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Options Expiration Friday – Anything Can Happen

SPY 5 MINUTEAnother crazy day ahead

What else is new in this market?  As you can see from Dave Fry's SPY chart, the pattern is holding up of high-volume (relatively) sell-offs following low-volume run-ups.  This is how the Institutional Investors manipulate the markets to dump unwanted shares on retail investors.  I've been telling you all week how it works and now we can see it in action.  

Of course, it's nice to have this knowledge ahead of time – that's the edge we strive to give to our Members at Philstockworld.  Even if you are just reading us for free and don't have access to our Live Member Chat Room, you would have done very well to follow our advice on Tuesday and go with the DIA puts at $166.80 and the DXD longs at $26.20 – it was right there on top of the morning post (which you can have mailed to you every day, pre-market by SUBSCRIBING HERE)!  In our Member Chat, the previous day, our trade ideas were:

A 5% pullback on DIA is 8.3 points (830 Dow points), back to $158.40 from here.  The June $161 puts are .95 so, if you have $100K to protect against a 10% drop, you can buy $5K worth of the June $161 puts and a 5% drop pays you back $8,000 and a 10% drop to $150 (15,000) would net you $11 per contract so a 10x return is $55,000 back – that's overhedged actually!  

On DXD, the July $25/28 spread is $1.10 and is $1.25 in the money so you get all the upside on DXD up to a 140% profit on a very small move down in the Dow.  We already have July $28 calls in the STP and it's a little too soon to roll but we will.   

On a new trade – you can just get out if the S&P holds 1,900 for more than a day – that's not too far from here.  

INDU WEEKLY$5,000 worth of June $161 puts were cashed out by us yesterday at $1.40, which would be $7,240 on 53 contract, up 50% in 3 days and the Dow has barely even pulled back!  That's $2,240 in your pocket to compensate for any longs you may have left on the table.  The reason we cashed them out is that we expected a bounce today – into the close of options, but we still have our DXD spread, now $1.45 and up 32% out of a possible 172% – so just on track to our goal

So $5,000 in each trade as a hedge would have returned $3,840 in 3 days – aren't ideas like that worth the $1 a day an Annual Report Membership costs?  I know $1 is a lot of money, in our Live Weekly Webinar on Tuesday, I pointed out to our Members that every $1 you spend today costs you $5 in your retirement – but that math only works if you instead invest it wisely.  Of course, the $3,480 you didn't MAKE this week by not spending $7 cost you $19,200 in your retirement – so I think it's a pretty good value proposition, don't you?

Anyway, so how did we know the market was going to turn down.  Well, I posted the link above to the week's post, where I laid out our bear case as strongly as I possibly could but I think this chart sums things up very nicely.  Institutional Traders (ie. Banksters) have been dumping out of the market while their pet Media Clowns (ie Cramer) herd the Retail Sheeple in to buy up the shares.

The "smart money" has left the building and is still leaving every day we have volume while their TradeBots pump the market back up on slower days – so they can get as much as they can for those last few shares in their portfolio.

I've been telling you this for months, David Tepper told you yesterday (see yesterday's post) but, sadly, even just 6 years after investors got very badly burned chasing a stimulus-induced rally – they are jamming their hands right back into the flames that are being fanned by the same Mainstream Media Assholes that screwed them over the last time.  

I say it often enough that you must be sick of it by now:  I don't care what the PRICE of the stock is, I care about the VALUE and, like David Tepper and Warren Buffet – I am just not seeing a lot of VALUE at these PRICES.  We did find 9 value plays this week in Member Chat and we'll go over a dozen more over the weekend but, so far, we haven't pulled the trigger on any of them as we're waiting to see how severe this pullback will be.  

Meanwhile, by combining fast and slow-moving hedges, we're able to take some quick profits off the table while maintaining a very nice upside (140% still to go) on our more conservative hedge.  Not only that but, since we have been drilling our Members on Futures Trading this year, we were able to take advantage of the intra-day bounces.  In our Live Member Chat Room yesterday, at 12:58, I said to our Members:

Gotta like playing /TF long at 1,080, just for the small bounce.  

/TF is the Russell Futures, one of our favorite day trades and it pays $100 per point, per contract when you get it right and boy did we nail this one:  

By having plenty of tools in our trading toolbox, we are able to make money in both directions on the same day.  Other than that, the only other trade we made all day was a bullish adjustment to our CMG spread, as that stock dipped down to $491.  There's another free idea for you – it may not make as much as our option spread from Member Chat, but it should do well into the fall, when margins begin to correct.  

Today is going to be another watch and wait day.  If you are a free reader, you can still get in on the DXD spread, that still has 140% more upside and we certainly want to be well-hedged into the weekend.  I'm sure we'll find something more aggressive than that in Member Chat – it depends how high they manage to take the indexes before the selling kicks in again.  

Meanwhile, enjoy it while you can – as Stephen Colbert points out, we're all screwed anyway:  

 

Have a great weekend, 

- Phil

 


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  1. Oil Lines

    R3 – 103.26
    R2 – 102.76
    R1 – 102.11
    PP – 101.61
    S1 – 100.96
    S2 – 100.46
    S3 – 99.81


  2. I guess an intended consequence…

    http://talkingpointsmemo.com/dc/washington-free-clinic-closed-obamacare

    "It happened very quickly. We had to start telling our providers not to come because we didn't have enough patients," Mary Hoagland-Scher, a Tacoma family practitioner who served as the clinic's medical director, told TPM. "It just dried up. Poof."


  3. Good Morning!


  4. We all may be screwed, just don't tell the kids…..


  5. Good morning! 

    Love that article, StJ – it's a Conservative Nightmare, Obamacare doing exactly what it's supposed to do and now all those Doctors and Nurses who do actually care about helping people will have more time to compete in a fair market with the ones who don't – another unintended consequence.  

    Kids/1020 – We watched that Colbert together and I told the kids when I was a kid we used to think we'd die in atomic wars or that pollution would get worse and kill us all (still up for debate in other parts of the World).  This is one of those times I wish my Dad was still alive because I'd love to get his perspective on how different this time really is.  Seems worse to me because it took the Earth 5Bn years to create a balance of conditions that have been beneficial to human life and, clearly, we're throwing it completely out of balance.  I'm not sure we'll be able to get it back in time – even if we do actually begin to do something about it.  We may actually end up being one of the last few generations of humans on this planet – oops! 


  6. Oil just failed $101.50 but very tight stops over that line as it's Friday.  /RB moving up almost 0.02 already at $2.973 but I don't see $2.98 holding.  Silver (/SI) tapped $19.25 and now $19.32 – it's $50 per penny but I do like a bull play off the $19.30 line.  



  7. I've never seen Cramer on every morning of the week before – they must be getting desperate.  

    We've flatlined from yesterday's pumped-up close so maybe we flatline all day from here.  Oil bottomed at $101.15 and now back to $101.37 so a nice little channel to trade until it breaks.  

