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Too High Tuesday? 10 Bullish Trade Ideas that Made Over 1,200%

SPY 5 MINUTEThis is ridiculous.

As noted on Dave Fry's chart, the S&P made a new record high with narrow participation and essentially all of the gains were one big move in the Futures to reprice the index.  I said yesterday we have been getting 50% of the day's volumes in the close and yesterday was no different and that closing volume is all dumping into the ETF, IRA and 401K suckers that are forced to buy.  

We took a couple of big bats against the Dow's move up yesterday, adding a DIA put at $166.80 (see yesterday's Member Chat for details) as well as going long on DXD at $26.20 – both with leveraged options plays, of course.  


We still have plenty of bullish trades to protect but, when we bein to cash out our winners and start buying short plays on the index – you can tell the winds are changing.  Our 500% trade on DDM from Thanksgiving was scheduled to top out in April anyway – and we sold in May to go away.  

That trade was one of our "10 Trade Ideas That Can Make (and some have already made) 500% in a Rising Market" and I had just as much trouble convincing people to go long in November as I'm having convincing people it's time to cash out in May.  

Not all the trades are done, but a quick summary of those positions is:

  • ABX 2015 $13/18 bull call spread at $2.80, selling 2015 $15 puts for $2.05 for net .75, now $2.35 – up 213%
  • 8 QQQ Jan 2014 $75/80 bull call spreads for $3 ($2,400), selling 1 ISRG 2015 $300 put for $23.50 ($2,350) for net $50, now net $2,600 - up 5,100%
  • HOV Jan 2015 $3/5 bull call spread at $1.25, selling $4 puts for .90 for net .35, now net .82 - up 134%
  • EWZ 2015 $44/49 bull call spread at $2.60, selling $35 puts for $1.95 for net .65, now net $2.25 - up 246%
  • CROX 2015 $12/17 bull call spread at $2, selling $12 puts for $1.90 for net .10, now net $2.10 - up 2,000%
  • 10 QQQ March $83/88 bull call spreads at $2.18 ($2,180), selling 1 AAPL 2015 $450 put for $32.50 for a net $1,070 credit, now net $4,610 – up 530%
  • DDM April $105/115 bull call spread at $5, selling CAT 2016 $60 puts for $4 for net $1, now $7.35 - up 635%
  • 10 DBA 2016 $22/26 bull call spread at $1.20 ($1,200), selling 10 DBA 2016 $21 puts for .65 ($650) and 1 CAT 2016 $65 put for $515 for net $35, now net $1.85 – up 428%
  • AAPL 2016 $450/600 bull call spreads at $60, selling 2016 $400 puts for $35, now $80.80 - up 130%
  • T Jan 2015 $30/35 bull call spread at $2.50, selling $33 puts for $2.40 for net .10, now $3.36 – up 3,260%

It should be noted that DDM actually missed our target in April and only just got over $115.  When the spread expired, it was "only" $8.35 but the trade still worked at the short CAT puts fell to $1 for a nice net anyway.  The point is, with a little PATIENCE in a choppy market, our 10 Thanksgiving trades are up an average of 1,267% – and they are not even all finished yet!   In fact, that AAPL trade still has another $69.20 to gain – up another 85% if it just stays over $600 (now $590).

So it's very easy to make lots and lots of money betting on bull markets – we're certainly not going to miss much sitting on the sidelines.  Our short DIA and DDM plays are designed the same way, they will make 500% or more if the market falls, which will protect our still-bullish portfolios very nicely BUT – if the markets hold these lofty levels – we may be inclined to add another round of bullish plays.  

If we consider, for example, that the Russell is now lagging well behind the other indexes (see yesterday's post), then we could look at something like TNA (a 3x Ultra-long on the Russell), which is down to $69.20 from a high of $86.  If this rally is real (we're not willing to bet that it is), then the Jan 2015 $70/80 bull call spread at net $3.45 should come back in the money and we can offset that with the sale of an FCX 2016 $30 put for $3.10 to net just 0.35 on the $10 spread.  

That means, if the Russell heads higher and FCX (now $35) stays over $3, that spread will return a profit if $9.65 or 2,757%.  That's how we hedge the upside.  If you are willing to risk owning 2,000 shares of FCX at net $30.35 (a 14% discount to the current price) then you can buy 20 of those spreads and potentially make as much as $20,000 on your $750 investment.  

Who says it's hard to find bullish trade ideas in this market?

We'll discuss some more on our Live Member Chat Room and in today's Live Trading Webinar but, to be clear, we're still playing for a correction first, then we'll be very happy to bottom-fish – even if we miss 100% or so of the gains by being too cautious.  


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  1. FIRST!!!  Good Morning Folks.  :)

  2. Retail sales not so hot!

  3. Oil Lines

    R3 – 101.92
    R2 – 101.42
    R1 – 100.98
    PP – 100.48
    S1 – 100.04
    S2 – 99.54
    S3 – 99.10

  4. Good morning! 

    Sorry, my web connection is really bad today.  Hopefully it will be fixed by the Webcast!  

    • Apr. Retail Sales: +0.1% vs. +0.4% expected, +1.2% prior (revised).
    • Ex-auto flat% vs. +0.6% expected, +1.0% prior (revised).
    • ICSC Retail Store Sales: -0.1% W/W, vs. -2.0% last week.
    • A disappoint read on retail sales from April's report could reset some expectations in the sector after analysts overestimated consumer demand.
    • The electronics and appliance store category (RSHBBYCONNWHR) saw sales fall 2.3% M/M and 1.5% Y/Y.
    • Clothing and clothing accessory stores (AEOGPSBKETLYSANFANNLBAROGES,CATO) registered a 1.2% M/M and 1.1% Y/Y gain in sales which didn't show the snap-back from soft winter traffic patterns forecast by some.

  5. SECOND!!! Good morning!

    THIRD…if you have those SPYs from Friday, Sell 1/2 or another 1/2 or get out.  THAT was a great trade.  I am holding 1/4 now to see where they run with this!

