$5,000!
That's how much our FREE Futures suggestions made between the time I put them in yesterday's morning post (8am) and the close of trading at 4pm. That's not bad for 6 hour's work, is it? As I said in the morning:
So, you may wonder, why would we want to go against the wishes of two of the most powerful people and short oil ($93.40), gasoline ($2.75), the Dow (17,150) and the Nikkei (16,350)? Well, that's because, as powerful as these people may be – they are still fighting physics in trying to make the markets do things they simply shouldn't be doing.
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I'm sure ALL the newsletters you follow are able to give you equally profitable advice so, by all means, DON'T SUBSCRIBE HERE – especially ahead of the rate increase in October (sorry, inflation). 
But, can you really blame us for being pleased that we totally nailed the drop?
In fact, had you simply joined us on Wednesday and replicated our virtual Short-Term Portfolio, which was only up 53.4% at the time, you would have caught a ride from there to 60% in just two days. Last Thursday, the STP was up only 30%, so that's a 30% ($30,000) gain for the week as our bearish bets paid off and it very much offset the $15,560 decline in our bullish Long-Term Portfolio. So much so that we took some of our shorts off the table to get us more neutral into the morning (as we expect a slight bounce unless GDP sucks).
You don't have to trade the Futures to make great money on your hedges. Our DXD Oct $24 calls jumped from 0.50 on Tuesday (when I reminded you about them in the morning post) to 0.96 at yesterday's close – up 92% in 3 days! That's a good hedge, especially when you consider the Dow only fell 2.5%, so we got 36:1 leverage on that hedge – and THAT is how we balance our portfolios and protect them from sell-offs.
Even a straight purchase of TZA (also noted in Tuesday's post – why don't you subscribe?) gained 13% in 3 days, 5:1 leverage without even using options. Our SQQQ suggestion popped from $35.26 to $37.13 for a 5% gain (2:1) and FXI shorts also gained 5% but, of course, we were playing the options for much better leverage (all from Tuesday's morning post) in our Live Member Chat Room.
Now all this SOUNDS very sexy but the real point is to have BALANCED positions so we can make money in up or down markets. What we really care about is the COMBINED gain of our STP and LTP, which went from 22.5% for the year last week to 25% this week as we gained a combined $15,000 overall. Had we been totally wrong and the market had jumped instead, perhaps we'd be down 2.5% instead but the hedging keeps us BALANCED and able to CALMLY make adjustments in any market conditions.
More to the point, the gains we make in our Short-Term Porfolio on the way down can flow to the Long-Term Portfolio where we establish positions at a nice, low-cost basis. I mentioned yesterday that we'd been doing some bottom-fishing this week and our Buy List (sorry, Members only) is full of great stocks we can add now that we're back at the bottom of a still-rising channel and we've already started taking advantage of the higher VIX to buy more stocks for a 15-20% discount off their current prices:
When you are not balanced, a sell-off like this leaves you licking your wounds, PSW Members are licking their chops!
Have a great weekend,
– Phil
“Buy Low Sell Higher? Worst sector over the past 90 days on rising channel support. Hmmm… $XLE $SPY “
https://twitter.com/KimbleCharting/status/515572885746774016/photo/1
Ha ha, SGEN up big after hours. I nursed a bunch of SEP calls, covering and uncovering, for six months, but when they hit opex last week I didn't roll them because SGEN looked weak. So Pharmboy you can thank me for this action, with options it's all about the timing, baby, and mine is always "close but no cigar".
(What’s Left of) Our Economy: New GDP Figures Show Record Exports and Imports — and Continuing Big Trade Recovery Drag
http://wallstreetexaminer.com/2014/09/whats-left-of-our-economy-new-gdp-figures-show-record-exports-and-imports-and-continuing-big-trade-recovery-drag/
Peak Debt—-Why The Keynsian Money Printers Are Done
http://wallstreetexaminer.com/2014/09/peak-debt-why-the-keynsian-money-printers-are-done/
Here’s How Much Exposure The S&P 500 Has To The Middle East
http://www.businessinsider.com/sp-500-company-earnings-in-middle-east-2014-9
Oversupply Pressuring Coal Producers, But Bottom Near?
http://www.valuewalk.com/2014/09/oversupply-coal-producers/
>>NFLX The 2015 $420/380 bear put spread is $23.50 and you can sell the $500 calls for $23 for net .50 on the $40 short spread.>>
I remember when this sounded so juicy …
A $60 trillion global-warming gamble in a $75 trillion GDP world
http://www.marketwatch.com/story/a-60-trillion-global-warming-gamble-in-a-75-trillion-gdp-world-2014-09-26?siteid=rss
Has Capitalism Reached A Turning Point?