    Indexes not looking too perky and that's with the Dollar being pushed down (80.05) from 80.40 yesterday, almost 0.5%.  Gold touched $1,287 but bounced right back over $1,290 and silver just failed at $19.34.  If the Dollar goes down, we might get a nice move up in both.  Japan doesn't want the Dollar down into the weekend or they'll lose 14,200 in the Nikkei and maybe 14,000 next week so I think they'll try really hard to keep it over 80. 

    TLT 113.50 is less nervous than yesterday and VIX is 13.26 and XLF is $21.66.  

    LQMT popping back to .19, XOM testing $100 from above (bad for the Dow if they fail), AAPL can't get back over $590 and CMG struggling at $500.  Frankly, I'd be out of here today if this wasn't my job – whatever does happen won't matter anyway.  


  8. SPY 186.5/186/185.5 P butterfly.  5c.  I think they tank this one quickly.  Total guess, as I am dropping nickles in the slot machine.


  9. Phil / Butterflies

    I am looking to establish some new fly positions.  Can I still go for the CZR and TXN with the new sells?


  10. Pharm, which expiration are you looking at in SPY butterfly? 

    Thanks


  11. So I still like that DXD primary hedge we left on (July $25/28, now $1.45 with possible $3 and DXD at $27) as it makes money if the Dow is not up at this point.  That can be offset with short puts on one of our value plays (RRD, WEN, KBH, IGT, WFM, HOV, IRBT, TASR) and I'll have more off my watch list this weekend.  These are stocks we don't mind doubling down on if they fall 40% in a market crash.  Of course, if the market does drop 40%, then I'll be preferring BA, CAT, IBM, AAPL….  You know the drill – but these are the ones that are on sale now.  

    Speaking of CAT, nice disaster short on them – July $100 puts just $1.35 with CAT at $105 and, as much as I love them long-term, they are not going to fight a Dow sell-off.  It's speculative but could be an easy triple off a 5% correction.  

    After a dip back to $95 (hopefully) – we can go back to betting the CAT will come back!  

    Flies/Britkid – Yes, they are very flexible, the long positions are merely a backstop to sell the short puts and calls against so, as long as we're generally in the target range – you can always enter them.  We play them until we don't get good premiums anymore, that's our primary decision driver.  As long as we can pick up more than 10% of our long position per month and we have 18+ months to trade – what's not to love?  

    • Apr. Housing Starts: 1.07K vs. 980K expected and 947K prior (revised).
    • U.S. housing starts rose 13.2% in April to a seasonally adjusted annual pace of 1.07 million, the Commerce Department said Friday. The increase was fueled by a by a big jump in multifamily homes. Construction of single-family homes was up only 0.8%.
    • The pace of construction for March was revised lower, showing a 2% gain from the previous month, compared with an initially reported 2.8% increase.
    • Permits 1.08K vs. 1.02M expected and 1.00M prior (revised).
    • Prices also have been rising, making it hard for first-time buyers to afford a new home. The median price of a new home rose to $290,000 in March, the highest level on record, according to the Commerce Department.
    • Builders have been growing more pessimistic as a result. The National Association of Home Builders reported Thursday that builders' confidence in the market for single-family homes fell to the lowest level in 12 months.

    Housing starts are just a bounce off the bad weather – let's not be silly on these data points.  

    See, if all goes well, we might get back to 50-year lows!  


  12. Phil – What do you think of selling the WMT Sept18 70P's for 3.05?


  13. SPY 50d MA is gonna be lost short term…..that's my premise.  Today's SPY.


  14. Pharm, OK I'm in for $50


  15. I have also shorted the Euro, buying the EUO Jan15 $20 Calls.  EUO is an UltraShort. 


  16. Pharm

    To bad we cannot invest in the Mayo

    Measles virus used to put woman's cancer into remission

     

    http://www.cnn.com/2014/05/15/health/measles-cancer-remission/


  17. WMT/Burr – I could have sworn I said I liked those yesterday.  I think I did but I also think you might do better by waiting (60/40).  

    CLF is back in the bargain basement at $16.67:

    Here's a good summary of CLF:

    Cliffs Natural Resources was a bit slow in responding to the uncertain commodity prices, because it was working on mergers and acquisitions to expand its asset portfolio. Thus, with the drop in commodity prices, Cliffs' profits went down substantially. In 2012, it experienced a loss of $6.32 per share. However, after a management change that included a new CEO, in the second half of 2013, the company reshuffled its business strategy. It is currently cutting operational and management costs. In addition, the company has suspended its aggressive growth strategy and stopped making acquisitions and mergers. It is now looking to expand production from existing assets, while disposing of non-core low-performing assets. Although it was late in responding to the shift in business challenges, it appears to be on the right track, concentrating on organic growth and enhancing financial strength.

    As a result of changes in business strategy, the company moved back towards profitability in 2013. It reduced costs of goods sold and decreased selling and general administrative expenses by 18%. It also reduced capital spending, which in turn resulted in positive free cash flow. In 2014, Cliffs continued its strategy of reducing costs, lowering capital expenditures, right-sizing its asset portfolio and enhancing production from existing assets. In the first quarter, it reduced COGS by 3%, SG&A expenses by 30% and reduced capital expenditures by 55%. Despite the cost reductions, as a result of the drop in iron ore and metallurgical and coal prices, its revenue fell on a year-over-year basis. Further, $39 million of expense-related Wabush-related costs led it to post a loss of $70.7 million.

    They have $364M in cash and $800M in inventory and "other assets" of $350M and about $4Bn in debt, which is being serviced AND they are paying a .60 dividend AND they still have  $140M in cash left to drop to the balance sheet at the end of the year.  Like ABX or BTU, they can't help the price of iron ore over the short run but, over the long run – they are an industry survivor and you REALLY want to be in it when the price swings back up. 

    You can sell the 2016 $15 puts for $3.50 and buy 2x the $15/22 bull call spreads at $2.35 for net 0.65 on the $7 spreads that are $1.55 in the money to start.  You get 200% of every penny of upside from here and the worst case is owning 1x of CLF at net $15.65.

    A more conservative play would be buying the stock for $16.55 and selling the 2016 $13 calls for $6.70 and the $13 puts for $2.40 for net $7.45/10.22 and that makes the .60 dividend 8% while you wait to get called away at $13 (21% lower than it is now) for a 74% profit.  We already have CLF in the LTP and Income Portfolio otherwise I'd be loving these trades.  In fact, let's put 1,000 of these buy/writes in the Income Portfolio anyway.


  18. CLF seems more valuable….. :)

    08:39 AM EDT, 05/16/2014 (MT Newswires) — Mining company Cliffs Natural Resources Inc. (CLF) has been downgraded by analysts at Macquarie to an underperform rating from neutral.

