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Flip Floppin’ Friday – Futures Fly as Fear Fades

obama hugs nurseNothing came of yesterday's Ebola hearings

Here's a picture of President Obama hugging it out with one of the nurses that treated one of the Ebola patients – a strong image for the people as calmer voices begin to prevail – on that front at least.

Markets were also boosted by dovish talk from the usually hawkish Jimmy Bullard, of the St. Louis Fed, who said the Fed should consider delaying plans to end its bond-buying program at the end of this month to halt a decline in expected inflation.  This is what it sounds like when Doves cry at the Fed and, like Prince's mother, the markets are never satisfied but, for this morning at least – we're taking back those weak bounce levels that we told you we'd take back by Friday.  

“The recovery from the lows after Bullard spoke yesterday is another reminder how addicted markets still are to liquidity,” said Deutsche Bank strategist Jim Reid.  “The Fed can certainly help markets but perhaps we really need the ECB to step up a gear for a true recovery,” he added.

SPY DAILYStill, manipulated or not, this gives us two nice reversal days on strong volume and we couldn't be happier as we flipped very bullish in our Short-Term Portfolio and should be able to take full advantage of this rapid recovery.  

Whether or not we maintain that bullish stance into the weekend depends on how our bounce levels hold up today (see Tuesday morning's post for our amazingly accurate predictions of the week's action).  

Keep that in mind when I tell you there is nothing particularly bullish about hitting the weak bounce on the Friday of a drop week – it's merely better than the alternative of FAILING to make those weak bounce lines.  That would have been BAD!!!  Meanwhile, those of you who took our FREE Trade Idea from yesterday's morning post to go long the Russell at 1,050 (the same line we were watching on Tuesday) are now sitting on $4,000 PER CONTRACT gains and I do so hope you are not greedy and set your stops at the 1,090 line.  

We will be doing a LIVE Futures Trading Workshop at our Seminar in Las Vegas on Nov 9th and 10th – you can find out about joining us HERE (last 20 spots) - or, of course, you can become a Member and join us every day for all sorts of trading fun.  

Yesterday, in the morning post (which you can have delivered to you pre-market every morning by SUBSCRIBING HERE), I said:

As we caught a great bounce from 1,040 on /TF(Russell Futures) back to 1,070 (+$3,000 per contract) on yesterday's rally we've been going back to that well at 1,050 this morning but, so far, only picking up $200-400 as /TF bounces between 1,050 and 1,054.  Still, as long as that line holds – I like it for bounces  

As you can see from the /TF chart above, we continued to bounce along that 1,050 line until 9:35 when we finally took off and then right to 1,070, which held well enough and then on to 1,080, wich held into the close (+$3,000 per contract already) and then, for the extra-brave, a bonus $1,000 per contract this morning at 1,090.  We don't get trade opportunities like this every day but, when we do, we take them.  

For the Futures-challenged, in our $25,000 Portfolio, we had the TNA (ultra-long Russell) Oct $58/60.50 bull call spread at 0.85 from last week's Live Member Chat Room and we picked up 5 of those for our $25,000 Portfolio and 30 of them in our Short-Term Portfolio.  When the Russell dropped down to our target low, I called for an adjustment – RIGHT IN THE MORNING POST – to roll to a more aggressive Nov $56/63 bull cal spread at $3 on the $7 spread and, this morning, that spread should be $6 in the money (up 100% in 3 days).  THAT IS HOW YOU HEDGE! 

Volatile markets are FANTASTIC – you can make ridiculous amounts of money with options and you don't have to use the options to take on risk – your HEDGES can make you a fortune.  But only if you learn to BE THE HOUSE – Not the Gambler!  

Have a great weekend, 

- Phil


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  1. Oil Lines

    R3 – 89.83
    R2 – 87.33
    R1 – 84.78
    PP – 82.28
    S1 – 79.73
    S2 – 77.23
    S3 – 74.68

  2. Good Morning!

  3. From Bloomberg, Oct 17, 2014, 8:28:32 AM

      Oct. 17 (Bloomberg) — Strategas Chief Investment Strategist Jason Trennert discusses the global selloff and his investment ideas on “Bloomberg Surveillance.” (Source: Bloomberg)

    U.S. stock-index futures rallied on speculation central banks will support economic growth with more stimulus, while Morgan Stanley and General Electric Co. reported better-than-estimated profits.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  4. From Bloomberg, Oct 17, 2014, 8:49:33 AM

    Roofers work on a house under construction in Louisville, Kentucky. Photographer: Luke Sharrett/Bloomberg

    New home construction rose in September after slumping a month earlier, indicating halting progress in the U.S. residential real-estate market.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  5. From Bloomberg, Oct 17, 2014, 6:59:13 AM

    Oct. 17 (Bloomberg) — JPMorgan Global Market Strategist Anastasia Amoroso says economic pressure is building on Russian President Vladimir Putin. She speaks to Jonathan Ferro on Bloomberg Television’s “On The Move” as Russian currency-market interventions that have topped $13 billion are failing to stem the ruble’s slide as oil tumbles. (Source: Bloomberg)

    Russian currency-market interventions that have topped $13 billion are failing to stem the ruble’s slide to unprecedented lows as oil trades near the weakest in four years.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  6. From Bloomberg, Oct 17, 2014, 5:00:01 AM

    The rapid drop in oil prices cut more than $20 billion from the price of some of the industry’s best assets. That may be enough to attract buyers.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  7. From Bloomberg, Oct 17, 2014, 6:00:06 AM

    Oct. 17 (Bloomberg) — Niall Quinn, managing director at Eaton Vance Management, says "there is more room for appreciation of the dollar, especially relative to the euro." He adds that the European Central Bank will be "willing the euro down." He speaks to Mark Barton, Anna Edwards and Manus Cranny on Bloomberg Television's "Countdown." (Source: Bloomberg)

    German Chancellor Angela Merkel and European Central Bank President Mario Draghi aren’t blinking yet.

    To read the entire article, go to

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  8. From Bloomberg, Oct 17, 2014, 8:49:03 AM

    West Texas Intermediate crude extended its rebound from below $80 a barrel as Goldman Sachs Group Inc. said the market isn’t oversupplied. Brent advanced in London.

    To read the entire article, go to

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  9. From Bloomberg, Oct 17, 2014, 8:30:05 AM

    The number of supertankers sailing toward China’s ports surged to a nine-month high amid speculation an oil-price slump is encouraging the world’s second-biggest crude importer to accelerate purchases.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  10. From Bloomberg, Oct 17, 2014, 8:36:42 AM

    European stocks climbed the most in more than seven months, ending their longest losing streak in 11 years, as an ailing euro-area economy increases pressure on policy makers to provide more stimulus measures. U.S. stock-index futures also rose.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  11. From Bloomberg, Oct 17, 2014, 8:30:02 AM

    Businessmen walk by a homeless man in New York City. Photographer: Spencer Platt/Getty Images

    Federal Reserve Chair Janet Yellen said she’s “greatly” concerned by the most sustained rise in U.S. wealth and income inequality since the 19th century, while declining to offer any policy prescriptions.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  12. From Bloomberg, Oct 17, 2014, 8:18:51 AM

    An employee works on a Rolls Royce Trent 900 aircraft engine, manufactured by Rolls Royce Holdings Plc, as it sits beneath the wing of an Airbus A380 aircraft on the assembly line in the Airbus Group NV factory in Toulouse, France. Photographer: Balint Porneczi/Bloomberg

    Rolls-Royce Holdings Plc (RR/) said sales will decline this year and could fall again in 2015 as a worsening economic situation prompts clients to delay orders and sanctions over the Ukraine crisis stall Russian contracts.