  6. Phil// I have the may sco 26/29 bcs.  Should I close them out? or roll my long 26 to june?  Thanks.

  7. Wheeee!  We got a nice move in oil from $101.50 back to $101 already.  

  8. Q on weeklies.  Can anyone tell me more about *when* the are released to the market and start trading?  I'm trying to make sense of it.  Seems like some stocks have more weeklies that others, or maybe they are monthlies?  For example AAPL has chains that go:

    May 16, 23, 30  : June 06,13,20,27

    Jul 18 : Aug 15 : Oct 17  (monthlies)

    When will the next "set" of weeklies come out?

  9. Bruce, are you playing short if we get a cross below 101? Or long back to 101.50?

  10. Very Impressive results (so far) Phil!

  11. I take 1/2 off the table at each goal and then add more as we move below the line.   Scaling in and scaling out is my favorite way to play it.  

  12. ~~Burrben weeklies come out on Thursdays

  13. yodi – So using AAPL as an example, what date will be released on thursday that will begin trading?  If weeklies trade for 1 week, it seems like the next date they release would be July 4th?  July 4th is way more than a week.  Still confused.

  14. ~~Burrben with AAPL you can trade all weeklies up to Jun4 I suspect on Thursday they will extend to Jun5 but check back on Thursday to make sure.

  15. Business Inventories up 0.4% – not enough to goose GDP and I never like building inventories anyway (it means stuff isn't selling).   We have Lacker (hawk) speaking at 10:30 and, as I noted this morning, German Confidence was down for the 5th consecutive month and this month they really thought it would bounce.  

    Oil rejected at $101.50, back to $101 (/CL) and we'll see if we can make $100.50 now.  

    Dollar made 80.28 before pulling back, now we'll see if it holds 80 but the higher Dollar means "THEY" can use it any time to drop it and goose the indexes.  That makes shorting Futures kind of foolish today.  

    /TF still at 1,130 and keep in mind it was over 1,200 so there shouldn't be so much overhead resistance there.  Same goes for the Nas at 4,145, it was 4,370 in early March.  On the Nas, the declining 50 dma is 4,179 – so that's going to be a critical spot.  On the RUT, it's way up at 1,155 – so it's baffling that this index can't get it in gear.  

    /NKD topped out at 14,480 and was rejected by 14,500 but there's no reason to short (or long) them today.  A falling Dollar and Dow might give us a reason later.  

    Gold $1,295, silver $19.53, copper $3.13, nat gas $4.43 and gasoline $2.91 – nothing exciting going on. 

    Check out Europe's earnings growth estimates:

    Our own Shiller p/e ratio is up to 25.50 – still along way to go before we're as silly as 1999 but and even longer way from where wise people like to bottom fish.  

    GaveKal On The Recent Emerging Market Surge: "Little To Suggest Any Sustainable Economic Healing". (graph)

    Fed Governor Admits Truth About QE: "Can't Go From Wild Turkey To Cold Turkey Overnight".

    This time China’s property bubble really could burst by George MagnusChinese property is the most important sector in the global economy. It has been pivotal in the country’s economic development, provided lucrative business for industrial commodity producers from Perth to Peru, and been the backbone of the surge in world exports to China. In the past few years, predictions that the sector was about to implode at any moment have not been borne out – but now is the time for the world to pay attention. Property activity indicators have been trending lower since mid-2013, and the downturn in the sector now threatens to turn into a bust. At best, China is entering a deflationary phase at a time of global fragility. The default risks in the weakly regulated shadow banking sector – and the rapid rise in local government debt – are real, and property-related.

    India's Public sector banks’ bad debts hit 9-year highBad debts of public sector banks have surged to a nine-year high, with the corporate sector accounting for the biggest increase. This will be one of the key challenges before the new government. Indeed, the current favourite to form the new government, the Bharatiya Janata Party, had in its manifesto expressed concerns over the bad debt situation. It promised “necessary steps to reduce non-performing assets (NPAs) in the banking sector” if it comes to power.

    This is all the same stuff we were worried about last week – it's all been forgotten due to rally fever.  There's nothing wrong with playing the momentum for as long as it continues but try to always keep in mind how dangerous this game is and how quickly it can all fall apart if people start to notice these issues again – of if something finally hits the fan in a way that's too big to ignore.  

    China's Premier made some nice noises over the weekend to goose the Shanghai off the 2,000 line and it hit 2,050 on the button today – up 2.5%.  There was no actual action taken, no policy shifts or anything of substance – just happy talk that's giving us a tiny bounce after a 13% drop and what is 2.5% but a weak, 20% retrace of a 13% drop? 


    Be careful!

  16. ~~Burrben But weeklies you would trade one or two weeks ahead not more than a month you might as well trade monthly

  17. GMCR - Coca-Cola Co. said Tuesday that it would increase its stake in Keurig Green Mountain Inc. to 16% from 10% as the world's largest beverage company deepens its exposure to coffee and countertop carbonation.     

  18. And GMCR takes off by 10% today…

  19. Yodi, I'm trying to understand *exactly* how they work.  I called 888-options and the cboe and so far, we are all guessing and assuming.  I want to know an accurate answer.  

  20. GMCR selling an other Jun14 125c for 4.34

  21. SCO/Rookie – We bailed on those last week.  End of this month kicks off "summer driving season" so we don't want to roll.  In the STP, we took the $26 calls off the table (now $2) and left the short $29s to expire worthless (now .10).  If you can, that's the way to go but, even if you only net $1.90 – it's time to bail on that trade.  

    Oil/Bruce – And how quickly it snaps back.  I don't have conviction at the moment, just like playing for the moves under the .50 lines and get out when the momentum changes.  

    Impressive/1020 – Those trades are easy to make, it's all about getting the timing right.  Notice we haven't done 5 Trade Ideas that Make 500% in a Market Crash yet – we still haven't gotten any signs that this rally is doing anything more than a short pause for quite a long time.  

    GMCR – Holy cow, does KO really think this is the future or are they buying them to kill them off?  I guess KO essentially makes its money selling formula.  All they sell is syrup to bottlers or restaurants – the rest is supplied by others so I guess this fits with their business model and the mark-up is probably better selling ingredients to home brewers.  I know if you let me control the syrup, I'd be making myself doubles and triples all day!  

    Oddly enough, in the STP, our GMCR Jan $110/90 bear put spread is still $6.50.  We were in for $10 and, if we buy the short $90 puts back for $5, we'll be in for net $15 on the $11.50 $110 puts.  Since they were $27 a week ago – that's VERY TEMPTING!!!  I think we'll give it a day or so and see where it calms down but the 10% stake in KO didn't boost them for long and this is just more of the same.  