    The firm also slashed its price target on the stock to $10 from $18 a share, which is 41% below its current trading price.


  19. Invest, funny how you posted about CLF exactly as I was liquidating my 2015 positions.  Have a lot of that one my the income portfolio, what a dog.  Was a year early.


  20. Mayo/QC – That's way cool.  

    The legend of George Soros grows

    • While other hedge fund bigshots like Bruce Kovner's Caxton Associates and Crispin Odey were buying up Bank of America (BAC -1.2%) in Q1 before an accounting foul-up forced the suspension of the bank's capital return plan and a 20% decline in the stock, George Soros unloaded his entire 2.5M share stake.
    • Caxton purchased 2.5M shares in Q1, while Odey bought 5.3M, about doubling his investment.
    • Soros also sold his entire 2.3M share stake in Citigroup.

    CLF/Mr M – When it was $26 in Jan was the time to liquidate, not now.  


  21. CLF/Phil, I think it is the $10 calls that are $6.70.  The $13's are $4.5


  22. Mrm, just my opinions on reading tea leaf… CLF is not far from the 2013 low 15.41 and it'll be on the support of the current declining channel. Something gotta give maybe.


  23. CLF – They bottomed at $15.50 or so last year. That might become interesting then or when we see some upward momentum back.


  24. And what Invest said :-)


  25. phil davis > george soros


  26. CLF/Income Portfolio, Lunar – Thanks, well, if we sell the $13 calls for $4.50 and the $13 puts for 2.50 with CLF now $16.50 that's going to be $9.50/11.25 and we make 47% at $13 – still not too bad.  

    We allocate $11,250 in margin (1/2 of 2x at net $11.25) and our potential upside is $4,500 + $1,200 in dividends over 2 years, so it's very margin-efficient and, of course, we only need $9,500 in cash + $1,350 in margin for the short puts so $4,750 in stock margin and $1,350 in option margin is $6,100 in net margin to make $5,700 (93%) in 20 months, if all goes well.  

    Soros/Toe – I do love that guy – he's a very clever investor.  

    Looks like the Fix is in as good headline Housing didn't take us higher and terrible Consumer Confidence didn't send us lower – like I said, good day for fishin'…


  27. Phil / CZR – Are we doing anything with our May 20 puts/calls today in reference to our butterflies with expiration being today? Sorry if you have answered this question before.


  28. Don't forget, Consumer Sentiment is another one of those numbers that's been so low for so long that we celebrate mediocrity:


  29. pharm, what's your target on GLD?  i already took a small profit on half.

     

    thx.


  30. Bounce lines/Phil – any updates to weak and strong bounce lines to look for today/next few days?


  31. DXD/Phil – and following on the bounce lines, i'm looking for what would be my exit the DXD spread.. $DJI closing over strong bounce line?


  32. pfehlmann CRZ you roll the 20p May to Sep14 20p


  33. phil/aapl — i have the 600/700 '16 aapl bcs – could you explain what will happen to the position once the split takes place next month?  thanks


  34. sorry it is CZR not to confuse matters


  35. Yodi – CZR
    Why are we rolling either leg – they're both in the money. Why wouldn't we just let them both expire ?


  36. Wombat the caller expires and I sold the Sept 20 call already Phil's recommendation was sell the Sept 21 so you only have to roll the putter which is ITM


  37. CZR/Phel – Sure, we just went over those Wednesday.  We always try to begin our rolls the Weds before expiration because we get better prices that way (as we can put in favorable bids and wait 3 days), rather than waiting until the last second.  

    Bounces/Scott – We'd be looking at 0.5% (weak) and 1% (strong) bounce lines for today – more likely we'll be flat and next week we can calculate with a better perspective.  

    DXD/Scott – If it's a hedge, you want it for the weekend.  As a bet, the Dow dropped from 16,700 to the 200 dma at 16,400 so not getting a strong bounce off a rising 50 dma would be pathetic.   300 points down is 60 points up to weak (16,460) and 120 points to strong (16,520) and the Dow is currently – TA DA!!! – at 16,460 on the button.  See how easy the 5% Rule is to use?

    AAPL/Toe – You should (check with broker) end up with 7x of the $85.71/100 bull call spreads.  

    CZR/Wombat – As long as your broker will cash settle them, then let them expire and pay if there's anything to pay but, if you will be assigned, then you want to roll to avoid the hassle.  


  38. Phil / CZR – I misunderstood the post on Wednesday then because of the comment to wombat to wait with rolling as both were in the money.


  39. Virtual Short Strangle Portfolio update,

    With another expiration behind us, let's sell the June:

    - Sell 10 RUT Jun 980 puts for $2.925, Sell 10 RUT Jun 1180 calls for $0.975

    - Sell 5 SPX Jun 1700 puts for $2.3, Sell 5 SPX Jun 1960 calls for $0.875

    There is no magic in selecting the strikes.  Pick the ones that you are comfortable with (with sound statistical reasons) and know how to make adjustments if necessary.


  40. Strangles / Peter – On SPX you are at 1.645 standard dev from today's price on the call side based on current volatility. That means a 95% chance of success. The put side is way beyond that (below 1786) so even safer.

    On the RUT side, a 95% chance of success is a below 1203 and above 992. So you are safer on the put side (wise) and a bit riskier on the call side (1.3 std dev with a 90% chance of success)


  41. Once again, the put side pays much better for an overall lower risk statistically… Which probably indicates a downside bias.


  42. STJ – Can you explain how you pull this info?  I'm assuming it is in the Analyze tab in TOS?


  43. Phil // CZR
    Thanks. Apparently IB does but TDA will not cash settle – RAWHIDE.

    PeterD / strangles
    I've been watching and watching.
    For the RUT strangle I'm getting margin of 30K
    For the SPX strangle I'm getting margin of 23K

    Is that correct, ??

    Palotay – yes, you can use the probability analysis tools to get a feel for them – or exact like St.J

     


  44. CZR/Pfehl – Often, when we get to the end of a cycle, I'll sell new puts and calls before I close the current ones.  Around Wednesday, I make offers that are about 10% better on each leg and then see which ones fill and clean up the mess on Friday.  