    To read the entire article, go to

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  13. I saw a chart comparing today to 2011 correction yesterday evening and can't find it.  today we are heading back up to complete right shoulder as we did in 2011.  it was interesting comparison.  anybody have it and can post it or the link?  thanks. 

  14. From Bloomberg, Oct 17, 2014, 7:23:56 AM

    There’s no mistake that this week has been a wild one for financial markets, living up to October’s billing as the cruelest month for equities.

    To read the entire article, go to

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  15. From Bloomberg, Oct 17, 2014, 9:13:38 AM

      Oct. 17 (Bloomberg) — Russian President Vladimir Putin and Ukrainian President Petro Poroshenko sat on either side of Italian Prime Minister Matteo Renzi at talks this morning also attended by the leaders of Germany, France, Italy. Bloomberg’s Ryan Chilcote reports on “Bloomberg Surveillance.” (Source: Bloomberg)

    German Chancellor Angela Merkel signaled a standstill on talks over Ukraine as European leaders met with Russian President Vladimir Putin in an effort to prevent the war from evolving into a frozen conflict.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  16. From Bloomberg, Oct 16, 2014, 5:14:43 PM

    Oct. 16 (Bloomberg) — Bloomberg “Money Clip” Host Adam Johnson reports on market volatility. (Source: Bloomberg)

    Corporate bond values are swinging the most in more than a year and here’s one reason why: Wall Street’s biggest banks are following the crowd and selling, too.

    To read the entire article, go to

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  17. From Bloomberg, Oct 16, 2014, 8:00:23 PM

    The 27-inch iMac with a 14.7 million pixel display. Source: Apple Inc.

    Apple just released an insanely high-resolution screen with a computer inside of it. Here are the highlights of what you can do with the new iMac, according to Phil Schiller, the company’s head of marketing: edit video and photos, read magazines … um, look at the pretty app icons.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  18. From Bloomberg, Oct 16, 2014, 3:30:00 PM

    Apple CEO Tim Cook during an event introducing new iPads at Apple’s headquarters on Oct. 16, 2014 in Cupertino, California. Photographer: Justin Sullivan/Getty Images

    If you missed the live stream of today’s Apple event, here are 8 images that encapsulate much of what Tim Cook & Co. had to say. Also read what our colleague Tim Higgins wrote.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  19. From Bloomberg, Oct 17, 2014, 8:41:57 AM

      Oct. 17 (Bloomberg) — General Electric beat analysts’ third-quarter profit estimates as cost cutting helped boost margins in the industrial business that Chief Executive Officer Jeffrey Immelt is working to grow. Scarlet Fu reports on “Bloomberg Surveillance.” (Source: Bloomberg)

    General Electric Co. (GE) beat analysts’ third-quarter earnings estimates as Chief Executive Officer Jeffrey Immelt squeezed out more costs from the company’s industrial units.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  20. From Bloomberg, Oct 17, 2014, 8:18:33 AM

    Almost half of merchant payment-card terminals in the U.S. will be able to handle more secure EMV-chip technology by the end of 2015, according to an industry group.

    To read the entire article, go to

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  21. From Bloomberg, Oct 17, 2014, 8:02:59 AM

    Rolls-Royce Holdings Plc Chief Executive Officer John Rishton told analysts today, “Wherever you look you see signs of evidence of economic slowdown.” Photographer: Chris Ratcliffe/Bloomberg

    While Rolls-Royce Holdings Plc (RR/)’s gas turbines and Jimmy Choo Plc’s $1,995 peep-toe sandals have nothing in common, today the two companies encapsulated the corporate decline that’s gripping Europe.

    To read the entire article, go to

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  22. From Bloomberg, Oct 17, 2014, 7:20:30 AM

    The European Union should consider suspending euro-area debt rules for up to two years so that growth can recover after the financial crisis, private equity executive Charles Dallara said.

    To read the entire article, go to

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  23. From Bloomberg, Oct 17, 2014, 6:48:58 AM

    Hillary Clinton is drawing large, cheering crowds at virtually every stop as she campaigns for Democrats in the midterm elections. Back in Washington, another audience is equally engrossed, though much less enraptured, by her every word.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  24. From Bloomberg, Oct 17, 2014, 8:45:34 AM

    European Central Bank Executive Board Member Benoit Coeure. Photographer: SeongJoon Cho/Bloomberg

    European Central Bank policy makers said governments must accelerate plans to strengthen their economies or risk derailing the region’s recovery.

    To read the entire article, go to

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  25. Phil,

      Should the naked TNA Oct $60.50 sold calls be closed, or wait until later today?

  26. SPY DAILYGood morning!  

    What excitement – let's keep level heads and watch our bounce levels please:

    • Dow – 15,480 should hold.  Weak bounce 15,824, strong bounce 16,168.
    • S&P – 1,800 should hold.  1,840 (weak) and 1,880 (strong).  
    • Nasdaq – 4,140 should hold.  4,232 (weak) and 4,324 (strong).
    • NYSE – 9,900 should hold.  10,120 (weak) and 10,340 (strong)
    • Russell – 1,050 MUST HOLD.  1,080 (weak) and 1,110 (strong) 

    That's 3 greens added since last night (Dow, Nas, NYSE) and, once you get a green, you don't want to give it back but it's those weak bounce lines that matter today – we need all 5 to stay green to stay bullish into the weekend because a WEAK bounce is not a strong bounce and this isn't day one off the bottom, it's day two – so we can't afford to cut our indexes any slack.  

    Does Cramer just wake up in the morning and repeat my morning post?  

    Oil rejected at $84, just testing $83, too rough to play into the weekend but, of course, I like our long play on USO.  

    Yellen didn't offer anything helpful this morning, which is good because we can get a better idea of whether or not these bounces are real. 

    2011/Terra – We had this in Chart School:

    Click to View

    Clearly we're overbought – the question is how overbought are we?  

