
    So, I have 1000 shares TWO @$12.54
    Sold 10Jan15 $12calls @ $0.23  
    ( the Fidelity reimbursement is cash into the account, so it doesn't effect my position ) and 
    Sold 10Jan15 $12puts @$2.59
    The way I see it I could never make money on the covered calls as the shares could be called away for $12 at anytime and they already ITM.

    Can you explain what you mean by 'unwind' the trade' – as I escalated to a sup and he called the trading desk and they said there was nothing they could do. I assume from your comment Fidelity would have their own Market Maker /? 

    Yodi /
    Thanks, I've been sick today, so just catching up. Let me try again with Fidelity, as Phil suggested first and then I'll looking into your straddle.
    "try buy stk 12.44
    sell Jan14 12 straddle for 2.10 if they do not sell in a straddle sell them sepperate"

  120. Starting to look like a consolidation period like we saw mid-December and again early January. In December it was followed by a correction (which would be nice for a reload) but in January we bolted higher.

  121. They call that a democracy:

    Third, gerrymandering is a major form of disenfranchisement. In the seven states where Republicans redrew the districts, 16.7 million votes were cast for Republicans and 16.4 million votes were cast for Democrats. This elected 73 Republicans and 34 Democrats. Given the average percentage of the vote it takes to elect representatives elsewhere in the country, that combination would normally require only 14.7 million Democratic votes. Or put another way, 1.7 million votes (16.4 minus 14.7) were effectively packed into Democratic districts and wasted.

    I guess if you can win on merit or ideas, you might as well cheat!

  122. Another good post by Josh:


    Think of  a portfolio manager who is charged with earning a return for investors and can assume a moderate amount of risk. Let's suppose he's been running a portfolio of 25% US stocks, 25% international stocks and 50% fixed income (I can't tell you how many portfolios have looked like this in real life for the last few years).  Now assume he reads a bunch of research and news and concludes that the market is due for a ten to twenty percent sell-off. And so he sells half his stocks, putting a quarter of his portfolio into wealth-destroying money market funds.

    Days go by. Weeks. In the end, he buys back into the stock market again – maybe even buying some of his old positions back at slightly higher prices.

    Why does he do this?

    T.I.N.A. – There Is No Alternative.

    The alternative he has is to own aburdly-priced bonds, buy highly volatile commodities, or go into less-liquid assets like real estate or private equity. In other words, for most PMs there is no alternative.

    Think about the college endowments – the top 800 control $400 billion in investable assets. Among these 800 pools of professionally managed capital, US equities represent only 15%. In the meantime, hedge funds are their largest allocation bucket, 20% or $80 billion. The returns have been scary-bad, not even keeping up with the pace of the schools' spending in the past year.  Yale University posted a loss of just under 1% in their last fiscal year ended June 30th. They have a laughable 6% allocation to US stocks. If you think this kind of thing isn't being rethought all over the country as we speak, then you misunderstand the concept of career risk.

    Now we're all going to laugh at the T.I.N.A. acronym the next time the market gets bludgeoned – and it sure is overdue for a healthy beating one of these days. But the fact remains that much of the activity we'll see across asset classes this year will be driven by exactly that lack of alternative, barring some other calamity we're not yet aware of.

    Seriously, what else are you going to do?

    This is the reason stocks are now trading at an average multiple of 14 (vs the discounted one they may deserve given the lackluster economy). It's the reason earnings shortfalls are being ignored in the aggregate and the reason even the most dour market watchers are coming out one after the other and admitting that yes, stocks are expensive, but not relative to alternatives.

    He has been really bullish and he is usually quite skeptical!

  123. If anyone has a suggestion for a medium that's more intuitive to use than a wiki let me know and I will look into it. I forget they can be challenging to interact with, especially if you haven't been using a computer for almost 30 years.
    In other news, it looks like Canada is getting rid of the penny as it will save them ~11M a year.