    They tried but could not get anything going in the end.  Oil made it up to $101.68 though.  Still plenty of time left in the day – yawn…

    • Barely in the green for the year at the moment, the S&P 500 could slide 10% between now and October, says the technician, but there's a stealth bear market already happening in the Nasdaq, S&P Mid-Cap, and Russell 2000, and when support breaks (less than another 2%), those indices could see 20-25% declines.
    • The situation reminds him of 1994 when the Dow and S&P were in a trading range all year, but things were falling apart underneath the surface.
    • Following the washout into October, though, Acampora sees a "very, very strong Q4."
    • The bank plans to double its commodities trade finance team within the next three years, according its global head of commodities Kris Van Broekhoven. A big player in trade finance – short-term lending guaranteeing payment on international shipments – Citigroup (C -0.3%) started building a commodity trade finance team in 2012, first in energy, then metals and minerals, and next up is agricultural commodities.
    • The move comes as rivals like Morgan Stanley and JPMorgan exit the business of trading physical commodities. When these operations were part of investment banks, traders could rely on quick access to financing. "When they move, their funding changes, and they turn to the commodity trade finance banks to fund them, so that creates an expanded market for us," says Van Broekhoven.
    • Data released by a lobbying group for oil refiners confirms that crude from North Dakota is very volatile and contains high levels of combustible gases, but the group says the crude is no more dangerous to ship than oil from other shale regions and new rules on safety standards are not needed.
    • Oil and refining companies say it's mostly the railroads that are at fault: a probe into the derailment and explosion of a train in Lac-Megantic last year found that brakes weren’t applied correctly; a train that exploded in North Dakota in December crashed into a train that had derailed across the tracks; and the April explosion of a train carrying Bakken crude through Lynchburg, Va., may have been caused because sections of the track bed had been washed away by heavy rains.
    • Among Bakken producers: CLREOGWLLHESKOGOASNOGEOXMRO.
    • Pfizer (PFE +1.5%) will submit an FDA new drug application for the use of its Palbociclib drug, together with Letrozole, for the "treatment of post-menopausal women with estrogen receptor positive (ER+), human epidermal growth factor receptor 2 negative (HER2-) locally advanced or metastatic breast cancer."
    • The decision stems from the results of Pfizer's Paloma-1 Phase 2 trial for Palbociclib/Letrozole. An NDA submission is expected in early Q3.
    • Pfizer is trading higher after coming off a halt. AstraZenaca (AZN +0.4%) investors are breathing a sigh of relief.
    • Gogo (GOGO +4.8%) CEO Michael Small bought 30K shares on Wednesday at $12.96. Director Charles Townsend bought 60K shares on Wednesday at $12.84, and another 100K on Thursday at $12.96.
    • The purchases come after the in-flight Wi-Fi provider's shares fell over 60% from a December high of $35.77, thanks largely to a momentum stock selloff and worries aboutAT&T's plans to offer a rival service.

  45. Phil / CMG – Hoping you can explain the CMG roll to the Sept 465/495 bull call spread for me as I'm trying to learn the reason behind the roll and what we are expecting to happen to CMG and what our corresponding moves would be down the road. I guess I'm having trouble seeing what will make us money on the spread with CMG at this level. From your previous posts you mentioned that if CMG cannot hold 500 we expect it to retest 480, I'm assuming that's now our premise but are we also thinking that CMG will not break 495 by Sept now? Sorry if this question seems basic (or confusing) but I'm still learning (and hoping you understand what I'm asking). thanks in advance


  46. Phil

    For the weekend

    If I want to go to the world cup in four years in Russia

    What would be a good trade?

    Like you did on the buy a Tesla

    Fun idea I think for two of us about $25,000. 

    Thanks


  47. UNP/pwright – nice move today.. our original play is now up 55%, and with the new Nov/Aug diagonal holding place at $2.60, (down slightly bot at $2.70) for an overall UNP net +28%


  48. Stj / Tracking,

    I like your spreadsheet that you put for the strangles update. Is it an excel spreadhsheet? I guess I can create one for my portfolio as it gives nice indication off the % profit/loss your position is making. I understand it is manual to set up first and maybe to average if you DD but provides a good view in the end.

    Thanks


  49. Stats / Palotay – You can certainly use the Analyze tab in TOS to give you an idea. I use a custom formula in my charting software.


  50. Portfolio / Pat – It's actually a Google Docs spreadsheet but you can setup something similar in Excel and it's actually easier because you can now get live prices from TOS directly into Excel. After that, it's a matter of adding columns and rows with calculations to keep track of your DD and short premium moves.


  51. UNP – if stock closes above 192.90 today, will move stop up to 191.12


  52. Not bad, but you don't want to get caught in a lost decade:

    http://www.bespokeinvest.com/thinkbig/2014/5/15/sp-500-rolling-10-year-returns.html

    Below is a chart we update from time to time showing the rolling 10-year price change for the S&P 500 going back to the start of the index in 1928.  As shown, over the last ten years, the S&P 500 is up 64.8%.  This might seem like a lot, but compared to past runs for the index, it barely shows up.  Since 1937, the average rolling 10-year return for the S&P has been 103%, so the current 10-year gain of 64.8% is only two-thirds of the average.  


  53. An interesting way to value an investment:

    http://www.millennialinvest.com/blog/2014/5/15/3x8es5ql3xr3nmrkqmsdruucmre8es

    When a company releases its three financial statements, the income statement (led by bottom line earnings) dominates, the balance sheet comes second, and the statement of cash flows generally comes third. You’ll see a lot of “breaking earnings reports” on CNBC, but you’ll never see a “breaking cash flow report.”

    This may be in part because the statement of cash flows has only been around since 1987, whereas income statements and balance sheets have been around forever. In the cash flow statement, cash flows are grouped into operating, investing and financing categories. Operating cash flows dominate—these are inflows and outflows resulting from normal business operations. Investing cash flows matter too, because they reveal how much a company is investing in things like machines, office buildings, and the like. But financing cash flows are the most useful for investors.

    Financing cash flows are pretty straightforward. Positive numbers (cash coming into the company) result when a company raises cash from outside stakeholders (through debt or equity offerings). Negative numbers (cash leaving the company) result when a company sends cash back to stakeholders by repaying debt, paying dividends, or buying back shares.

    It turns out that companies with the most negative flows, relative to their market value, perform considerably better than those with the most positive flows and perform better than the overall market. The factor (financing cash flows divided by market value) is sometimes called “shareholder yield,” but I prefer “stakeholder yield” because it doesn’t belittle the creditors who are not technically equity shareholders. 


  54. And another good article on stock picking:

    http://www.millennialinvest.com/blog/2014/5/12/two-ways-to-improve-the-momentum-strategy

    You may think that value and momentum are polar opposites, but they work remarkably well together. Think of the combination as cheap stocks that the market is just beginning to notice.  The combination of the two factors yields results more impressive than either of the two investing styles on their own. (Note: for value, I’ll use the simplest measure possible to make the point: price/earnings)

    The cheapest 10% of stocks by P/E have historically delivered 16.3% per year, and the top momentum stocks have delivered 14.4%, but a combination of the two has yielded 18.5% per year (bottom right corner of the table below). What’s more, the volatility of this combined strategy comes way down: from 24.4% for raw momentum to 18.9% for value + momentum.