    Speaking of overbought – still too many barrels at the NYMEX:

    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Nov'14 83.18 84.45 82.53 83.14 09:30
    Oct 17


    0.44 40984 82.70 83587 Call Put
    Dec'14 82.40 83.74 81.75 82.42 09:30
    Oct 17


    0.47 45376 81.95 322946 Call Put
    Jan'15 81.89 83.28 81.32 82.04 09:30
    Oct 17


    0.54 10521 81.50 161775 Call Put
    Feb'15 81.40 82.87 81.05 81.62 09:30
    Oct 17


    0.53 5463 81.09 54668 Call Put
    Mar'15 81.10 82.50 80.60 81.35 09:30
    Oct 17


    0.59 5466 80.76 113708 Call Put
    Apr'15 80.75 81.90 80.48 80.98 09:30
    Oct 17


    0.50 1776 80.48 40375 Call Put
    May'15 82.00 82.00 80.98 81.02 09:30
    Oct 17


    0.72 847 80.30 31516 Call Put
    Jun'15 80.57 81.86 80.07 80.69 09:30
    Oct 17


    0.52 6293 80.17 139139 Call Put

    Things calm down considerably once April becomes the 4th month (2 months from now) because then it will be easier for them to roll contracts into it.  For now, Dec is a big problem but the front 4 months are only 621,000 – that's manageable on the whole – so don't look for technical pressure on oil prices from the trading desks – it's all about supply and demand now.  

    TNA/Kevin – I'm for waiting, we'll probably flatline here but we might sell off and also, my decision for the $25KP may be different than the STP, because the $25KP is less flexible. 

  27. TNA/Kevin – I just looked.  No way would I pay $1.50 (current price) to buy back the $60.50s with TNA at $61.37 – we KNOW that ALL of that 0.63 of premium will be gone by the end of the day so unless TNA adds 50% to it's already $1.20 gain for the day – it won't hurt us and, if it does, then we'll get good money for a roll.  

  28. EGLE –  In case anyone was wondering about the share price today:

    If you were watching Eagle Bulk Shipping (NASDAQ:EGLE) trade today, your jaw probably hit the floor. The ticker is showing the stock up a whopping 2,223.53% following its restructuring news. You would have gotten rich if only you loaded up yesterday, right? No, not really.

    The old common shares were cancelled and replaced with "new" common shares. Old shareholders got a 0.5% equity interest plus 7.5% in warrants. 0.5% equity of the new share structure is the mathematical equivalent of a 1 for 107.6 reverse split before dilution and warrants. For example, if you owned 100,000 shares of Eagle Bulk Shipping yesterday you now own only 929 shares today.


  29. Butterfly – Phil, I think you outlined all the rolls, except we were waiting to do WMT today, yes?

    WMT – These are actually on track since we sold $75 calls and $77.50 puts so we'll let it play out until Friday on this one. 

  30. Think it's time to get out of the Nov SQQQ hedges if we look to bit stablized?  Maybe PSW did get out of them and I missed it..

  31. I'm still a little confused by my EGLE puts.  I went from having 40 sold Jan 16 $2.50 puts at $.80 to 20 sold Jan 16 $2.50 puts (non-standard) at $1.60, and my account is showing another $575 in loses today after $1,875 yesterday.

    But in reality, if I sold $2.50 puts at net $1.60 ($.90 a share if put to me) with the stock at $15.98 I'm thinking I am just fine, no?

  32. Burrben

    What's changed? Europe has resolved its issues in one day?  The Ebola thingy is done? ISIS is solved? Putin is happy? ….oh wait, we did find Kim Jong Un! Maybe that's what driving us up? 

    On the other hand, volumes are good.  So, maybe legit turn. I'd give it a week before putting out the "all clear" signals.  Just amazing how quickly things turn. 

  33. TRIP/Phil

  34. So far, this is a bounce, not a turn.. and the bounce might not even hold the day yet. i'm looking forward to seeing where we are near the end of day.

  35. Oops, I hit send to quick. I was trying to ask about TRIP which is down 30% from it's July highs. If we discount the Ebola fears as something that will be forgotten in another few weeks and people start to feel the effects of lower oil prices and decide to take a vacation, perhaps there is an opportunity here to make a buck or two. So, since I do love TRIP and use it all the time I was wondering if you could advise me on a BCS for it? Thanks

  36. It's interesting when trying to initiate new trades that the strike prices aren't budging; in fact not even being posted as an ask price. Dead cat bounce I would say. Thinking of a Tsla short & rolling down on these calls that are gaining no premium even though the markets are supposedly "up."

  37. $DJI/Phil – I know you do sound rounding and other sizing, and you explained it a bit the other day, but for the DJI I just can't see the weak/strong bounce lines you are calling out.  I'm drawing in weak at 16150 and strong at 16450.  What am I missing?

  38. sound rounding.. oops..  "some rounding"

  39. phil/anyone who knows technical analysis --

    what significance do you place on chart gaps?  

  40. Craig Trip still a bit early to say we reached a bottom but if you wish to put your toe in the water

    Jan16 BCS 70/80 for 5.25 and you can cover the cost by selling a Jan16 60 p for 5.50 even given you a little credit from there wait till the dust has settled and start selling  1/2 monthly calls

  41. Good Morning:


    Burr  ,  In my  opinion the market is not reacting to political or social issues ( except perhaps oil which is being used as a weapon against Russia ).

    Technical correction with medium – long term uptrend?… let´s hear Phil.

  42. Wow, big surge and reverse -shaking out weak hands in every direction!

    EGLE/Rev – I think the warrants are key.  If EGLE holds up, they'll be worth a good amount.  You get one share of EGLE per 100 old so the 2,200% gain is only a 22% gain from the old price (0.60) but you also have 17 warrants per 100 old, so it all depends on how those end up converting (long wait to find out).  

    WMT/Butterfly, Rev – Yep, we wanted to see if they came back a bit but not so far at $73.50.  That means the short calls go worthless but the short $77.50 puts we owe $4 on – so actually worse than Weds on that one.  Fortunately, it's just 5 contracts and we can roll out to the Nov $75 puts and calls at $2.45 + $1.08 ($3.53) and see if they can't claw back a bit.  

    SQQQ/Burr – We cashed in the long end of most of those bull call spreads on Wednesday and I discussed the fact that we did it in yesterday's morning post.  You HAVE to take advantage of things that go so far your way so quickly – don't wait for me to tell you – especially if you might miss it.  .  

    Burrben (basic) 


    I'm so confused.  I'm adding hedges to the downside, trying to play the upside bounce, long oil, long a bounce via TNA.  

    I need some adderall to figure this out.  One thing I know is my portfolio keeps going down a bit each day….

    October 15th, 2014 at 11:30 am | (Unlocked) | Permalink

    Confustion/Burr – At the moment, I'm just trying to take advantage of what is hopefully a blow-off bottom.  If not, we are going to be way on the wrong side of this and will need more hedges quickly.  Whenever we make adjustments, we need to WATCH our portfolios and see if they had the desired effect.  Intra-day, it's tough as the price of options fluctuates wildly but we should now, in the STP, be very bullish and we should be losing money on a dip back to the bottoms.  

    And, as Rustle says – CASH!!  What did we accomplish today in the STP with the above moves?  We now have $220,000 in cash (though we are using a lot of margin now with the naked short calls), which makes us flexible and, if the market does move up and those short (bearish) calls expire worthless, we get to keep that $220K. 