  22. Burrben. Weeklies work in increments of .5 and 1 as monthlies normally work in 1, 2.5 and 5 depending on the stock.

  23. Phil GMCR some play as you mentioned. Still stands good but here as usual all locos are buy the stock as there is no limit, they will only sober up after tomorrow or so. Regret the margin on any call play is very high. 

  24. NFLX on a tear, back to $350.  GOOG $533, CMG $510 again, LQMT popped back over .18, TWTR $33.50.  WYNN $207, TSLA $189…

    Actually, it turns out that this 16% position by KO is simply the completion (at KO's option) of the original contract.  

    "Between May 8, 2014 and May 12, 2014, Atlantic purchased an aggregate of 2,805,591 shares of Common Stock in the open market as set forth in Exhibit 99.4 attached hereto.  All such purchases of shares of Common Stock by Atlantic were made, and the purchase contemplated to be made by Atlantic pursuant to the Agreement (as defined below) is expected to be made, using Atlantic’s cash on hand."

    ROFL – People are such suckers.  KO already owned 19M shares and, when the stock dipped, they bought some more and announced the position AFTER to goose the stock.  Same move Icahn makes!  

    • April Import/Export Prices: Export prices -1% vs. consensus of +0.2% and +1% prior (revised).
    • Import prices -0.4% vs. consensus of +0.4% and +0.4% prior (revised).
    • Germany's Bundesbank is willing to support significant ECB stimulus if the latter's inflation forecasts for the period through 2016 are lowered, the WSJ reports.
    • Measures could include a negative rate on bank deposits and purchases of packaged bank loans as the Bundesbank lends its weight to the battle to stop low inflation becoming permanent and even becoming deflation. However, the bank is still resistant to large-scale purchases of public and private debt.
    • Still, the Bundesbank's readiness to counter stimulus marks a departure from its traditionally strong opposition to such action.
    • "Investors are all aboard the periphery train, and there's now simply no margin for error," says BAML's Obe Ejikeme, commenting on his firm's fund manager survey for May. A net 36% of the respondents say they're overweight eurozone stocks, up from 30% in April, with the equities of Spain (EWP) and Italy (EWI) are preferred to those in the core.
    • Ejikeme also calls long bets in EU periphery debt the most crowded traded globally. Indeed. Spanish 10-year debt is now priced to yield 2.93%, Italy 2.97%, Ireland 2.67%. As comparison, U.S. 10-year Treasurys yield 2.63%.

    Uh oh!  U.S. may consider lowering some crude oil export restrictions, Moniz says

    • In the most explicit statement yet from the Obama administration, Energy Secretary Moniz says the U.S. is considering relaxing regulations that ban the export of crude oil.
    • The issue of crude oil exports is under consideration because of growing domestic production of oil that isn't for refining locally, Moniz said at an energy conference in Seoul, adding that a study of the subject, including multiple agencies, is now taking place.
    • A planned change in the way the U.K. taxes North Sea drillers exposes the loophole in a system that allowed the industry to pay almost no corporate taxes for two decades, legally and with the consent of Britain's tax authority, according to a Reuters analysis of company accounts, shipping registers and other company statements.
    • Companies that have benefited from the current rules include Ensco (ESV), Rowan (RDC) and Transocean (RIG), which collectively accounted for 60%-plus of the U.K. market in 2012; the main British operating units of the three companies reported combined U.K. revenues of $11.8B during 1993-2012, while their combined tax charge was $70M.
    • The amount of money the government expects the tax change to raise is equivalent to ~5% of total rig market revenues, which would have raised an additional ~$600M from the three companies alone over the last 10 years.
    • Encana's (ECA) +0.8% premarket after Q1 operating earnings beat expectations and nearly tripled, helped by higher gas prices and liquids production.
    • Output of oil and natural gas liquids averaged 67.9K bbl/day, up 56% Y/Y, while natural gas production averaged 2.81B cf/day, down 2% Y/Y.
    • ECA's realized gas price was $5.82/Mcf vs. $3.86 prior.
    • Cash flow nearly doubled to $1.09B, or $1.48/share.
    • Closed its $1.8B sale of much of its Jonah gas field in Wyoming and has more properties still on the block.
    • Whirlpool (WHR -2.1%) is downgraded by Longbow Research after channel checks from the firm indicate slowing growth in the U.S. and Latin America.
    • Shares are now pegged at Neutral from Buy.
    • Related: Appliance category shows weakness in April Retail Sales report.
    • Leveraging technology acquired from 2013 acquisition SeatMeYELP has launched a restaurant reservation service that's integrated with its business pages.
    • Whereas market leader OpenTable (OPEN) typically charges restaurants a hardware fee, a monthly subscription fee, and a per-diner bookings fee, Yelp's service will be free to any restaurants that has "claimed" its Yelp page.
    • Yelp suggests the service's feature set won't be quit as robust as that of SeatMe's paid service, which will continue to be offered. The company's main goal: To boost user and restaurant engagement, with the hope that the latter group will be more interested in buying ads to promote their Yelp pages.
    • Yelp's move comes shortly after TripAdvisor (TRIP) entered the restaurant reservation market by acquiring leading European player LaFourchette; TechCrunch reports the purchase price was $140M. LaFourchette claims 12K+ restaurant partners; OpenTable has an international installed base of 7,721 restaurants at the end of Q1.
    • OPEN -0.9% premarket. Shares fell last year after Yelp announced the SeatMe deal. Though OpenTable's U.S. dominance is unlikely to be challenged in the near-term, Yelp's offering could gain a following with businesses looking to cut customer acquisition costs and/or are disgruntled with OpenTable's pricing.
    • Media analysts at the Upfront meetings in New York City forecast some ad rate increases for major broadcasters.
    • Topeka forecast: ABC (DIS) +0.5%, NBC (CMCSA) +3%, Fox (FOXA) +5%, CBS +7%.
    • Advertising revenue from this week's Upfront commitments will be largely realized later in the year.
    • The CW network – owned by CBS and Time Warner (TWX) – is tapped to see a 1.5% falloff in ad rates due to some dwindling momentum.
    • Upfront coverage: ESPN dazzlesstrength at CBS
    • The BlackBerry Z3 (BBRY +0.5%), first announced in February, goes for just $200 unsubsidized and is the first phone to be made via the company's Foxconn partnership.
    • As suggested by its codename (Jakarta), the Z3 is initially aimed at Indonesia, a market where BlackBerry still has a sizable base. It sports a 5" 960×540 display, a dual-core, 1.2GHz., CPU, a 3G modem (a 4G version will launch later), and a 5MP rear camera.
    • Competition will be provided by low-end Android phones from a slew of OEMs (Samsung, Huawei, ZTE, etc.) and white-box vendors.
    • The Z3 launch comes as Motorola Mobility, soon to be owned by Lenovo (LNVGY), launches the Moto E, a $129 Android phone featuring a 4.3" 960×540 display, 3G modem, and 5MP camera.
    • Korea's reports Samsung (SSNLF) plans to launch the Galaxy S5 Prime, a version of its flagship phone that features a 2K (2560×1440) display, in mid-June via local carriers SK Telecom, KT, and LG U+. The phone will reportedly cost just $50-$60 more than the regular S5.
    • There were reports the S5 would sport a 2K display prior to its launch. Samsung instead went with the 1080p resolution used for the S4, albeit with an improved OLED panel that has received good reviews.
    • Samsung stated last November it plans to launch phones with 2K displays in 2014, and phones with 4K displays in 2015. Universal Display (OLED -0.1%) wouldn't mind seeing that happen, given OLED panels with higher resolutions require more OLED materials.
    • Naver's report doesn't state whether the S5 Prime will feature a metal case, as has been previously rumored. Samsung has received its share of criticism for sticking with plastic cases for its high-end phones, and the company recently replaced its mobile design chief.
    • Apple, a fan of using aluminum cases (the plastic 5C excepted), is expected to launch 4.7" and 5.5" iPhones in 2H14.