    The table below breaks all stocks into a 5×5 panel by value and momentum (6m return and price/earnings). Stocks in the upper left have terrible value and terrible momentum. Stocks in the lower right have great momentum and great valuations. The combination of these concepts has been very powerful.

    Annualized returns, 1963-2013

    That is something much easier to screen for.


  55. Pharm / Euro – Agreed

    French President Francois Hollande and his 17 member cabinet have a collective age of 982 years. The number of years the President  and his senior members have spent working in private sector businesses totals 3.  Disclosure:  short Euro long UK equities + short Euro


  56. stjeanluc – thanks for the stats as always.  Please alert me right away when we have spreads with 110% probability of success!


  57. wombat, the margin looks correct (with PM).  However, they can increase if the market moves towards either strikes.  The Reg-T margin ATM is 1180 x 100 x 20% x 10 contracts = ~ 236k, so you'd need to set aside $118k for the RUT spread.  At least for 1 possible 2X roll on PM.


  58. Would you settle for 99.99% Peter? I fear it's the best I can do.


  59. Thanks Peter 
    Someday ….


  60. CMG/Pfehl – Well, we net into the spread at $17.90 and it's a $30 spread thats 100% in the money so the upside is $12.10 or 67% on our 2x position.  Since the long Sept $465 calls are $54, as long as we roll them before they go below $18, we can move to another spread if we have to.  Eventually, we would hope CMG stops falling but I'm pretty sure it already has – we simply moved to a more conservative position, just in case I'm wrong.  Also, when I say I expect CMG to hold $500 and it falls to $490 (down 2%) on a 2% drop in the overall market – do you think I wouldn't adjust my target to compensate?   You can't fixate on numbers – they are generally meaningless and situationally dependent from day to day, week to week.  We're playing a 4-month target with July earnings in between – unless something FUNDAMENTALLY changes about CMG – we'll continue to take any dip as an opportunity to press the position.  

    This is about Fundamentals and targeting.  After earnings, we thought CMG would rebound quickly back to $550.  Since we took that trade – they have disappointed but our VALUE assumption ($550) hasn't changed so, rather than wait until June, we're going to roll to a position that pays off at anything over $495 way out in Sept.   Even if we find out bad news between now and then, we have a lot of flexible options to move the position.  

    Russia/QC – Well, RSX is nice and cheap at $24, since it bottomed out at $15 in 2009 and was $30 in October.  If we give them until 2016, I suppose this Ukraine stuff will blow over and the 2016 $19/24 bull call spread is $3 and you can sell the $21 puts for $2 for net $1 so $5,000 will get you $25,0000 if it works out but then you'd be on the hook for $110,000 worth of RSX at net $22 if they go in the crapper so maybe you'd rather sell 20 MANU Dec $15 puts for $1.10 ($2,200) and 10 RSX 2016 $21 puts for $2 ($2,000) against 50 of the spreads for $15,000 for net $10,800 and you can hopefully work off another $5K selling more MANU after this bunch expires.  

    http://finviz.com/chart.ashx?t=rsx&p=d&s=y

    http://finviz.com/chart.ashx?t=manu&p=d&s=y

    WWE is almost interesting now, but only almost.  They're taking a $50M hit this year (two year's earnings) gambling on a subscription model for their fans, rather than the constant pay-per-view marketing thing they do now.  They pay a 2.5% dividend that's .48, so more like 4.2% at $11.34.  Still, I just don't like them and it doesn't really get compelling until they are below $10, which it touched today – worth keeping an eye on.  They don't have LEAPS but you can sell Oct $12.50 puts for $2.70, buy the stock for $11.34 and sell the $11 calls for $2.15 for net $6.49/9.50, which would make the .48 dividend 7.4% while you wait.  As I said – ALMOST compelling but then you have to explain to people what you like about the WWE or, even worst, the McMahons…

    S&P/StJ – I look at it differently.  We are in a recession, like we were in 1970 and like we were in 1930 and those are NORMAL economic cycles in which the S&P should NOT be returning any gains.   The Fed and the Government have stepped in and artificially stimulated the economy, like the War did in 1941 but that doesn't repair the real economy – only time and a proper reallocation of investment capital accomplishes that (see Hayek).  

    By circumventing the natural order of things we are giving the appearance of a recovery but it's not a recovery at all – remove the stimulus and we collapse again because money has not been going to the right places – just the same old places propped up again. 

    Take housing, for example.  There was a statistic earlier that the average new home is now $293,000 – that's 20% higher than it was in 2006.   That's completely ridiculous – there's no demand, there's no money in the hands of first-time homebuyers and people who bought homes back in 2006 are still about 20% underwater.  

    What should have happened is housing should have completely collapsed, banks who made too many mortgage loans should have folded and their investors should have lost money and the Government would then have spent the TARP money making the depositors whole and forgiving or refinancing debt, a la Resolution Trust.   That would have let housing drop about 40%, to the point where ordinary people were excited to buy homes, bringing demand back for materials, furniture, appliances, etc and leading to more household formation that would lead to strong long-term housing demand (and jobs) down the road.  It would also have rebuilt the local tax bases and revitalized local economies as most of that money would be spent in communities – instead of being shipped to the Waltons or Kochs of the World…

    So I don't see that as 64.8% out of a possible 300% rally, I see it as a 64.8% spike off what should be a flatline and there will be hell to pay when they stop pumping this market full of adrenaline.  Maybe they will never stop, maybe they'll get away with it but, even so, they can't keep increasing the stimulus, we're still going to flatline here – even if they can keep this up, because I don't think they can do any more than they're doing now.  

    As to cash flows – I guess I'm old-fashioned (circa 1987), I prefer the positive ones. 

    CLF/MrM – I don't disagree that there may be more downside but, long-term, I'm comfortable with them below $18.

    Gasoline did make it over $2.98.  Silver topped out just over $19.40 but now back to $19.30 yet again (another chance to go long!).  

    My boring day prediction is right on track at 2:22…


  61. Oh good, we're back.  That's funny, right after I said boring day, the server went down (index scrambled, actually).  Programmers are already being drawn and quartered and all is well again.

    Meanwhile, if the site crashes in the Future - just go to our Facebook Page and we can chat there:  https://www.facebook.com/philstockworld2


  62. Good call, stjeanluc.  99.99% is actually a lot better than 95%, meaning that 1 out of 10,000 months that we'd need to make adjustments.  We can live with that – 800+ years.


  63. Question-I am new to Phil's "new" trades & I am trying to sell the calls on tasr 16x 20 str @ 2.00. What do u do, put in a good until cancelled? This is my 2n day of trying. The put went through but …it is very  thinly traded & I usually avoid  these trades like the plague. However, I do want to own tasr. Any suggestions.