  124. Wiki/Thanks stjean !

  125. Wiki / Kwan – The wiki is OK but adding a page is not intuitive at first. Right now we have most topics under the book project but it might make some sense to have topics on the main page even if they link to topics in the book project as well. For example, the pages for FAS Money and the one I just added for the verticals. Might want to add an Education page on the Main page and add these under that.

    I'll check what I have clipped from the site and see what I can add to the wiki. 

  126. MJJ / FAS – FWIW…. JP Morgan is up 25% in 3 months and IMHO, looks similar to the SLV move when it had a climatic run.  2.3% move today off an inside day yesterday.  From technicals…..(I Know…) the RSI and other overbought indicators have been in nose bleed section since mid December.  And looking at volume… who is left to buy at these levels?  Seems to me the financials are getting frothy and we all need to watch the levels.  But, as they say, these markets can stay irrational…..

  127. I guess hitting home now! An article from Le Monde (in French) where they say that 2 of the richest German landers (states) want the rules changed so that they don't have to support the poorest of the states:

    Taking lessons from their federal leaders I guess. What's next, rich people will arrange to pay fewer taxes that could help poor people… Oh wait!

  128. Phil / X – Thanks for the explanation of thinking through the whole trade before executing.  Very informative and worth a read by all members especially members that are new to PSW.  The post was early morning today, on Monday's thread.  For those that missed the post see:

  129. Sorry guys, linking the post is not working.  See Feb 4, posts, Phils comments at 6:22am (at the very end of the comment section).

  130. Good morning! 

    Futures were up but now flattening – not sure why yet.

    Thanks on Wiki, StJ!  

    TWO/Wombat – Unwind means cancel.  Anyway, you are looking at this thing all wrong now.  You got $500 back, you got $230 for the short 2015 $10 calls, you bought the stock for $12,540 so net was $11,810 and yes, you can get called away at $12,000 at any time – so what?  If you do not get called away, you collect a .55 dividend each Q and, if you do get called away, you still have the short puts at a very nice price. So, if you get called away, you make $190 for the quarter and, if you don't get called away, you get a $550 dividend but, if you get called away, then your short puts must be doing well.  

    Big Chart – Still need that Dow to get over the hump.  The rest just have to hold up. 

    Gerrymandering/StJ – It's been around for well over 100 years, the GOP has just gotten really good at it. 

    No alternatives/StJ – I agree with that one.  As I've been saying, putting money in bonds is a losing game and commodities are iffy given slow global growth and Europe sucks and Asia is only now looking less dangerous.  US stocks remain the best asset class this year. 

    Wiki/Kwan – I love Wikipedia and Wikinvest, I think we should aspire to get better at using it, rather than go with an easier but less common format.  

    Financials/Jfaw – I agree on that but try telling it to XLF/FAS.   I still think $17.50 is the "right" spot for XLF into next Qs earnings so we just need to see where it calms down.  As to JPM, they are still not expensive and still the best Bank in America and, if I'm a money manager that needs to add bank exposure, that's still where I'd start.  Don't forget – if the economy really starts to take off and rates go up and people start borrowing again – big banks with huge deposit based (that they can lever 10:1) will do very, very well.  

    You're welcome Jfaw. This link.

  131. Very good video on the budgets and debt limits you can tweet to people:

  132. Possibly my new favorite chart:

    Keep this in mind when "THEY" are telling you what to buy and sell – they actually UNDERPERFORM flipping a coin!  

    Essentially, analysts tend to tell you what DID happen, not what's going to happen.  They essentially do what I keep telling you guys not to do – they look back 3 months or 6 months or a year and try to find a pattern and then they assume the pattern will repeat so they are constantly about 6 months to a year behind the curve.  While it's important to learn from the past, as Yoda says: "Always in motion is the future."  And, of course, it was Mark Twain who said: "That it's better to remain quiet and be thought a fool, than to open your mouth and remove all doubt."  Too bad more pundits don't read the classics….