    EGLE/Rperi – No, there are the warrants and stuff in the split adjustment – you need to speak to an options specialist at your broker and he will probably need to contact someone smarter than he is to answer your questions.  It's possible they are not even calculating things correctly yet.  

    Good points DC.  

    TRIP/Craigs – I do like the travel idea but why TRIP?  EXPE is the best of the bunch and you can take advantage of the dip freaking people out to sell the 2017 $55 puts for $7.50.  TOS says my margin requirement to sell 10 of those for $7,500 is just $5,600 (non-PM) so that's like FREE MONEY with a 115% upside to margin in 26 months.  Worst case is we own 1,000 shares of EXPE for net $47.50, which is about 1/2 of the year's high and another 40% below the current price.  Let's do 10 in the Income Portfolio!

    See, this is how we build our long-term positions, we collect money up front by OFFERING to buy a stock we REALLY want to own if it gets ridiculously cheap.  If not, we keep the money and, if so, then we can sell puts and calls against it to reduce the basis further and, meanwhile, we make 5% a month on our margin while we wait.  

    TRIP/Craigs – I see that you love them so we'll ignore the relative 2x p/e to EXPE and assume you think they are worth the risk.   Their options only go out to 2016 but you can sell $67.50 puts for $8 and net $59.50 and that's 25% off in one year vs. 40% off in two years for EXPE – so not too bad if you really think you'd rather own TRIP. 

    Dead cat/Pirate – I'm just watching earnings now – should we or should we not be higher than last year?  That's the question for the rest of November.  

    DJIA/Scott – From Tuesday's morning post:

    • Dow 17,200 (long-term levels ignore spikes) less 10% is 15,480.  The weak bounce line is a 20% retrace of that 1,720-point drop (which hasn't happened yet), so +344 to 15,824 and a strong bounce is another 344 unit up to 16,168.  So, if the market is to be stabilizing, 16,168 should hold.

    Notice how the 5% line was already confirmed as support back in Aug so we had at least confidence that the 10% line at 15,480 would lead to a bounce of 20% of the 1,720-point drop (weak) to 15,824 or, probably a strong bounce (40% retrace) back to 16,168 and, of course, a bounce off the strong bounce line (after testing the weak bounce, no less) was a very good indication that we'd at least retest the 5% line at 16,330 before turning back down.  See – simple!  blush

  43. By the way, ignore spikes means we'll also throw out the last 3 days' action if we stay over the 5% line and consider it bullish consolidation along that line – which would keep us very bullish in our long-term outlook.

  44. Gaps/Toe – The concept that the "need to be filled" has some validity but it does depend on the circumstances.  Sometimes, something fundamentally changes (like earnings) and the stock gaps up or down because it was previously mispriced (NFLX) – that in no way means it will ever get back to the old price.  As with all TA, something to look at but nothing to hang your hat on.  

    Issues/Advill – The Fed is still on our side and may not tighten again until next year – same as it ever was, on the whole…

  45. phill i was wondering if you had any thoughts on seadril  sdrl… 

  46. I'm about to sell calls into this rally on some stocks.  Don't think it will sustain itself.  But will give myself plenty of room on the upside just in case..  Hoping GPRO could get back into the 80's before their next earnings so I can write calls on that again.

  47. Bfly  did anyone get the TXN 2016 50C roll to 2017 45C for $1.90?

  48. part of my rationale for previous comment is McClellan was a -29 coming into today and should be +100 after today.  Plenty of room to go down on that.

  49. SDRL/Tri – They are down with the sector and the market but it's not unwarranted as day rates for rigs are down to $350,000 per day (but you already know that, because you are looking into SDRL) from $450Kbd, which, like a gold miner, cuts SDRL's profits by about 50% as it does cost them $250,000/day to operate the rigs.  With SDRL – that also imperils their dividend and you know what happens when companies announce dividend cuts…  

    Those nasty Europeans have finally stopped trading and, so far, we're still hanging on to big gains.  

    NOW we may as well buy back those TNA $60.50 calls for $1 in the $25KP and we can cash in our long Nov $56 calls as well ($8.20) as those are great gains for a small portfolio.  In the STP, we were fancier but same buy back of short Oct $60.50s but there we can leave the Nov $56/63 bull call spread because it's too risky to leave the short $63s naked and the spread is just net $3.60 out of $7 so not worth cashing yet

    Calls/Rustle – I doubt we'll rally all the way to the top again and that means there's a lot of unrealistic pricing on calls but, don't forget earnings.  




  50. This is not covered by our Corporate News, of course:

    Morales’s enduring popularity is a result of his extraordinary socio-economic reforms, which – according to the New York Times – have transformed Bolivia from an “economic basket case” into a country that receives praise from such unlikely contenders as the World Bank and the IMF – an irony considering the country’s success is the result of the socialist administration casting off the recommendations of the IMF in the first place.

    According to a report by the Centre for Economic and Policy Research(CEPR) in Washington, “Bolivia has grown much faster over the last eight years than in any period over the past three and a half decades.” The benefits of such growth have been felt by the Bolivian people: under Morales, poverty has declined by 25% and extreme poverty has declined by 43%; social spending has increased by more than 45%; the real minimum wage has increased by 87.7%; and, perhaps unsurprisingly, the Economic Commission on Latin America and the Caribbean has praised Bolivia for being “one of the few countries that has reduced inequality”. In this respect, the re-election of Morales is really very simple: people like to be economically secure – so if you reduce poverty, they’ll probably vote for you.

    TO NOBODY’S GREAT surprise, Bolivia’s president, Evo Morales, has won a third five-year term by a landslide majority. It’s no surprise because Bolivia’s gross domestic product (GDP) has tripled since he took office in 2006. The number of people living in poverty has fallen by a quarter, even the poorest now have the right to a pension, and illiteracy has fallen to zero. Of course he won.

    What has happened in Bolivia seems as miraculous as what happened in Brazil, where another left-wing president, Luiz Inacio “Lula” da Silva, took office in 2003. The economy started growing at five percent a year, unemployment fell steeply, and some 40 million Brazilians, almost a quarter of the population, were lifted out of poverty. Lula’s former chief of staff and successor as president, Dilma Rousseff, is also likely to win another term in office.

    No credit, no cash, no bank account? There’s still a place to go shopping, but it comes at a price.


  51. Now Mark Cuban is tweeting NFLX higher:

    I'm buying NFLX stock. At half of YHOO, 10B<Twitter and small pct of major media companies, Someone will try to buy them.

  52. My reply:

    1. Not going to change our short Mark, made $100M last year (going down) and made $1.4Bn – That's why they are worth more!

  53. Love when billionaires decide to manipulate stock prices

  54. Phil/Butterfly Portfolio..

    I would like to add another company to my Butterfly it the right time?

    What company would you recommend and what strikes would you use.Thanks.