  64. Hey, this is very useful: 

    Another good chart:  


  65. Peter – Actually, the put side on the RUT is almost exactly 2 std dev so a 97.72% chance of success. The SPX put side, 2.15 std dev or 98.42% chance. Close…


  66. TASR/Pirate – Yes, good to cancel usually.  If you just have the short put, then worst case is you own the stock at net whatever but I'm not sure what trade you are talking about if you mean the $20 calls – those are never going to hit $2 without a major rally.   If you sold the $13 puts for $3 then you have the stock at net $10 worst case – if the other leg fills, so much the better, but no hurry.  

    Getting a nice stick move now – we'll see how much gas they can give it.  Don't forget, it takes 0.5% for a weak bounce.  

    • The KBW Bank Index (ETF: KBE) is off about 8% from early April, with the performance of high-profile members like BofA, JPMorgan, Citigroup, Goldman is even worse (though Wells Fargo remains close to an all-time high).
    • It used to be, writes Michael Santoli, bank stock action was key to gauge the broader health of the market, but few are fretting now. Instead attention is being paid to the slides in the Russell 2000, high-flying growth names, and Treasury yields.
    • Rather than saying anything about the economy, the drop in bank shares could be more about thinning out an easy trade (long) that got too crowded. The latest BAML fund manager survey shows pros as big sellers of bank names in the last few weeks, dropping their allocations to a 10-month low. Even with the selling, their exposure to the sector remains far above the national average.
    • The Minnesota Legislature passes a bill restricting the use and sale of electronic cigarettes. It now heads to Governor Mark Dayton's desk for his signature.
    • The bill requires child-proof packaging for all e-cig liquids, prohibits their use in schools, prohibits their sale from mall kiosks and requires them to be kept behind the counter in stores. The law allows local governments to pass more stringent restrictions and ensures penalties for those who sell e-cigs to minors.
    • E-cig use is also banned in hospitals, healthcare clinics, doctors' offices, most government buildings, all facilities owned by the University of MN or MN State Colleges and Universities, including dorm rooms and licensed daycare facilities, including home daycare during operating hours.
    • The bill is a watered down version of an earlier bill that would have treated e-cigs the same way as conventional cigarettes.
    • Related tickers: (MO) (BTI) (LO) (PM) (ECIG) (VAPE) (HPNN) (MCIG) (MWIP) (NTRR)
    • Nearly $8.7B in U.S. tax breaks that encouraged Boeing (BA -0.6%) to keep production of the 777x jet in Washington state could be challenged by the EU, potentially opening a new phase in the formal trade dispute over aircraft industry aid, Reuters reports.
    • The package exceeds the estimated cost of developing the 777X, suggesting Boeing is getting an aircraft "fully funded by the U.S. taxpayer," an Airbus (EADSFEADSY) spokesperson says.
    • Meanwhile, Boeing prepares for next week's investor meeting; although the conference hasn’t driven material stock performance in the last two years, Citigroup thinks relatively low expectations could provide some upside potential, as the firm expects BA to reiterate targets supporting a bullish view.
    • Though available only on the Xbox One/360 and PCs for now, Electronic Arts' (EA +2.1%)Titanfall was the bestselling game in U.S. physical retail channels for the second month in a row, per NPD's April numbers. Strong Titanfall sales have already fueled EA's big calendar Q1 beat.
    • Activision's (ATVI +0.7%) Call of Duty: Ghosts rebounded to #2 on NPD's list after coming in at #4 in March. Another Activision title, The Amazing Spider-Man 2, landed at #8.
    • Take-Two's (TTWO +0.9%) NBA 2K14 rose to #3 from #7 as the playoffs arrived. Grand Theft Auto V came in at #9.
    • Total physical retail game sales fell 10% Y/Y, as gamers direct more spending towards next-gen consoles (hardware sales rose 76%) and digital channels. But the figure represents an improvement from March's 27% decline.
    • One encouraging piece of data for the next-gen console cycle: NPD states PS4/Xbox One game sales are up 40% relative to PS3/Xbox 360 sales over their first 6 months of availability.
    • Game developers are ticking higher a couple days after selling off in response to Take-Two's soft calendar Q2 guidance, as is GameStop (GME +0.5%).

  67. TASR Jan16 $15 Short PUTS filling at $4.00



  68. VIX back to 12.33 because, you know, this isn't volatile at all, is it?

    Watch /TF at the 1,100 line.  If they get over that, they may get a strong bounce (+1%) on the Nas or RUT into the close.  


  69. Phil

    Look at the resilience of XRT!  Don't quite understand it, but may be another shorting opportunity next week.


  70. XRT/DC – It's got things like Auto parts in it that keep it from falling too hard but any time it's at $85, it's a short.  

    Stock Weight Amount
    Conn's 1.29% $10,515,120
    Asbury Automotive Group 1.20% $9,784,255
    Susser Holdings 1.18% $9,601,192
    Dillard's INC. Class A 1.16% $9,413,727
    Office Depot 1.15% $9,359,370
    Rentacenter 1.15% $9,346,493
    Murphy Usa 1.15% $9,341,144
    Staples 1.14% $9,267,759
    Group 1 Automotive 1.14% $9,247,247
    J. C. Penney Company 1.11% $8,994,436
    Rite Aid 1.11% $9,039,322
    Lithia Motors INC. Class A 1.11% $8,999,063
    Supervalu 1.11% $9,038,566
    Nordstrom 1.10% $8,957,558
    Zumiez 1.09% $8,875,114
    Foot Locker 1.07% $8,671,244
    Finish Line INC. Class A 1.06% $8,643,482
    Nutrisystem 1.06% $8,595,322
    Outerwall 1.05% $8,572,238
    Kroger CO. 1.05% $8,569,043
    Page 1 2 3 4 5 6 next »

  71. GLD target 1200.

    Damn SPXs…..I thought 1860 was in the bag b'f the pop back to 1880.


  72. CHK down over 4.4%.


  73. STJeanLuc – Prescient call on options expiry. What keeps you in these small towns? Great call/great article. Pegged the action today – head fake lower followed by later surge. Nicely done.


  74. Phil/XRT

    JWN and JCP helped today.


  75. Now, the Nas has fallen from 4,160 to 4,040 so, if it were going to strong bounce – that would be 4,088, right?  

    CKH/ZZ – They spun stuff off and sold some stuff – I don't even know what they are made of anymore.  That's why we stopped playing them. 

    OK guys, I have a meeting to run to.  Hope nothing too drastic happens in the next 15 mins.  

    Have a great weekend everyone, 

    - Phil


  76. Jut looked at my notes-I guess it was 3P & 13 calls-wow. I messed up my btu by buying the 13p instead of selling it!! Got out when I noticed the discrepancy. Costs a bundle to make mistakes-thanks for your help.


  77. pirate:  I've been doing this for a few years and I still get it wrong once in awhile – Doh!!!  But now I notice in seconds and bail in seconds more, whereas at one time I could hold it for days, scratching my head as to why my call was correct and yet I was still losing money.