  133. Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    9:00 Treasury Refunding Quarterly Announcement

    10:30 EIA Petroleum Inventories

    7:41 PM Japanese stocks trade higher, pushed by fresh multiyear lows for the yen and strong results from Toyota (TM +1.05%). The Nikkei Average surged 2.3% to 11,304, wiping away the previous session's 1.9% loss, with autos leading: Mitsubishi Motors (MMTOY.PK +5.1%), and Subaru maker Fuji Heavy Industries (FUJHY.PK +6%). The move on the yen also gave a lift to tech exporters as well: Sony(SNE +2.8%), Olympus (OCPNF.PK +3.2%), and Panasonic (PC +5%).

    4:24 AM The prospect of more easing earlier due to the hastened departure of BOJ Governor Masaaki Shirakawa helps weaken the yen even further and send Tokyo shares to their highest closing level in over four years. Given that Shirakawa is leaving only three weeks early, it all seems a bit overdone. Other Asian stocks also rise, as do those in Europe. Japan +3.8% to 11464, Hong Kong +0.5%, China+0.1%, India +0.1%. EU Stoxx 50 flat, London +0.6%, Paris +0.1%, Frankfurt +0.2%, Milan flat, Madrid +0.65%.

    6:00 AM Overseas: Japan +3.77%. Hong Kong +0.47%. China+0.06%. India -0.10%. London +0.35%. Paris -0.64%. Frankfurt-0.02%.




    Ben Bernanke and other senior Fed officials had major concerns about ratings agencies in mid-2007, which marks part of the period that the Justice Department is focusing on in its $5B lawsuit against S&P (MHP) for inflated ratings. Bernanke spoke of "a loss of investor confidence" in the firms, while William Dudley warned that flawed ratings could be masking "significant market risk."

    The Fed has become the latest government organization to be hit by a cyber-attack. While admitting that some information was obtained, the Richmond Fed said last night that the breach was plugged soon after it was discovered. "This incident did not affect critical operations," the Fed said. On Sunday, Anonymous said it had accessed data belonging to 4,000 bankers in the bank's system.

    The deficit will fall to below $1T this year for the first time since 2008, the CBO forecasts . Assuming that automatic cuts take effect in March, the deficit will drop to $845B in 2013 and then $616B in 2014. However, debt will continue to accumulate, taking the overall burden to $20T by 2023 and annual interest payments to above $850B. The CBO also predicts that GDP growth will slow to 1.4% this year before accelerating to 3.4% next year. 

    Europe Yield Backup Signaling Complacency Bringing a New CrisisEuropean leaders lulled into complacency by Mario Draghi’s pledge to buy their bonds may be stumbling toward the next euro-region emergency. Policy makers are squandering the decline in borrowing costs triggered by the European Central Bank president’s commitment to defend the single currency, leaving the 17-nation bloc’s economy and financial systems vulnerable, according to economists Charles Wyplosz and Paul De Grauwe. 

    Silvio Berlusconi further narrows the gap with frontrunner Pier Bersani after his pledge to say to heck with the Germans and cut taxes. Three weeks ahead of elections, the former PM is now just 6.1 points behind. Also helping is the derivatives scandal and bailout at Banca Monte dei Paschi. Europe's mostly lower, led by Italy (EWI)-0.7%. 

    The early retirement of BOJ Governor Shirakawa is cause for a party in Tokyo, with the Nikkei soaring 3.8%. The dollar strengthened vs. yen – nearly tapping on 2009 levels – before backing off to about unchanged on the session. BOJ board member Takehiro Sato says achieving the new 2% inflation goal would require as-yet untried QE methods. Can't wait. EWJ +1% premarket.

    Goldman Sachs President Gary Cohn remains bullish on China and its banks even after Goldman just unloaded part of its stakein Industrial Bank. "You can absolutely still make money off Chinese banks," he says (by selling?). "We are very optimistic, but cautious, about where China is going." CHIX +3.6% YTD.

    Eaton(ETN) CEO Says China GDP Report Overstates Growth Rate.