  25. OK, let's buy back the GMCR Jan $90 puts in the $25KP and the STP for $4.90.  If it goes higher, we will roll up our long $110 puts and sell some more short puts.  

  26. UNP/pwright. very nice move this morning! takes the trade to a 50% gain since opening on 4/25. If we had just bot stock, would be up just 3%. If just the Aug long calls we are now in, would be up 12%.   Going to let it be today. if close is over the 192.05, will add a new diagonal tomorrow.

  27. scottmi no doubt, I'm kicking myself for covering early.  Let me know if you decide to add one, and if so what it is.

    I got a few GMCR 120-100 Jan bear spreads for about $8.45, off to a good start already

  28. Phil / GMCR
    Been watching from the sidelines all year. What, if any would you recommend as a new bear entry. Look alike they're flirting with all times high.
    Thanks for the early response on /TF today – we had some crossed signals, but i appreciate the time. 

  29. GMCR
    I'm looking at a Jan15 $130 / $150 BRPS. Pretty margin efficient, and it's 2X in 8 months ?

  30. UNP/pwright – no kicking for covering. covering is key to the strategy for the higher return and 'cover.'  we do not know what will occur tomorrow. be happy it is going our way!  the cover can and will be rolled out and/or up if it keeps going our way. As I pointed out with the uncovered long call, not being covered would result in a smaller return.

  31. Good article on Barry's site about labor participation rate – with facts:

    For example, here is a chart from a 2006 piece The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply:

    LFPR Projection from 2006 Fed Paper

    So, eight years after that paper was written, how have things played out? Let’s have a look:

    lfpr quarterly since 1996

    Translation: It’s mostly demographics with a touch of recession.

  32. GMCR/Wombat – Well I like those Jan $110 puts at $11.50, of course!  When we took the spread, they were $20 and they went to $27 but we were trapped in the spread – now we're untrapped.  The spread is fine too but I think we'll hit the same pattern as last time KO stepped in to save this stock – up for a few days, then back to reality.  As to Futures – TOS lets you open a paper money at the same time as you have the regular account open – PRACTICE!!!  

    Participation rate/StJ – That's why there's an underline plan to destroy the values of people's homes and retirement accounts, so they have to keep working long after 65 and keep the labor pool high enough to depress wages.  

    S&P with first rejection off 1,900.  Dow still over 16,700, Nas 4,130, RUT 1,123 is pathetic.  

    Oil tapped $101.50 again for another short (/CL).  

    Gold tapped $1,300 but I don't like shorting them.  

    /NKD flirting with 14,400 from above. 

    Poor CMG can't hold $510 – so annoying with our June $510s.  

  33. Phil // GMCR
    I agree with you, thats why I feel compelled to put on a bear spread for Jan15. R U suggesting no spread, just the Jan15 $110 short puts ? ( and why these btw ? )
    I guess I'm not familiar with where you guys are with its been around for so long.

    Credit spread or debit ?

  34. GMCR/Phil/ Wombat … how about selling a naked call at say $125 strike for June at $4.30 and covering with Sept $130/140 bull call spread at $3.30 (initial credit $1.00) … if it stays under $125 we can then sell the naked call again for July/Aug & Sept if all goes well… similar to a play I did back in Feb on the original news.. it worked out very nice indeed :)

  35. OK, ahead of the 1pm Webcast (link here), let's look at a few stocks we like that are cheap for our "Get Rich Slowly" plays:

    • RRD pays a fat $1.04 dividend and the stock is down to $15.85 so you know I like a buy/write for this one.  We can buy the stock and sell the 2016 $15 calls for $2.35 and the $15 puts for $2.70 and that's net $10.80/12.90 and that makes the $1.04 dividend 9.6% while we wait to get called away with another 38% profit.  Worst case is owning 2x at $12.90, which is 19% off the current price.  

    Getting a built-in 20% hedge and a 10% dividend while waiting to see if you make another 19% a year if the stock doesn't go DOWN 0.85 over 2 years is EXACTLY the kind of plays we are looking for!  

    TEX is on my list but not making the cut at the moment.  

    • WEN has taken a nice dip but they just put in solid earnings and $8.37 is a nice discount off the $10.22 high.  I think $10 was a bit silly but so is $8 and we can be conservative with these guys and skip the .20 dividend and just sell the 2016 $10 puts for $2.80, which is net $7.20 so another 20% off from the current price and TOS says the net margin is just $1.60 so super-efficient return of 175% on margin if you're willing to own WEN for net $7.20 and they get back over $10 in 20 months.  The nice thing about this is that anything over $7.20 is still a profit. 