  78. ~~pirateinvestor

    Hi I think you do your self the greatest favor if you start paper trading for the next 3 month. Other wise go to the casino and just bet on even and un even numbers and you will have a better chance. I mean my remarks serious so you do not throw your money away and you finally will still blame our site because most of us are here to gain from the knowledge of this site.


  79. Cash flows / Phil – You are reading it wrong, cash flows can be positive overall, but the financial part of it has to be negative. Basically, he is screening out the financial engineering part of the business – things like adding debt or raising equity as opposed to paying out investors through dividend or paying back debt. Operational cash flows can still be positive. This makes a lot of sense to me actually. I just have to find a way to screen for that. Maybe use the other screen for momentum and value and then rank using cash flow. So many ideas, so little time…


  80. Call / 8800 – Did I call it right? I guess I called for an up day today and we are getting one. That was just pattern analysis at this point and looking at support lines.


  81. stjeanluc 

    how do you do pattern analysis?


  82. Ed – This one was easy – look at the charts. Over the last 2 months we rarely have 3 down days in a row. The last time we had 2 big down days, we bounced the day after. Pretty much like Phil's weak and strong bounce theory.


  83. World’s highest minimum wage: Switzerland votes
    http://www.bbc.com/news/business-27412079


  84. Google buys Word Lens, the app that translates languages with your phone’s camera
    http://www.theverge.com/2014/5/16/5724230/google-buys-word-lens-translation-app



  85. TASR/pirate- I am fairly new also, though at 3 months in I am starting to get it. Sounds to me like you were trying to buy a bull call spread along with selling puts. If you are using think or swim, they are called vertical spreads in their lexicon and you just have to look carefully before pulling the trigger. I have seen it change from buy to sell when I edit the premium, so just be careful and review. To get the prices you want you edit the premium to match what you want it to. Be and the program adjusts the pricing for you. They have a paper trading feature which is very helpful. Also there are some terrific sites that teach you option trading in easy to understand terms which can help as an adjunct to what you learn here. My favorite is taught by the guy who started think or swim. He teaches his daughter in the videos and while it may go over stuff you know already, it is very comprehensive. Another nice member here helped me so I hope I have paid that forward now. Hang in as it gets more clear each day, and don't kill yourself over mistakes.


  86. Wall Street’s Elite Can’t Get Enough Of These $250,000 Dinners With Ben Bernanke
    http://www.businessinsider.com/r-at-big-ticket-dinners-a-blunt-bernanke-sounds-theme-of-low-rates-2014-16




  87. Apple manufacturer Foxconn suspends Vietnam production amidst protests
    http://venturebeat.com/2014/05/16/apple-manufacturer-foxconn-suspends-vietnam-production-amidst-protests/


  88. Fed Chair Janet Yellen Commends Small Businesses For Energizing Economic Recovery
    http://www.businessinsider.com/janet-yellen-national-small-business-week-economic-recovery-2014-5



  89. Comcast plans data limits for all customers
    http://money.cnn.com/2014/05/15/technology/comcast-data-limits/


  90. Your Chipotle burrito is getting pricier for this one simple reason
    http://qz.com/209911/your-chipotle-burrito-is-getting-pricier-for-this-one-simple-reason/


  91. Retailers exit first quarter with higher inventory
    http://features.blogs.fortune.cnn.com/2014/05/15/retailers-inventory/





  92. Joseph Stiglitz: ‘Creating a Learning Society,’ and the Implications for Industrial Policy
    https://blogs.worldbank.org/psd/joseph-stiglitz-creating-learning-society-and-implications-industrial-policy


  93. pirate / greetings
    wombat here. doesn't sound like you didn't understand, you just made a mistake – still happens to me quite often. Best advice is take your time – never feel rushed, and look over your confirmation before you send. Or, if you're really unsure about the big picture ( assuming you are using TOS ) construct your trade in the analyze tab and then convert it to 'Confirm and Send' from there.

    One of the things that always baffled me is the different names for things. One broker could call something totally different – very frustrating. Since its after hours, here are my two basic lists to keep your head from exploding. I still find them invaluable >>

     

    BEAR STRATEGIES

     

    BEAR PUT SPREAD / PUT DEBIT SPREAD  / LONG PUT SPREAD

    requires no margin

        BUY HIGH PUTS ( CASH — )   ITM  ( higher strike )

        SELL LOW PUTS ( CASH +++)   OTM ( lower strikes, same expiration ) 

     

        **can SELL multiples strikes if you want to be put shares at discount

        Good for picking up shares on bear runs.

     

        example.

        I much prefer picking specific stocks I want to buy at say 2010 lows- october 2011 lows and selling a put spread. 

        For example Aflac is a good buy at 40. So i would then buy a 50 put and sell a 45 as well as a 40 put. I would end     up getting put the stock at 40 and shelling out next to no money. All Jan strikes

     

     

    BEAR CALL SPREAD / CALL CREDIT SPREAD / SHORT CALL SPREAD

    requires margin

        SELL LOW CALLS ( CASH +++ )   ITM or ATM   ( lower strike )

        BUY HIGH CALLS  ( CASH —    )   OTM  ( higher strike, same expiration ) 

    short the strike thats ATM and buy long the strike by further out OTM

     

    hugher lift in extrinsic value

     

        Example:
        XYZ stock is trading $63

        Strategy:
        Sell one 60 strike call at +$5.60
        Buy one 70 strike call at -$1.60
        Net Credit +$4.00    

    Maximum Profit = Net Credit Received

    Maximum Profit = Net credit $4 *100 = $400

    Breakeven = Short Call Strike + Net Credit Received ( 60 + 4 = 64 )

    Maximum Loss = Difference in Strike Prices ( Spread ) – Net Credit Received ( 10 – 4 *100 ) = $600

     

     

     

     

     

    BEAR PUT BACKSPERAD

     

        BUY 2 HIGH PUTS ( CASH — )   OTM – buying more at lower strike

        SELL 1 LOW PUTS ( CASH +++)   ITM 

    unlimited profit, limited risk – initiated when trader thinks stock will experience significant downside in the near-term.

    The put backspread is a bearish strategy SELLING PUTS and BUYING 2X MORE PUTS at a lower strike. 

    It is an unlimited profit, limited risk options trading strategy that is taken when the options trader thinks that the underlying stock will experience significant downside movement in the near term.

     

     

    VERTICAL SPREADS – same everything, just different strike prices.

    HORIZONTAL / CALENDAR SPREAD – same everything, including strike, but different expirations

    DIAGONAL SPREADS - different strikes, different expirations 

     

    Long strangles need vol to make them profitable since the stock needs to go outside of the long strikes.  Here at PSW, we sell premium, so we are short the strangle, so we want the stock to stay between the strikes.  If vol picks up, our trade gets hurt as option prices will increase and stock movement will as well.  
     