  55. I think Cuban broke the rally – reminded people what manipulated BS it all is! 

  56. Butterfly/DM – The trick is to find a stock who's short-term volatility is worse than it's long-term V so you can take advantage of selling front-month contracts.  VLO can be fun because they just had a nice sell-off to $45 and the 2016 $35 puts are $2.65 and the 2016 $55 calls are $2.95 so we can buy 10 of those and sell the Nov $47.50 calls for $1.20 and the $45 puts for $2.20 and that's $3.40 back on $5.60 in 35 days (60%) – let's add 10 of those spreads to the Butterfly Portfolio.

  57. If Mark Cuban now tweets "Hey, just kidding, wouldn't touch NFLX with a 10 ft pole" and stock drops, is that an SEC violation or no biggie?

  58. doro

    Bfly  did anyone get the TXN 2016 50C roll to 2017 45C for $1.90?

    not me….. 2.90 might do it today

  59. Mark Cuban just made 16 points on his stock.  I'd be a billionaire too pretty quickly if I had that power.

  60. YHOO/Phil- What is the outlook for YHOO at this point. The Alibaba IPO doesn't seem to have done much for them price wise, but they also didn't go way down this week, so what will be the catalyst for them to move higher at this point?

  61. These guys can't be underestimated – they are sinking billions in R&D:

    Google isn't a search company or a software developer. Its real business is advertising. Most of the money flowing into Mountain View (and there's quite a lot of it: $16.5 billion this quarter to be exact) comes from ads. The company could simply build up a war chest or snatch up some more startups, but clearly its eyes are on the future. With Larry Page at the helm Google has branched out beyond browsers and mobile operating systems to delivery drones, internet-delivering balloons and whatever Glass is. A year ago Page told investors he wanted to spend more on "speculative" research and development projects. At the time its R&D budget had just seen a $1 billion growth over the previous year. Since then Google has added nearly another $2 billion. Over the first nine months of 2014 has pumped $7 billion dollars into R&D projected, including $2.7 billion in the last quarter alone. Obviously, not all of that money is being funneled into Google X, but it's clear that the experimental arm is adding quite a bit to the company's expenditures. Loon and Calico aren't just about generating goodwill though. Clearly the more consumers Google can reach and the longer those consumers are alive, the more ads it can serve.

  62. While I am asking, I sold shares of MO right after it went ex dividend while it was up near it's high of $47 in an IRA account. It has pulled back only slightly to the low to mid $45 range right now. My question Phil is if I want to get back in is there any reason, considering the substantial dividend they pay, to buy a spread as opposed to stock in an IRA? I still think this stock can go much higher over the next 5 years if more states legalize marijuana and they move into that arena. Or, should I wait and see how the legalization issues play out for a while and just stay cashy for a while longer? 

  63. Phil/WMT

    Is the WMT Butterfly still an entry at this level Phil?

    What 2016 strike band range would you use now?

    Thanks on the VLO info Phil.

  64. Google/2B R&D: Maybe google wants to go after GreenCoin…

  65. I think Mark Cuban and Carl Icahn just tweeted that GOOG will be buying NFLX and AAPL will be buying TSLA.

  66. But no one is buying SODA

  67. Tablets are just getting ridiculously overpowered:

    With that in mind: the 'HTC Volantis' (read: Nexus 9) scored 1,903 in Geekbench. To put that in context: an entry-level 2012 Mac Pro, a machine designed for professional-level media editing and retailing for over a grand, scored a 1,925. Heck, my Macbook Air barely scrapes over the 2,000 mark. In tablet terms, that's nearly unheard of. The Nexus 10 that it's replacing scores 879, and in Geekbench world, double the score means double the performance. Even the year-old iPad Air only squeaks in at 1,085.

  68. Pharm- Do you know anything about GALE. They had a scandal last year about price manipulation with a stock promoter and the CEO who was implicated has since resigned . Is this a dead company now, or are their products NeuVax, Abstral, and Zuplenz real enough to overcome the problems they have been having. I own the stock in an IRA, so there is no tax benefit in taking a loss, but is it worth tying up the remaining money I have stuck in this one to wait for a turnaround? Any knowledge you might have would be appreciated.

  69. Hog is reporting Tues-ridiculously low earnings estimate of .60/ With consumers strapped I wonder if it will be a miss. They are at 58.35 now. Low was 54.22 on the 15th-high vol today. Can't decide which way this time.

  70. Quote of the day:

    David Varadi, “The bottom line is that the longer an investor experiences a market state, the more comfortable that they become that it will last forever.”  (CSSA)

  71. SEC/Rustle – Well, the fine for manipulating the markets on thousands of stocks for years is $1M, so I guess it's about $100 per instance – tops.  

    TXN/Butterfly, Gerry – 2016 $50 calls have been going for $1.78 for last two days and 2017 $45s just traded at $4.50 so that roll is $2.72 now.  On Monday, the last transaction on the 2017 $45 calls was $3.35 at 10:20 am but the next trade didn't go off until Thursday at 11:30 – a full day after I made the call on Wednesday at 1:40, when was at a low for the week.  Of course you won't be able to fill at the same price AFTER a stock pops 5%.  

    We wanted to make an aggressively bullish roll BECAUSE it was a good deal at the time.  What you need to take away from this is WHY we made that call when we did because, as you can see, the 2016 $50 calls were $1.45 at the time and now went up to just $1.75 but the more aggressive calls we wanted to roll to jumped from $3.35 to $4.50 – a much more profitable position.  

    If no one managed to make the roll, then we'll simply not put it through and wait for the next good opportunity to improve our position. 

    Maresk/Scott – Wow, that's pretty drastic.  Interesting to see if it sticks.  China must be stocking up on something.  

    YHOO/Craigs – BABA is at $89, which is $220Bn, which is higher than our estimated $85 that puts YHOO at about $45 and, in the STP, we have the April $32/39 bull call spread at net $3.95 with the short $37 puts at $3.10 for net 0.85 on the $7 spread so we'll get back $21,000 on our $2,550 investment if YHOO holds $39 into April expirations.   That's still a fantastic spread.  

    The "catalyst" (not that we need one) is for someone to eventually do the math on how much cash + BABA stock YHOO is holding.

    GOOG/StJ – Yep, I wish I had $7Bn of OPM to play with like Sergey and Larry!  Nothing against GOOG – I like them and I like what they are doing but not everything people put R&D money into pays off and not in the short run almost ever.  IBM spends $7Bn a year on R&D and once in many years they have something to show for it – GOOG simply doesn't have the experience and discipline to ramp up R&D that quickly but there may be something to be said for the shotgun approach they are taking – maybe…

    /TF back to the 1,080 line – hope it holds. 

    MO/Craigs – Actually, when a stock pays a big dividend it's usually not as good to buy a bull spread because they are siphoning off the profits that would likely propel the stock higher.   The dividend on MO is $2.08 and the stock is $45.45 so 4.5% dividend but you can sell the 2016 $40 puts for $2.50 and your net entry is $37.50 so your return on that (since it's an IRA and I assume full margin) is 6.67% – so way better AND you have $8 of downside protection (almost 20%) for free.  Now you could buy the stock for $45.45 and sell the 2016 $42 calls for $4.65 and that reduces your basis to $40.80 and then the $2.08 dividend drops you down to $38.72 and, if all goes well and you are called away at $42, you make $3.28 vs $2.50 for taking not that much more risk.  Those are the things you need to weigh out when looking at stocks like that.  As to a bull call spread, the 2016 $35/42 bull call spread is $6 and the $37/45 bull call spread is $5.60 so those are useless by comparison.  