    KBH is the first builder I've liked since HOV (which I still love at $4.63).  Earnings were .41 vs -.76 last year's Q1 yet they are not being rewarded for it, probably because their debt/equity ratio is up near 4, but that's mostly because they wrote off most of their inventory, the debt itself is just $2.2Bn and serviceable under current cash flow.  When you buy a builder at this stage in the cycle – you are essentially giving your money to a professional to invest in housing.  KBH is solid and, because they've taken massive losses in the past 5 years, it will be 5 years before they have to pay any taxes on earnings – that's nice too.  No dividend (.10) means no reason to own the stock and, because they look scary, we can sell the 2016 $13 puts for $1.60 and use that $1.60 to buy the $!5/25 bull call spread for $2.90 for net $1.30.  So we effectively own KBH for $16.30, which is what the stock cost now but, if it drops all the way below $13, we only have a net $14.30 cost if it's put to us.  So $2 of cushion for free and we make 100% of the upside between here and $25.  We can also potentially sell some short calls along the way if they move up a bit more.  

    IGT confuses me.  They just had good earnings yet they are being treated like dirt because they are in the midst of restructuring.  We love it when we can take advantage of a situation by simply being more patient than the current investors!  IGT does pay a .44 dividend and they have expensive options so perfect for a buy/write where we buy the stock for $12.57 and sell the 2016 $10 calls for $3.40 and the $13 puts for $2.80 for net $6.37/9.19 so our WORST case is owning 2x at $9.19, which is 27% off the current price and that makes the .44 dividend 7% while we wait to see if we get called away at $10 for another $3.63 (57%) and, of course, we need to be over $13 to realize the full profit but – if IGT were put to us with the stock at $11, for example – we'd still be up $3.63 on the first batch (which still would have been called away at $10) and our new 1x position would be $9.37 less the .88 dividend we collected over 2 years.  Not bad for a bad outcome…

    WFM I have not liked for ages but $39.43 finally gets their p/e into the low $20s and they are moving into the UK and, as we've discussed before, they are merely getting squeezed by rising food costs they haven't passed on to customers yet.   This one is easiest played by just selling puts and you can get $3 for selling the 2016 $33 puts and that gives you a net $30 entry, another 25% down from here.  TOS says net margin is $3.30 so almost 100% return on margin for promising to buy WFM for 25% less than it's trading for now – not too shabby. 

    Let's not forget HOV at $4.63.  They are a constant buy for us in large part BECAUSE we can sell the 2016 $4 calls for $1.40 and the $4 puts for .75, which drops the net to $2.48/3.24 and that's 30% off the current price as your WORST outcome!  

     IRBT is our Stock of the Century and I can't believe it's back to $33.15.  They don't have Leaps so we just grind the price down by selling Dec $30 calls for $6.60 and 30 puts for $3.45 to drive the net down to $23.10/26.55, which is a very nice, additional 20% discount.  

    TASR is shorter-term, since it's our Stock of the Decade and they've dropped off 1/3 from their $20 high so we like them again at $13.62.  They do have Leaps so we can sell the 2016 $13 puts for $2.50 and the $15 calls for $3.20 for net $7.92/10.46, which gives us another 22% discount on this one.  

  36. DM // GMCR
    Yep, I was thinking something really similar. I like the thought of monthly call selling but the vol on GMCR bothers me – you'd have to really stay on top of it.
    Thats why I think I'm partial to bear spread – set and forget for the most part.
    Phil ? Thoughts ?

  37. ~~DMulligan

    GMCR great play just take the Jan15 BC spread and you can play all year

  38. Can't access the webcast.

  39. Phil – that's a great line up for today!

  40. UNP/pwright – looking over the strikes for an add tomorrow and the Aug 195 jumps out as overly fat premium. putting in an order to buy +Nov 195 / -Aug 195 calendars for $2.70.  Size of trade (# contracts) to make for me is ~ 25% of current position. Generally when adding, I consider 1/4 to 1/3 position sizes. If order goes through, will move stop up to 189.40. Otherwise, will look at it all again tomorrow.

  41. ETF analysis on Stockcharts:

    Weakness in retailers and homebuilders weighed on the consumer discretionary sector and caused it to be the worst performing sector over the last three months. PerfChart 1 shows performance for the nine sectors since February 12th (three months). All twelve are up, but the Consumer Discretionary SPDR sports the smallest gain, followed by the HealthCare SPDR. Relative weakness in the most economically sensitive sector could pose a problem for the stock market as a whole. Even so, the S&P 500 is trading at a new high and the S&P 1500 is challenging its early April high. This is in part because the Industrials SPDR, the Materials SPDR, Energy SPDR, the Consumer Staples SPDR and the Equal-weight Finance ETF hit new highs this month. The Technology SPDR is on the verge of hitting a new high today.

    Will the laggards catch up or the leaders correct?

  42. Phil,

    On the above "Get Rich Slowly" ideas, which I assume are buy writes (since we're selling calls), would you recommend scaling into the stock (some now, some later) given the possibility of a correction ? I realize no one knows with certainty, just curious as to your strategy for buying the stock in this environment.

    Thanks as always

  43. scottmi re: UNP Nov and Aug 195s, I put in an order for a few of those, it's very close but didn't yet get a fill.  My position size is already very small, if I put on 1/4 position, I don't think they have those to sell me :)

    But these are very efficient on cost against profit potential, with stops in place and no margin, very relaxing way to go.  I'd almost want to increase the size actually, although may be cautious about that yet in current environment.

    Thanks Phil for posting those get rich slowlys, a lot to work with in there

  44. ~~8800

    In the just ending web seminar Phil discussed the matter. In our way of trading you find that buying a stock is only prudent if the same pays a reasonable div. and second if the stock is in the middle or below the trading range, meaning one should not buy a stock on top of the ladder at any time.  If a stock does not pay a div. you find the best way is to enter a leap BC spread possible as well selling a put to cover most of the cost and start selling monthly calls against your position. Please take note a stock paying a reasonable div. will have very little premium when selling calls against the stock.