    Door is about to slam shut on high-rolling holidays to MacauBeijing is planning a crackdown on Triad-linked “junket” operators who bring high-rolling gamblers into Macau from across China and smooth a money-laundering route that processes billions of dollars every year.

    Australian Retail Sales Fall in Longest Decline for 13 YearsAustralian retail sales unexpectedly fell for a third month in December, the longest stretch of declines in 13 years, as consumers spent less dining out amid a deteriorating employment outlook

    Brazil Losing Mantega's War  as Stagflation Threatens: Currencies. Brazil is finding that winning the global currency wars may mean it's actually losing. After taking steps to push the real down 16% the past two years as government officials said monetary policy in major economies were debasing currencies such as the dollar while driving up those in developing nations, Brazil is now backing off efforts to weaken its exchange rate. Rather than having the desired effect of boosting the economy, the lower real has down little more than spur inflation, which has exceeded the central bank's 4.5% target the last 29 months

    Annaly Capital (NLY) files a shelf registration for the possible offering of common and preferred stock, warrants, rights issues, or debt. (S-3)

    Pension Funds Cut Back On Commodity Indexes. Pension funds and other institutions are retreating from popular investments linked to commodities after finding they did little to protect their portfolios against inflation risk and the unpredictable returns of stocks.

    US gasoline demand slips last week as prices rise-MasterCardDemand over the past four weeks averaged 0.1 percent higher than at the same time last year, the report said.

    Silver Wheaton (SLWagrees to acquire from Vale (VALE) an amount of gold equal to 25% of the life of mine gold production from its Salobo Mine in Brazil, and 70% of the gold production for a 20-year term from some of its Sudbury Mines in Canada. SLW will pay $1.9B in cash, 10M warrants and ongoing payments of the lesser of $400 or the prevailing market price for each ounce of gold delivered under the agreement.

    Silver Wheaton’s (SLW$1.9B purchase of Vale (VALE) gold streams should hike revenues generated from gold production from an average of 12% to a peak of ~25% in the next five years. The move is expected to immediately boost SLW’s production and cash flow profile by adding expected average gold production of 110K oz./year over the next 20 years, or ~$3.7B at prevailing gold prices, Jon Ogg calculates.

    ArcelorMittal (MT): Q4 EBITDA -23% to $1.32B vs consensus of $1.25B. Net loss $3.99B vs $1B. Revenues -14% to $19.31B. Expects 2013 EBITDA to exceed last year's $7.1B as it ships more steel, with analysts expecting $8B. (PR)  More on ArcelorMittal (MTQ4massive net loss due to$4.3B hit from write-down of the value of European steel ops and $1.3B related to the idling and closure of facilities. Net debt -$1.4B to $21.8B. Forecasts output of +2% to +3% in 2013; expects global steel consumption of +3% after +2% in 2012, with growth in China and Brazil speeding up and Europe's contraction decelerating.

    Volvo (VOLVY.PK) saw its sales and profits plunge in Q4 with weak demand persistent in Europe. Sales fell 17% Y/Y to 71.8B kronor ($11.32B) and profits fell at the same rate to 793M kronor ($125M). The automaker's troubles crossed the pond as well, with orders in North America down 21% during the period.

    Another one from the Income Portfolio:  Goldman Sachs lists Goodyear Tire & Rubber (GT) as one of its top stocks to see price gains this year. Based on its current price target, Goldman sees 40% upside potential for the tire manufacturer.

    Rice Jumps to 15-Month High on Signs U.S. Inventories Tightening. Rice futures surged to the highest in almost 15 months on mounting concern that inventories are dwindling in the U.S., the world’s fifth-biggest exporter.Stockpiles will drop to 960,000 metric tons in the year ending July 31, down 26 percent from a year earlier, the U.S. Department of Agriculture said Jan. 11.