    On the other hand, if you think they can go "much" higher – then you forego the dividend and buy the 2016 $42s for $4.65 and sell the $47s for $2.20 for net $2.45 on the $5 spread and you make 100% at $47.  Since that spread makes 100% vs 8% on the $3.28 spread, you will make as much money using 1/10th the capital with the bull call spread if you are right and, if you are wrong, you only have 1/10th the capital at risk in a hedged entry you can hopefully adjust in a drop.  

    WMT/Butterfly, DM – Yes, I like it because WMT, on the whole, is going to stay between $70 and $80 or maybe $65 and $75 if we assume the worst so that means that we can just keep selling premium in between and rolling the loser.  Our longs are 2016 $80 calls (now $2.25) and $70 puts (now $4.40) with WMT at $74 and we can sell the Nov $75 puts and calls for $3.30, recovering 49% of our long position on the first sale.   WMT's earnings are 11/13 so we'll probably roll before then but let's say we can sell just $1.50 a month in premium – that's 14 x $1.50 = $21 and we payed $6.65 for the spread so we have $14.35 to play with as WMT goes up and down – doesn't that seem like a very good probability that we'll make a profit?  

    Speaking of WMT – I'm liking that enough that I would like to double down on our position in the Butterfly Portfolio

  72. SODA/Rustle – Maybe GMCR will buy them.  

    HTC/StJ – That's really impressive.  Moore's law on the march…

    That's about 10-15 years from now that they'll have the processing power of a human brain in a PC – planned obsolescence indeed!  


    HOG/Pirate – Talking to my brother, I'd stay away from vehicles until we get numbers.  To some extent, HOG is in its own World but it's been a long time since I've seen one of my neighbor's riding friends show off a new bike. 

    Excellent chart, thanks STJ.  

    I'm very disturbed by the RUT not holding up.   Now all we have is a pre-market pop that sparked some short-covering and momentum buying that fizzled out on the EU close and we're only up 1.5% on our indexes with RUT down 0.5% – this can turn ugly if these levels don't hold (16,250, 1,875, 3,800 and 1,080 – already gone).  

    The laggard would be the Dow (/YM), which is a good short below the 16,250 line.  

  73. Rules are Rules so, in the STP, we need to buy back the short DXD Jan $27s ($1.55), the short SQQQ Nov $40s ($4.50) and the SQQQ Jan $40s ($5.50) and that will flip us more bearish quickly as we still have our 100 SQQQ bull call spreads that were covering them.  

    There's nothing complicated about this – we're simply stopping out of our gains.  

  74. Speaking of WMT – I'm liking that enough that I would like to double down on our position in the Butterfly Portfolio

    Phil,are you sticking with the 2016 $70 Puts and $80 Calls on that play?

  75. Phil/Expedia – Phil, after hours when you have a min, can you please explain your last sentence on expedia where you said "in the meanwhile we collect 5% on the margin while we wait" – is that typical? when we sell a put, do we collect interest on the margin? thanks 


  76. Thanks Phil re WMT.

  77. So now, in the STP, we still have bullish plays on USO, FAS, TNA, SLW and YHOO but now we are well-covered in case there is a weekend drop and, since we are protecting $500,000 STP and Income Portfolios, we do like to error on the side of caution.

    WMT/DM – Yes, those are fine with the stock at $74 (and, we think, in the lower end of the range).  

  78. Phil

    What would be a SQQQ bull call spreads 

    to enter today ?


  79. Expedia/Nram – I just mean that we're going to collect 110% of the margin requirement over 22 months so that's 5% per month on average. We don't actually get paid anything other than the fact that the cash is deposited in our account on day one and our obligation (hopefully) deteriorates over time.  This is how rich folks get FREE MONEY – when the Fed is backstopping the market and you can take 20% of your $1Bn and get 5x margin from Interactive Brokers and sell puts that make 5% a month – that's 5% of your entire net worth each month that you're making.   

    Keep in mind, that's dangerous because, if the market crashes the margin will destroy you but if the Fed makes sure it doesn't happen it allows and even encourages that kind of dangerous behavior.  In reality, you have guys like Buffett, who have $50Bn, who do that with 5% of their wealth and make $2.5Bn a year so, even if they lose 100% on their margin – it's only -$5Bn (10%) and he'll still be able to afford Cherry Cokes.  That's why you see the Forbes list grow and grow and grow – those guys know how to BE THE HOUSE!

    SQQQ/QC – Why didn't you ask when TZA was looking good earlier?   I still like the SQQQ Jan $40/50 if you are looking for protection.  It's only $2.90 for a $10 spread that's $2.68 in the money so, essentially, either the Nasdaq is higher in Jan or you get your money back.  Then we have the March $38/45 bull call spreads and those are now $2.50 for the $7 spread but that one is $4.68 in the money to start, so the Nas MUST be higher than it is now or you make money on the spread.  THAT's HOW YOU HEDGE! 

  80. Thanks Phil

  81. phil hope you and your family are doing well .. seems like its been a long week. 

    do you have any thoughts on aapl before earnings?  i feel like you think better buying opportunities will present themselves down the road?

  82. You're welcome, QC.  

    AAPL/Toe – Thanks, it has been a long week, but at least the markets have been exciting.  I really don't know re. AAPL earnings.  In our more conservative Income Portfolio, I couldn't bring my self to take off our short Oct calls (now rolled to short Jan $90 calls) for the 1/2 cover.  I very much like the 2017 $90/120 bull call spread at $10.50 and I also think shorting the 2017 $75 puts for $7.30 is an opportunity you may never see again.  If you want to play it conservatively, I'd go for the bull spread and only add the puts if they go lower and, otherwise, nothing wrong with 200% upside.  

  83. GALE/craig – I see no reason to be in them at all.

  84. So, yesterday I noted 190 on SPY/ 1900 SPX.  Well, that is done.  I am now 100% short.  Nov 180 Ps are very cheap for protection and will not hurt much if they move this up.

  85. Phil,

      I have the Nov SQQQ $35/40 bull call spread for protection. Would it be advisable to roll it to the Jan $40/50 spread you just mentioned a little earlier?

    Thanks in advance

  86. Good analysis of GOP idiocy:

    The House hearing served one purpose, which was for Republicans to go on the record, in their official capacities, calling for a travel ban from certain West African countries. This works for them politically because it allows them to lay the Ebola blame at President Obama’s feet. They know the administration can institute a travel ban, which is politically popular, but won’t, because it would be poor public policy, for the purposes of both tracking the spread of Ebola and for international commerce. The playbook is 1) to fan fears about how we’re all going to die of Ebola as rapidly as possible and 2) claim that the president won’t do anything about it, because he is incompetent, he is lazy, the world is going to hell, we’ve got ISIS and Ebola on the borders, he just wants to play golf and raise money, etc.