  45. CZR is just about going for bulls eye 20.19 !!!!

  46. CAT flying to close to the sun ! 107.11

  47. 101.90 wow

  48. from webcast //
    do you ALWAYS sell HALF the calls as you have LONGS ?

    Confirming >> RRD The div justifies the stock ? RRD looks like a falling knife
    Current position Jan15 $15/16 BLCS / $15 short puts

  49. GMCR/Wombat – Because our target hasn't changed (below $90) and we get good bang for the buck on the $110 puts.  Our original spread was the $110/90 bear put spread (still in the STP and $25KP) for $10, we never expected to make more than $10 but that's 100% and we're not greedy.   Now we've made $5.50 on the short puts so, if we can get out of the long puts for $14.50, that's goal for us.  

    GMCR/DM – Because the stock is much more volatile than your cover, which makes it pointless.  Why waste any money on a cover in that case?  GMCR is up $20 since Friday and you are allowing for $18 in the next 129 days and the delta on the June $125s is .42 and the delta on your Sep spread is .13 so, in an upside move, you will lose 3:1 to the short caller anyway.  I'm not saying it won't work out as I do think any short call over $120 is a good sell – I'm just saying the cover position isn't helping it.    

    How about sell the GMCR Sept $120s for $13 against the 2016 $130/165 bull call spread at $10.  That's a $3 credit and you have $35 of upside protection (assuming you can roll the short calls up $10 over 18 months if you have to).  

    Scaling/8800 – That's what I ALWAYS recommend (see our Strategy Section).  As I said in the Webinar – that's why we have such small positions in general – we never got a correction to add more into.  So we just buy different stocks that are cheap this quarter instead.  

    Posts/Pwright – You should see the reject pile!  Takes me forever to come up with these picks, unfortunately.  

    Oil fails again at our $101.90 line.  That's why our entries are $101.45 and $100.90 – those tend to be turning points.  

    AAPL still can't get over $600. 

    TSLA battling back to $190.

    Calls/Wombat – We don't ALWAYS do anything.  As to RRD looking like a falling knife – I only look at charts at all for you guys.  Never used to use them when I valued companies for a living and neither did the other highly paid professionals I worked with.  Retail idiots, TV analysts and Junior Traders – they use charts all the time to make their investment decisions.  What's the chart look like for your house?  Your business?  Your car?  Do you check the ratings before you watch a TV show to make sure other people are watching it?  Do you only go to restaurants that have good reviews?  Do you only watch movies that have good box office numbers?  

    Charts are a crutch to make up for the fact that you don't have a real reason to buy or sell your investments.  Nothing more.  For trading purposes, they are a tool I can use to get an idea of what the beautiful sheeple are doing – but that doesn't make me want to be one of them.  

  50. Yodi,

    Thanks for the guidance.

  51. RRD / Phil – Today is Ex-Dividend Date! We missed 0.26 by 1 day!

  52. Thanks Phil … What is the fundamental rationale for you liking RRD .. 

  53. RRD / Phil – I hit the Submit too fast…. Actually we didn’t since yesterday the stock was at $16.25. Price always adjusts down on Ex-Dividend Date… I wish there was an "edit comment" button.

  54. Yodi / selling monthly calls – would you be able to show using an example how you sell monthly calls against your BC spreads? What do you watch for and what are the pit falls? Thanks in advance. 

  55. Phil,

    Thx for response re scaling. Understand its a question of opportunity cost and portfolio mgt. Small is better than none if market goes up and better than a lot if it falls. Requires a certain amount of maturity/trading wisdom to not anguish over missed opportunities vs larger losses.

  56. RRD/Akad – But that's also why it's cheap today.  

    And what you said!  

    Speaking of cheap, USO at $37 and June $38 puts just $1.33, let's get 5 of those in the $25KP.

    You were missing part of your link, Angel.  Here it is.

    debt cotd

    Here are some of the highlights from the report:

    • Mortgage debt increased by $116 billion to $8.17 trillion as of Q1 2014.
    • Student loan debt climbed by $31 billion to $1.11 trillion.
    • Auto loan debt was up $12 billion to $875 billion.
    • Credit card debt fell by $24 billion bringing the total as of Q1 2014 to $659 billion.
    • Home equity line of credit (HELOC) balances fell by $3 billion to $526 billion.
    • Overall household debt is 8.1% down from the Q3 2008 peak of $12.68 trillion.

    RRD/DM – They are the major player in a very dull and very required industry that isn't going away anytime soon 150 years after getting started.  They've been diversifying their product line for growth and that's cost them money this year and they are still swallowing CGX and they just bought some company in Toronto too.  They took a big hit on earnings from rising paper prices, which will be passed on this Q (it always is) and International Sales were slow because the International Economy sucks.  They are going to make about $1.60 for each $16 share this year – that's a p/e of 10 and we're able to buy them for net 10.80, which makes the p/e 6.75.  If I were them, I'd cut the dividend and buy back the stock at these prices.  

    Scaling/8800 – Unfortunately, until people actually live through a major market correction – it's very hard for them to get the concept of why scaling is better over the long haul.  

  57. Silly /TF failing 1,120 again.  That's down almost 1% for the day, wiping out 40% of yesterday's gains or a strong retrace of the weak bounce already…

    TLT moving up and there are no notes to sell, so that's real people moving to cash.  VIX just laying there at 12.18 though and XLF still happy at $22.12.

  58. 1,897 – close but no cigar.  Dow over 16,700 is very impressive.  Nas down, RUT down, NYSE down – no wide acceptance of these highs.   SPY volume pathetic – maybe less than yesterday.  

  59. scottmi, I did get a fill on a few of the Nov / Aug 195s at $2.70

  60. ah wish I had got those USO puts before the close, now they'll be expensive in the morning

  61. Phehlmann

    There are two things to consider 1. there is never a sure thing. 2. there are trades offered on this site every day. Just make sure you do your own home work and do not take things for granted.

    Here is one trade I just put up the other day which is a trade you can put in the drawer or you can work it as well on a monthly basis just to try to make the extra Mac muffin.

    SWI traded 5/12

    Bought the Jan16 BC spread 30/37.5 for 11.34/7.27 sold  1/2 !!!! the Mac muffin Jun14 40 c for .90.