    More on Chipotle's (CMG) Q4: Comparable restaurant sales increased 3.8% Y/Y for the period as the restaurant operator puts in another quarter of subdued growth. Chipotle added 60 new restaurants to brings its total restaurant count to 1,410. Looking forward, flat to low single digit comparable restaurant sales growth is forecast for 2013. CMG +4.2% AH. (PR) 

    Expedia (EXPE+4.1% AH and Priceline (PCLN+2.3% thanks to Expedia's Q4 report, which featured a strong revenue beat to go with a slight EPS miss. Gross bookings rose 19% Y/Y, matching Q3's growth. Hotel room nights +33% (27% in Q3), rates -3%. Air tickets +12% (boosted by VIA Travel acquisition), airfares +2%. Domestic bookings +11%, international +32% and now 44% of global bookings (42% in Q3). Costs/expenses +26%, a little above revenue growth. No shares repurchased. (PR)

    H-P (HPQ+4% AH after Quartz reports the company's board is "studying a break-up," among other options for boosting shareholder value. An H-P breakup has been discussed by many a pundit, investor, and analyst, with opinions about its merits varying greatly. Dan Primack suggests taking the report in stride. "The HP board of directors is doing what boards of directors are paid to do: Evaluating all possible options." Update: AllThingsD's Arik Hesseldahl reports "no active board discussions" about a breakup are underway.

  134. More on Disney's FQ1: Revenue at the company's Parks and Resorts division and Media Networks both rose 7% Y/Y, while Studio Entertainment slipped 5%. ESPN saw higher programming costs push profit lower than a year ago. Increased spending at parks helped offset some expansion costs. As forecast, capex spending in parks, resorts, and other properties fell off 14% to $534M. DIS 
    +1.6% AH. (PR .pdf)

    As expected, Liberty Gobal (LBTYA) has agreed to acquireVirgin Media (VMED) for $16B in cash and shares, with the enterprise value of the deal $23.3B when debt is included. Liberty Gobal's offer of $47.87 per Virgin Media share represents a premium of 24% to the latter's closing price on Monday, prior to the news of the acquisition becoming public. (PR)

    Cisco(CSCO) Just Published A Massive Report Predicting The State Of Mobile In 2017.

    The QWERTY-sporting BlackBerry Q10 might not be available in the U.S. until May or early June, though other markets are expected to get it by April, Thorsten Heins states in an interview. He adds early Z10 sales in the U.K. are "beyond expectations," and suggests BlackBerry (BBRY +6.8%) is willing to evaluate takeover offers. Many, but not all, of the early reports (III) on U.K. Z10 sales are positive.

    Facebook (FB) roundup: 1) 61% of respondents to a U.S. Pew survey said they had taken a break of at least several weeks from Facebook at some point. 28% said the site is less important to them vs. a year ago, and 12% said it's more important. U.S. Facebook users are much more lucrative than international users. 2) Instagram user photo streams are finally available on PCs. 3) A Wiredarticle looks at how Facebook's control of user data and APIs across mobile platforms could strengthen its monetization efforts, and diminish the value of Apple and Google's platforms.

    Fresh off a quarter where R&D spending fell 70% Y/Y, Zynga (ZNGA) is shuttering CityVille 2 and two other games. Not getting shuttered is FarmVille 2, which Zynga says exceeded expectations by 100% and will soon hit mobile devices. 72M of Zynga's 298M MAUs are mobile-only, and (like Facebook, Yahoo, etc.) a majority of workers are now focused on mobile. But Draw Something users continue to decline. Zynga Poker MAUs rose 8% Y/Y to 37M, and real-money gambling titles will be launched in partnership with in 1H. Shares +5.8% AH. (CC live blog) 

  135. And wheeeeeee on oil!   $95.50!  

  136. Phil: 
    That's quite a run JPM has had. Just looked at their chart. How would you play them here. Or would you just wait for a pullback for now?

  137. Phil/FB
    "28% said the site is less important to them vs. a year ago"
    Boy, that can't be good news?!

  138. Phil, is it time to roll the Mar 13 34 short calls in the inc PF?

  139. Phil, what do you see as a downside target on oil?  TIA…

  140. Hello & good morning from Lancashire UK! Just sitting back, tuning in, observing and learning. Thanks all.