    Rep. Tim Murphy convened the hearing, hollered at CDC director Dr. Thomas Frieden, and then called for a travel ban. Rep. Fred Upton, chairman of the powerful Energy and Commerce Committee, said we should have a travel ban, because golly, it just doesn’t make sense not to. Rep. Cory Gardner, running for Senate in Colorado — you know what he called for? Travel ban.

    Dr. Frieden had to explain the myriad of reasons why he does not recommend a travel ban, making him a good public servant in some eyes and an Obama mouthpiece in others. (There’s a strange belief that the Obama administration ignores politically popular positions, such as instituting a travel ban, for political reasons — trying to tamp down fear, etc. This doesn’t make a whole lot of sense. If the Obama administration were doing things for purely political reasons, it would institute the politically popular policy. The politically popular policy just happens to be the wrong one right now.) 

  87. SQQQ/Kevin – Nothing wrong with the Nov spread as it's in the money, so you make 100% unless the Nas recovers further.  If that's your intent – great.  You can ADD the Jan spread (or March) as a layer and that's especially useful if you can then do what we did this week on the spike down and sell your long Nov $35s and leave the naked short Nov $40s – covered by the new spread, of course.  That's the technique we used to drop a bunch of cash into the STP while riding out this bounce and now we're back to bearish cover over the weekend.  

  88. Phil,

      You're a big Who fan; did you know that they are around again? Before you go getting all Tull (Too Old to Rock and Roll) on me, remember the last lines of the song are, "You're never too old to rock and roll, if you're too young to die." I saw them at Nassau Coliseum the last time they were around, a year or two ago, and they were a great show. They did the whole Quadrophenia album + a bunch of hits. Zak Starkey was the drummer and, I swear, he channelled Keith Moon, which is not so surprising as I've read Keith taught him a lot. The bassist was OK, but of course, no Entwistle. Townshend was very good and Daltrey was in fine voice; he can't throw his vocals around with reckless abandon anymore, but I didn't expect him to and he obviously is aware of that as well. Were they equal to the original band as I saw them in the 70s? Well, Duh, no. Were they an enjoyable show and well worth the money? An enthusiastic Yes! The crowd was on the older side, so I didn't feel out of place ( I've got about 15 years on you for reference) and pretty well behaved; no one jumping up and down in front of us or obstructing a seated view. I was sitting mid level seats, by the way, not Orchestra or nose bleed. They compared quite well, with the pleasurable experience of seeing a much younger band, The Killers, whom I saw around the same time with my daughter, although that involved standing the whole show not by choice. I should mention that I'm a big Who fan as well, and have been since Happy Jack, which I still have on 45.

  89. Phil do you like the SPY Nov 186 puts here if this market turns back down? Thanks. Strether

  90. Phil:  I approach this question with some trepidation, not wanting to gainsay your experience.  But……while my SQQQ spread worked out very well this week, thank you -- getting the puts off my back without losing the benefit of the spread was a real teeth-grinder with a scary downside [remember, we lifted a leg]  and I wonder if putting on a straight SQQQ call position at certain times and treating it as a sacrificial cost of business wouldn't be both simpler and, in the end, much less risky to a portolio over all.  Can I ask that? 

  91. Who/Kevin – What about "Hope I die before I get old?"  A bit hypocritical for a band that's 50 years old!  I used to go see these guys everywhere when I was young (and they were young) but, the way my mind works, when I'm watching them, I have a split screen with a dozen previous performances running in the background and not as good is not as good for me – hard to enjoy the moment.  Frankly I think they should just go do a Roger and Pete acoustic tour – something mellow and nice and different.  

    SPY/Streth – I don't like any directional bet where your premium will get chewed up on a move against you.  We could go up or down 5% next week and we know how to roll out of trouble on a bull call spread but a naked put can just kill you if you get it wrong.  Also, I don't really expect much downside – I think we had our sell-off but, with a couple of $500,000 bullish portfolios to protect – you're damned right we're going to hedge bearish into the weekend uncertainty.  

    Meanwhile, RUT is holding 1,080 and /TF is hovering right on that line and the rest are behaving after that little dip below our lines.  Oops, and there's the bell – SAVED!  

  92. SQQQ/ZZ – Of course you can ask that.  As noted to Strether above, what I don't like about straight puts is that you COULD be wrong and, not only that but then the market could just sort of gyrate around and you end up making nothing at all on your longs (the LTP is at 15.7%, for example, about the same as last week after all that) but losing on your hedges – that's not going to work well over the long-term.  

    If you are having problem getting fills or simply following the fast action, try using QQQ instead – it's way more liquid.  Ideally though, you need to learn to REFLEXIVELY take your profits in that manner when a spread goes your way.  What did we do?  We took an SQQQ bull spread, the market fell 5% and we waited and, had it come back – we would have lost a bit.  But the market fell another 5% and then the price of our long calls exceeded the net on the spread while the short calls were only just in the money (despite showing $5 in PRICE due to the sharp move).  So we cashed in our long calls, set up some longer-term bull call spreads to cover a break below the 10% line and, when we got our bounce – we watched our strong and weak lines and stopped out of the short calls with a nice net profit AND, we still have the longer-term spreads for protection.  

    That's the way you do it.  Don't wait for me to tell you to do the right thing – LEARN to do the right thing.  

    Now, that being said, in a market that is toppy like this – there is a valid put rolling strategy called – THE MATTRESS PLAY.   We have not used the Mattress Play since it saved us in the great crash of 2008 BECAUSE – we haven't had a really toppy market since then but now, maybe we can revisit that.  

    So – weekend reading assignment for discussion will be:  The Stock Market Parachute


    And have a great weekend everyone, 

    - Phil

  93. Phil/Who

    2 of them did die, one was a bit old, other wasn't.

  94. Wasn't/Rustle – Yep, most ironic cover photo of all time:

    He died 3 weeks after that cover came out….

  95. It would be a lot more fun to go see The Who if they weren't asking close to $300 a ticket at this stage of their careers. Yes I know it's the music business now, but it's still outrageous.

  96. I think what they should do is give you a 50% discount and great seats in exchange for one of their first albums on vinyl – something to reward the real fans.  They could make the money back by collecting all the trace THC that's still stuck to the covers – especially on double albums.  cheeky

  97. Phil / Butterflies

    Well, I couldn’t roll to the 2017 TXN calls either. So I vote for not including it in the portfolio.

    Since we are considering rolling our longs, how about the long OIH 2016 $60.00 call? It is only $0.50 and we can roll to the 2017’s. Maybe the 2017 $50.00 call for $3.50 (minus the $0.50 from the 2016’s it gets to $3.00), and we lower or basis by $10.00 and we get 12 more months to recover that $3.00. Or should we wait for another opportunity with a lower VIX?