http://www.forbes.com/sites/stevedenning/2014/09/26/has-capitalism-reached-a-turning-point/
How Philosophy Makes You a Better Leader
http://blogs.hbr.org/2014/09/how-philosophy-makes-you-a-better-leader/
Finding Entrepreneurs Before They’ve Founded Anything
http://blogs.hbr.org/2014/09/finding-entrepreneurs-before-theyve-founded-anything/
Workers Don’t Have the Skills They Need – and They Know It
http://blogs.hbr.org/2014/09/workers-dont-have-the-skills-they-need-and-they-know-it/
Ken Burns on “The Roosevelts” and American Leadership
http://blogs.hbr.org/2014/09/ken-burns-on-the-roosevelts-and-american-leadership/
Why major creative breakthroughs happen in your late thirties
http://qz.com/177694/why-major-creative-breakthroughs-happen-in-your-late-thirties/
How Apple Pushes Entire Industries Forward
http://blogs.hbr.org/2014/09/how-apple-pushes-entire-industries-forward/
Have Economists Been Captured by Business Interests?
http://blogs.hbr.org/2014/09/have-economists-been-captured-by-business-interests/
If Your Kids Get Free Health Care, You’re More Likely to Start a Company
http://blogs.hbr.org/2014/09/if-your-kids-get-free-health-care-youre-more-likely-to-start-a-company/
The Best Leaders Are Insatiable Learners
http://blogs.hbr.org/2014/09/the-best-leaders-are-insatiable-learners/
damnit Phil // I knew you had something on the side ….
Since it's the weekend, a political piece about Islamic State I thought quite good: that it is entirely distinguishable from fundamentalism in a historical sense.
http://opinionator.blogs.nytimes.com/2014/09/03/isis-is-a-disgrace-to-true-fundamentalism/?_php=true&_type=blogs&_php=true&_type=blogs&_r=1
I own 300 shares of SGEN bought at around $34. I recently sold Oct '14 $44 calls thinking it probably wasn't jumping in the current environment. So, since I have never experienced a call option expiring above my strike price, what is the likely scenario if it finishes on Oct. 18th at say $45? Will it definitely be exercised. maybe exercised, or probably not? Anyone? Thanks for any help and if there is anything I should do to prepare or a strategy I should know about, feel free to shout it out!
craig exercised, the computers take every penny.
Well, it's the Post, but you never know…. http://nypost.com/2014/09/26/tapes-showing-meek-oversight-of-goldman-are-about-to-rock-wall-street/
craig
If SGEN is above $44.01 at the close of business on Friday of opex, your 300 shares will (definitely) be sold at $44.00. Prior to opex there is always a very slight possibly that the owner of the call could exercise his right to acquire your shares at $44.00. Usually, that only happens if there is a dividend involved.
thanks stockbern.
I may be the only one that can honestly say I exercised options for as low as $.10. I called the broker, he had no idea how to do it, in NYC. I think he was about to die but I was very calm and asked, "Wasn't it obvious why I did this 3 days ago?" He did get it done. That was before programed trading.
Phil / GPRO
Yes, its so bad it's finally peaked my interest. I've read all the previous threads I could find ( have no idea what Russell is doing ) but I'm trying to construct a LEAP play.
I understand the theory on the 5% rule and turning a bad buy into a 'good sell' –
I mentioned a beginning salvo – can you comment on it this weekend when you have time ?
My mind goes // bull call spread, sell expensive calls.
Thoughts ?
Phil,
Thanks for the great ideas on the ABX option workout. Opens up interesting possibilities. My remaining question has to do with the macroeconomics of gold and the timing of entering a position. The 2013 divergence between gold and money supply I assume was and is due to QE and the decreased velocity of money. That being the case, wouldn’t gold continue to diverge from the money supply (Big Disconnect) until the Fed really does stop printing and really does taper ? How realistic is that in the current economic/political environment? Until the velocity of money increases (due to a much stronger economy) wouldn’t inflation and gold be expected to remain at depressed levels? If my reasoning is correct wouldn’t the first concrete indication that the FED is about to reverse course be the trigger to enter gold? Just looking for a light on the other side of the swamp.
Thanks again
DirecTV shareholders on Thursday voted to approve AT&T's offer to buy the satellite TV company for $48.5 billion. DirecTV said 99 percent of shareholders voted in favor of the deal.
http://www.cnet.com/news/directv-shareholders-ok-at-t-takeover-deal/
Question on Delta and Hedges.
I used to use the greeks as a measure of my exposure to market moves. Delta would tell me how long or short I am, vega would be my exposure to vol increase, etc.