    I still have the sale of the Jan16 30p on order for 3.60 GTC. Many trades like this have been offered see even today. Selling the monthly calls are obviously not always a sure thing that they run worthless. So you do have to watch them. They generally lose their premium fast but if the stock goes up it can over run option price very quickly. The importance on the monthly caller is you have always still premium in your play and if the stock is ready to pay a div. just make sure the premium in the option exceeds the div or you might get called. The monthly caller always gives you one or the other position either it becomes worthless or you need to roll to the next or even second next month, making sure you still be left with a credit in the total play. One can write a book about this type of trading but experience and learning is the most important thing. Start with small trades so you can scale in later. Not sure try paper trading for a start. Learn to be patient as the monthly option today might look like a loser but two days later you got a winner. Just look at Phil's play on CZR how many people wanting to jump over board already? hope this helps. 10.15 PM for me and time to warm up the bed!

  62. CZR – I note that Carnival is adding a fourth ship to the China business. There're a lot of Chinese tourists coming to Korea for gambling and shopping, and CZR is (still) working on a casino in Incheon, one of the ports for the big cruise ships. The other primary port is Jeju Island, and Busan is very much secondary.

  63. RRD/Phil .. Thanks

  64. Phil- the rise in oil price today is being blamed on the fact that exports may be reopened after decades of not being allowed. They story says USproduction has boomed in recent years with domestic supplies at all time highs. Well, look no further for proof that the game is rigged. If all that we're true, which it is, why have prices remained so high through that huge increase in domestic production ? Shouldn't our government be insisting that we pay less before selling it outside our shores? Where is the outrage? 

    So having said all that, what happens to futures tomorrow? Do we keep playing short into the 10:30 inventory at 101.90 or 102? Or do you think it is prudent to wait and see? Curious how you think this will go? It amazes me that they can release a story blaming price increases on rising capacity and keep a straight face. 

  65. Quote of the day:

    Nicholas Colas, “The chance that you possess the marginal information to catch a stock at an inflection point is essentially zero.  Traders know that; analysts tend to forget it.”  (TRB)

  66. Phil / Webcast – Could you please post the replay link for the webcast. Thanks!

  67. Umm…. Wow!

    The Regulatory State Goes Parabolic—-79K Pages Of New Rules; $1.9 Trillion Cost; Impact Per Family Exceeds Minimum Wage Job

  68. Craig / CL:

    In the wrong side of the trend today ( after 8 sessions being in the right one)  – $5K ……oouchh, wait with interest comments about it  today!.

  69. Two reason for /CL rise: 

    #1 )  I bought a put.  As I'm the strongest contrainan indicator in the universe, I'm sure this is the reason.

    #2)  APA report wasn't great.


    WTI, shrank by 590,000 barrels last week, the American Petroleum Institute said yesterday. Supplies nationwide were probably unchanged at 397.6 million, near a record high, a Bloomberg Newssurvey showed before Energy Information Administration data today. Ukraine is fighting an “undeclared war” with Russia, according to Acting Defense Minister Mykhaylo Koval.

    “Prices have gained momentum from reports showing a draw-down in Cushing inventories,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London, said by e-mail. The declines are “taking Cushing stocks close to operational minimum levels.”"

  70. SPY 5 MINUTEGood morning!  

    Webinar Replay is HERE.  

    Oil seems to be much ado about nothing, it hit $102 (short, of course) and topped out at $102.18, now $102.92.   API showed a small build but bulls are hanging their hats on Energy Secretary Moniz's comments, which were basically just – we'll consider allowing SOME exports:

    U.S. Energy Secretary Ernest Moniz said Tuesday that some of the fast-growing supply of domestically produced oil isn't suitable for refining locally, which could warrant re-examining a nearly 40-year-old law that bans exports of most crude.

    "The nature of the oil we're producing may not be well-matched to our current refinery capacity," Mr. Moniz said Tuesday after an energy conference in Seoul. The administration is studying the issue, though government officials declined to comment on its scope or timing.

    INDU WEEKLYOil already got a big boost last month on a comment by John Podesta last month – who essentially said the same thing.  Not even Bush II could get that change through Congress and this one is only a maybe.  If we have a build today, oil will get smacked back to reality. 

    Nonetheless, this is not a story that will go away as the lobbyists are in a full-court press to get this going and IHS is on the case, which means someone (Kochs?) is spending a fortune to make this happen.  Seems a bit stupid to me though, as rising prices are the number one reason it won't get passed and they are already jacking them up.  If gas is over $4 in the summer, it would be a very stupid time to bring up a bill to change export rules. 

    Also, we certainly know that the reason US refineries are at capacity is because they are EXPORTING 2Mb/day and using more profitable mixes INSTEAD of making gasoline that Americans need – we're not going to reward this behavior and you know I am going to make damned sure people know what a scam this all is. 

    RUT WEEKLYAnyway, Asia was mixed again and, most importantly, Shanghai couldn't hold the weak bounce at 2,050.  Hang Seng's entire move up came in one shot at 11:30 (their time) so BS on that 1% move and India sold off all day 0.25% but Singapore gapped up 1.2% and held it all day.  

    Ex-BOJ Policy Maker Sees Scary Japan Inflation DilemmaThe Bank of Japan faces a “terrifying dilemma” of inflation forcing it to tighten monetary policy just as the central bank most needs to support the bond market, according to a former board member. There’s about a 50-50 percent chance the BOJ will achieve its 2 percent goal for consumer-price increases, which could push the 10-year yield above 3 percent, said Kazuo Ueda, who served as a BOJ policy maker from 1998 to 2005, and was also senior adviser to the Government Pension Investment Fund. Bond market expectations for inflation have risen to 1.36 percent from 0.94 percent in October, data compiled by Bloomberg show.

    Goldman(GS) to Citigroup(C) Miss World’s Worst Selloff in China. The China reform trade is backfiring in the stock market. After soaring the most in two years on Nov. 18 as the Communist Party unveiled its biggest policy changes since the 1990s, the Hang Seng China Enterprises Index has since posted the world’s worst drop. An index of stocks JPMorgan Chase & Co. says benefit most from reform sank 10 percent this year through yesterday.

    China Deploys Submarine Near Vietnam Oil Rig, 86 Vessels Now Present

    Europe has been selling off since the open but not much damage since they opened high, down 0.2-0.5% into lunch.  