    Thanks why during earnings, as vol in a stock is pumped high, ppl will sell a front month option, and buy a back month option in some form (calendar, diagonal, etc).  Take advantage of the juice.

     

    BULL STRATEGIES

    BULL PUT SPREAD  / PUT CREDIT SPREAD / LONG PUT SPREAD

     

        SELL HIGH PUTS ( CASH +++ ) ITM

        BUY LOW PUTS ( CASH — ) OTM 

     

     

    Short PUT protection Good for pullbacks. Bullish strategy, income generating.

    SELL a PUT roughly 5% BELOW the current stock price drop while simultaneously 

    BUY a put approximately 10% UNDER the current price

    This lowers the collateral I have to put up in my brokerage account, hedges risks and enhances risk adjusted return.

     

     

    BULL CALL SPREAD / CALL DEBIT SPREAD / LONG CALL SPREAD 

     

        SELL HIGH CALLS ( CASH +++ )

        BUY LOW CALLS ( CASH — )

     

    good for a short term moderate rise 

    limited upside – depends on the difference in spread of strikes

    its a debit spread – you're spending cash

     

    BULL CALL  BACKSPERAD

     

        BUY 2 HIGH CALLS ( CASH — )   OTM – buying more at lower strike

        SELL 1 LOW CALL ( CASH +++)   ITM 

     

    unlimited profit, limited risk – initiated when trader thinks stock will experience significant upside in the near-term.

    The call backspread is a bullish strategy SELLING CALLS and BUYING 2X MORE CALLS at a lower strike. 

    It is an unlimited profit, limited risk options trading strategy that is taken when the options trader thinks that the underlying stock will experience significant upside movement in the near term.

     

     


  94. Thanks stjeanluc 


  95. Weak bounces but right before a weekend, who knows… Anything can happen!


  96. Makes you wonder what is in that FOMC Meeting Minutes on Wednesday that they have to line up 4 speakers the morning before!

    I'll be reporting from Russia next week and part of the week after and then France until June 7. I actually wonder if I can post on a blog from Russia since they have these new laws that in order to be an editor of a blog with more than 2000 readers you have to report to the authority! In any case, it should be quite interesting. 


  97. I would make sure your posts include a Buy rating for RSX.  You can always include a smiley face as a word to the wise.  :)


  98. Thanks Zero… Although my colleagues there told me that Russia doesn't spy on its citizens email or electronic communications unlike the NSA in the US. So I guess I am safe.


  99. stjeanluc 

    Show them these comments

    Have safe travels

     

    Phil

    For the weekend

    If I want to go to the world cup in four years in Russia

    What would be a good trade?

    Like you did on the buy a Tesla

    Fun idea I think for two of us about $25,000. 

    Thanks

     

    FROM PHIL:  Russia/QC – Well, RSX is nice and cheap at $24, since it bottomed out at $15 in 2009 and was $30 in October.  If we give them until 2016, I suppose this Ukraine stuff will blow over and the 2016 $19/24 bull call spread is $3 and you can sell the $21 puts for $2 for net $1 so $5,000 will get you $25,0000 if it works out but then you'd be on the hook for $110,000 worth of RSX at net $22 if they go in the crapper so maybe you'd rather sell 20 MANU Dec $15 puts for $1.10 ($2,200) and 10 RSX 2016 $21 puts for $2 ($2,000) against 50 of the spreads for $15,000 for net $10,800 and you can hopefully work off another $5K selling more MANU after this bunch expires. 


  100. SPY 5 MINUTEGood morning!  

    Mistakes/Pirate – That's why the stress at PSW is teaching you HOW to fish, rather than giving you fish.  When you understand WHY you are making trades, your mistakes will go down dramatically because you'll know before you enter them that something doesn't make sense.  Like any profession (and trading is a profession), you have to practice to get good at itl.  Unfortunately, learning from your mistakes in trading can be an expensive proposition, which is why you should start off small and always practice scaling in (see Strategy Section).  

    Cash flows/StJ – Good point, I do always look at that stuff before saying I like the cash flow but, I'm sure most people don't realize that.  Hard to find a screen that picks things apart but maybe an opportunity for you (or someone) to develop an adjusted cash-flow indicator.  In the very least you could suggest it to Bespoke – they love playing with data like that.  

    That article on Google's Self-Driving Car trick is interesting.  On the one hand, they are cheating and it means self-driving cars may be farther away than we think but, on the other hand, their solution may end up cornering the market – making their solution the only one people will use.  They are essentially brute-forcing the road template cars will drive on and, as I suspected when they announced the split, they are going to make MASSIVE R&D investments on these long-range projects.  There's a risk in doing things this way because you may not ultimately win.  While GOOG is spending a fortune to map every road in America (if they stop there), IBM (or IRBT) may come up with a better brain for self-driving cars that makes the mapping unnecessary.  

    Printing 3-D houses is a major game-changer.  Americans won't want to live in them yet but, in poorer countries, this is just amazing:

    You know this trend always bothers me when I see it:

    Retail sales slowed significantly in April

    Wal-Mart on Thursday said U.S. inventory grew 5.3% from a year ago, primarily due to new store openings and slower sales of weather-related categories like outdoor items.

    Department-store operator Macy's this week reported inventories grew 4.7% from last year. Chief Financial Officer Karen Hoguet said that level was "a bit higher than we would have liked," though she said the increased stock included some key summer items.

    Kohl's inventories climbed a more modest 0.5%, a level the company called "appropriate."

    All three retailers reported sales at existing locations, a key metric known as same-store sales, declined in the first quarter. But encouragingly, executives at those companies said sales trends appeared to be improving.

    RUT WEEKLYBig Chart – The weakest of bounces all around and, coming on low volume – even worse.  And weak bounces are less impressive when they come off the 50 dma (Dow, S&P and NYSE), since that's almost always going to be bouncy anyway.  

    4 Fed speakers on Weds ahead of the Minutes is a new one.  Plosser is the only real hawk and they shove him into Tuesday, George and Kocherlakota are not doves, but no one is a proper hawk these days.  All in all, it's a very strange mix with Dove Dudley, Super-Dove Yellen, then George and Kocherlakota in one-hour intervals (about) into the Fed minutes.  

    That's going to be a crazy day!  

    Even stranger is NO Fed speak after.  Seems to me there's something hawkish in the minutes and they want to prepare us for bad news and then see how we react.  

    No data until Thursday either and then it's a lot of housing data, which will probably suck as the only things getting built are multi-family.  PMIs are always fun – those guys have been enthusiastic all year.  

    OK, moving comments on to the new post now (since that's where the news will print when I begin posting it).  


  101. Phil,

    It looks like yet another Manic-mulated Merger Monday coming pUmP.

    Strether