Now with things like SQQQ, if you are long SQQQ it will show a long delta, even though it's actually a negative effect on delta since it's an inverse ETF.
Anyone have any ideas how to deal with this?
Raytheon, my old employer is drooling over this terror and Russia stuff. Missiles to attack and defend.
Who win this non-war? The military industrial complex!
http://finance.yahoo.com/news/raytheon-links-polands-wb-electronics-101125516.html
Burr // SQQQ
no idea : .? Thats why I try to gauge the 1% – 5% dips and pops. Even that is a moving target because of Theta, but it will give you a rough idea of the reality of your ports reactions.
My problem is I'm overweight in a number of stocks, so if KKR or NLY busts, my ports are all screwed up anyway.
Thanks for the grub info – did I tell you I'm an ex-chef ? Thats why you sent it ? Get me some comps and I'll gladly go and give you a private review. I don't tend to get up into the Embarcadero much because of the tourists, but it can be a goldmine for churn and burn mark up.
Next time you're in town I'll take you to some of the local favs.
JJ
@wombat
I used to live in SF for 10 years before I left to "travel" the world…. and end up in FL running a food truck 🙂 So at least I know the old "hip" spots.
I didn't know you were a ex-chef, but I'm trying to tell all the people I know that live in SF about it. We partnered with the GM that made Delarosa and Lolinda so big. It's not on the Embarcadero. It's right on Chestnut St in the Marina. Here is the location : https://goo.gl/maps/DPru4
We just got a really good review from Michael Bauer of the SF Chronicle. http://m.sfgate.com/restaurants/diningout/article/Causewells-Bold-flavors-at-new-Marina-spot-5767397.php
If I could get you some comps I would, but since I'm not in town it's hard to do. If I was in town, no prob. I have a house acct. Although I'll email my man.
Wombat / irrationality
There are a few groups ( my number is 28) that are using huge investments in mathematicians, algorithms, computers, have political influence and are living out there as common citizens, and they are the group that is controlling all this weird without rational explanation events.. they are not GS, CS, etc. they are free.
Perhaps a is "reloaded" version of middle age conspiration of freemasonry societies, but for me now, a very very few individuals controlling $ 100 B each, are controlling the show in the markets….and they are over all the old style market practices
Phil / ABX.TO – In one of my restricted accounts (can only do covered calls), I have ABX.TO shares at $19 covered by the Jan/15 $19 call (1.80 now 0.44). I want to roll the call but not sure what I need to look for.
I was thinking of rolling to the Jan/16 $17 call at $2.50 dropping my breakeven to $15.14 (19-1.36-2.50). If I get called away at $17 that's still a 10% gain ((17-15.14)/17). And I was thinking that when ABX starts to turn around, I can always remove the cover but in the meantime I'm protected for another 10% drop and improved my delta on my call with the roll.
If you have the time, could you give me your advice and input on what I'd like to do vs what would be a better option? Thank you.
GPRO/Wombat – Though wrong so far, I still like our play of the short bear call spread covering the short calls, not a long bull call spread.
NFLX/Wombat – They are still below $500, aren't they? The idea would have been to follow the rules and roll out the Jan $420 puts (now $18.90) BEFORE they fell below $23.50 (the net of the spread) to preserve their value while waiting for the short $500 calls (now $12) to expire worthless. Nothing is "juicy" if your plan is to just sit there and stare at it with your fingers crossed – as if making a trade incapacitates you from making changes when the conditions change.
Also, I'm surprised you caught on to my hobby – I thought the disguise would have worked…
ISIS/ZZ – I don't know why more Muslims don't speak out against these guys. It would help Westerners understand that there is a difference and their actions are not condoned.
SGEN/Craigs – You have to check with your broker as some will net out a spread and some will not. If you have shares and a spread, they will likely call your shares. For the sake of a nickel or dime, I would rather get out of things just before the close if I'm not sure as the hassle of an unwanted assignment isn't worth it. Even TOS, who is really good about that stuff – won't put that policy in writing, so you just have to hope they cancel them out, which they have always done in my experience.
Goldman/ZZ – That's a major scandal – see today's news.
ABX/Pfehlm – At $15.24, you might want to give ABX a chance to come back a bit before re-selling. They came off $15 last November and hit $21 in Feb. If you sell the 2016 $17 calls for $2.50, that's 5 quarters at .50 each you have to gain if ABX stays below $17 but that's also AFTER you buy back the short Jan $19s (which look like 0.16 to me, not 0.44). Meanwhile, if you are not restricted from having a bull call spread, I would point out that you can get a 2017 $10/17 bull call spread for $3.70 and that's net $13.70 and you get 100% of the upside to $17 but you take $11.50 off the table.