    Speaking of BS, here's how they masked the selling in the Dow at close yesterday:

    Split-Second Lurches Affect Stocks From AOL(AOL) to Caterpillar(CAT)A trading firm’s mistake caused wild price swings in U.S. stocks including Caterpillar Inc., AOL Inc. and Nabors Industries Ltd. about 10 minutes before markets closed today, according to people familiar with the matter. Caterpillar, which had been trading around $107.12, jumped to an intraday high of $108.21 within a second at 3:49 p.m. New York time before almost immediately sinking back to where it had been. More than $11 million worth of shares changed hands at the elevated levels, according to data compiled by Bloomberg. The shares were moved by orders tied to the close of trading that were incorrectly entered, said the people, who asked to not be named because the details aren’t public.

    Finally something is being done to boost housing:

    U.S. Backs Off Tight Mortgage RulesIn Reversal, Administration and Fannie, Freddie Regulator Push to Make More Credit Available to Boost Housing Recovery. The Obama administration and federal regulators are reversing course on some of the biggest postcrisis efforts to tighten mortgage-lending standards amid concern they could snuff out the fledgling housing rebound and dent the economic recovery. On Tuesday, Mel Watt, the newly installed overseer of Fannie Mae and Freddie Mac, said the mortgage giants should direct their focus toward making more credit available to… 

    • MBA Mortgage Applications:
    • Composite Index: +3.6% vs. +5.3% last week.
    • Purchase Index:   -1.0% vs. +9.0% last week.
    • Refinance Index:  +7.0% vs. +2.0% last week.

    If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Devastating For The US

    Corporate bond rally is next to bust, some fearIt’s ‘better to leave early than to stay too late,’ say UBS strategists.

    Rupert Murdoch's Drop Boxes: Where Central Bankers Post Front-Runners On When To "Buy"

    Russia Holds "De-Dollarization Meeting": China, Iran Willing To Drop USD From Bilateral Trade

    German Finance Minister Admits To "New Bubbles" & "Excessive Confidence"


    U.S. Fed warns of more bank scrutiny over leveraged loansA senior Federal Reserve official warned banks on Tuesday the central bank may have to take further action to ensure compliance with U.S. guidance on leveraged lending, in the clearest sign yet it is seeking to dispel a perception that it is lenient.

    Weak outlook stings Sony

    • Sony (SNE) is lower by 5.1% in premarket action after reporting a net loss of ¥138B (¥93,2B profit a year ago) in FQ4 on sales of ¥1,870.9B (+8.1% Y/Y), and guiding to a net loss of ¥50B for the full fiscal year ending next March.
    • It will be narrower than the ¥128.7B loss reported for this fiscal year, but weaker than analyst estimates for a profit of ¥59B. The news isn't completely unexpected as Sony has repeatedly lowered guidance in recent weeks.
    • The culprit looks to be continued restructuring costs stemming from the sale of the PC business and "other strategic initiatives." Bright spots: 50M smartphone sales are expected, up from 39M; PS4 sales forecast of 17M is up from 14.6M.
    • Press Release
    • The deal for undisclosed terms comes days after Snapchat settled FTC charges accusing it of deceiving customers by promising photos sent on its service disappeared forever after a certain amount of time.
    • Yahoo (YHOO) has yet to comment on the purchase, which was announced on the Blink website, but the deal is the latest in a number of small, mobile start-ups acquired since Marissa Meyer took the helm.
    • Snapchat, of course, famously rejected a $3B purchase offer from Facebook late last year.

    Much bigger story than people realize:  Google(GOOG) Faces Challenges in Europe After Privacy RulingSurprise Decision Could Prove Highly Disruptive to Search-Engine Operators. Europe's top court ruled that Google Inc. can be forced to erase links to content about individuals on the Web, a surprise decision that could disrupt search-engine operators and shift the balance between online privacy and free speech across Europe. Under Tuesday's ruling—which doesn't trigger any specific new enforcement, but sets a strong legal precedent across the European Union—individuals can request that search engines remove links to news articles, court judgments and other documents in search results for their… ?

    How can they spend money on ships to address non-existent climate change?  U.S. Military Pressed on Climate ChangeRetired Officers' Report to Call for Updated War Plans and Building More Ships to Operate in Arctic. The military must do more to prepare for the impacts of a changing climate, including updating war plans and building more ships to operate in the Arctic, a report by a group of retired military officers will say Wednesday.

    Harvard Group Cancels "Satanic Black Mass"


















  71. Futures/Craigs – It depends what kind of player you are.  We went with June USO puts because I wasn't sure what would happen this week, even though the rollover is Wednesday next week.  I do feel strongly we'll get a nice sell-off by the end of next week and, so, I'm willing to play a conviction short at $102 on /CL, which means I'll DD at $102.45 to average 2x at $102.23 (getting back to 1x on a move down, of course) and then a stop at $102.60 and re-enter 2x at $102.45 (average would then be $101.86 on 2x with another DD at $102.95, for an average of $102.40 on 4x and a stop at $103.10 for a $2,800 loss) or a re-enter 2x at $102.95 for an average of $102.59 with a DD at $103.45 for an average of  $103.02 on 4x and a stop out at $103.55 for a loss of $2,120.   That's the plan.  

    Big Chart – Ignoring the weakness in the RUT and focusing on the great-looking Dow, S&P and NYSE is like when you tell a patient dying of cancer that they look great for losing all that weight.  

    Yes Scott, we get it, government is evil.  Without all those pesky regulations there would be a whole new industry selling oxygen to people so they can breathe indoors, like China!  That's what we should aspire to…  Those figures are beyond idiotic and pushed by the Kochs, who would actually save Billions if the Government got off their backs as well as Banksters who could rip consumers off in peace and fisherman who could drive species to extinction and BP, who wouldn't have to pay all those whiners just because they destroyed their homes with a little oil spill….

  72. Phil- Thank you for the detailed answer about oil futures. This is perfect and now I have a game plan, understanding, of course, that anything can happen at any moment to change the plan or need adjustment to the plan. Barring new developments, I too believe there is no reason for this jump in price, but wanted to check with you if I was missing something that an experienced trader could see, and am now somewhat reassured that I am not completely off base.