  98. PHIL/SQQQ:  I'm not headged at all but think it prudent that I do. What SQQQ BCS do you suggest, at what Month and Strike per $100K portfolio?


  99. Phil, thanks for your reply. In your parachute example, were the. DIA 115 puts in the money or out of the money?  Strether

  100. Thanks for the explanation, very helpful.  It was the point of setting up the second spread after taking off the [very profitable] long calls that I missed.  So, in the event, taking off the long calls and watching the market tank another 150 pts [350 total] turned into a bit of a nail-biter.  But the market g-ds occasionally see their way to protect fools, so it all ended well –  and I just learned, in the most indelible way you can [terror], what I need to do next time, i.e., set up a second spread farther out and further down.  Thanks again.

  101. Someone commented on a blog that the weak ruble was beneficial for the Russian economy, taking the bit out of the low price of oil and supporting Putin's regime.  And someone else answered as follows, which I think is probably correct: 

    "Having a weak ruble might be beneficial to Russia if the Russian economy produced anything besides commodities and low-value added goods that the rest of the world wants. Two-thirds of Russia's exports consist of four goods: crude oil, refined oil products, natural gas, and charcoal. And the rest of the top 10 consists of similarly low-value added products: iron, raw aluminum, wheat, gold, diamonds, and raw nickel. In fact, no product in Russia's top 20 is a high-value added product."

  102. European demographics — all similar to the UK.  The U.S. will be in better shape due to higher immigration.  The Euro and Euro stocks will continue to diverge from the U.S.  -- anyone remember the U.K. in the mid-70s?.

    From FT: "Paul Johnson, of the Institute for Fiscal Studies, recently told the Liberal Democrat conference that the fault line of the 1980s, in which the rich had pulled away from the poor, had been replaced by a new fault line for the 21st century, in which the old pull away from the young. Since 1979 pensioner benefits have tripled in value. The over-60s now take a third of all benefits. In his excellent book The Pinch, David Willetts pointed out that the generation born between 1956 and 1961 will take from the welfare state 118 per cent of what they put in."

  103. Perhaps the Russians are now working on a doomsday machine tied to global oil production figures:

  104. From Bloomberg, Oct 17, 2014, 5:17:17 PM

    New York State’s Attorney General wants to evict you.

    New York is the obvious business case for a service such as Airbnb: a dense city where a lot of people want to visit, and hotel rooms are limited in number. You’ve got a population of educated professionals who travel a lot, leaving their apartments empty. You’ve got insane housing costs in desirable areas, leaving renters open to making a few extra bucks on their abode. Unsurprisingly, almost 30,000 NYC units are available on the site.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  105. From Bloomberg, Oct 17, 2014, 12:16:21 PM

    Want or need? 

    With a sputtering global economy increasingly dependent on demand from Americans, it’s worth asking what kinds of goods and services U.S. consumers have been buying. The answer, according to a subjective and unscientific study: A lot more stuff they don’t need.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  106. From Bloomberg, Oct 17, 2014, 7:58:36 AM

    I have been traveling the past few days — did I miss anything? Once again, morning train reads:

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  107. From Bloomberg, Oct 17, 2014, 1:44:07 AM

    Rising food prices bring down governments in India.

    This was a good week for Reserve Bank of India Governor Raghuram Rajan. Euromoney named him the world’s best central banker. More importantly, new data showed India’s wholesale inflation slowing to its lowest rate in five years. The numbers may give Rajan room to consider a rate cut in the next few months. They should also spur both him and the government of new Prime Minister Narendra Modi to sort out once and for all lingering questions about how India should combat inflation.

    To read the entire article, go to

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  108. From Bloomberg, Oct 17, 2014, 8:35:40 PM

    A demonstrator is arrested by police officers on Argyle Street in the Mong Kok area of Hong Kong on Oct. 17, 2014. Photographer: Brent Lewin/Bloomberg

    Hong Kong police clashed with about 9,000 protesters in the Mong Kok district overnight after authorities cleared barricades, and student leaders asked the government to hold promised talks by Oct. 22.

    To read the entire article, go to

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  109. From Bloomberg, Oct 17, 2014, 5:39:50 PM

    Sheldon Adelson arrives at an event for Republican presidential candidate Mitt Romney in Jerusalem on July 29, 2012. Photographer: Gali Tibbon/AFP via Getty Images

    The world’s 400 wealthiest people dropped $26.2 billion from their collective net worth this week as stocks slumped amid concern global growth is slowing.

    To read the entire article, go to

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  110. From Bloomberg, Oct 17, 2014, 5:25:23 PM

    Photograph: Getty Images

    Oil profits are being tested. Crude prices have face-planted to their cheapest level since 2010, threatening the balance sheets of companies and the budgets of nations.

    To read the entire article, go to

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  111. From Bloomberg, Oct 17, 2014, 5:33:27 PM

    China’s central bank is said to plan the injection of about 200 billion yuan ($32.7 billion) into some national and regional lenders as Premier Li Keqiang steps up stimulus to support economic growth.

    To read the entire article, go to

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  112. From Bloomberg, Oct 18, 2014, 12:00:01 AM

    David Wolf, a fund manager at Fidelity Investments in Toronto, says equity spasms such as those that shook global stocks this week scare professionals as much as everyone else.

    To read the entire article, go to

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  113. From Bloomberg, Oct 18, 2014, 12:01:00 AM

    A drop in mortgage rates has the potential to boost home sales and gives builders reason to take on more projects. Photographer: Luke Sharrett/Bloomberg

    In a week when stock markets were roiled over concern that the global economy is faltering, U.S. homebuilders had the biggest gain in almost nine months.

    To read the entire article, go to

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  114. From Bloomberg, Oct 17, 2014, 10:41:48 AM

      Consumer confidence in the U.S. unexpectedly rose in October to the highest level in seven years. Photographer: Victor J. Blue/Bloomberg

    Consumer confidence in the U.S. unexpectedly rose in October to the highest level in seven years, showing a brightening in Americans’ moods as gas prices drop and the labor market gains traction.

    To read the entire article, go to

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  115. Not much going on until Wednesday night when we start the PMI releases! China GDP on Monday night should not surprise much given the fact that the number has already been decided.

  116. One of my old friends that I grew up with (about 25 of us still get together every year on the night before Thanksgiving when we all return to visit family, which is referenced at the end) is now the director of the office of budget and management for NIH. So, I asked him if the reports about budget cuts impacting the Ebola crisis were true. Here is his response which I thought you all might find interesting.


    Hi Craig,


    Sorry it took me a while to respond, I've been quite busy dealing with Ebola.  My boss likes to remind people that we've been hampered by budget cuts, but this time it had unintended consequences.  The recap of events in the link below should help explain the situation:

    Of course, what would have happened under different circumstances is always a matter of opinion. Looking forward to seeing you at Erev Thanksgiving,


  117. Ok,  I don´t remember who asked for it but about Biosurfit, a portuguese company for analysis. My daughter is a PhD. molecular biologist and she told me this:

    1. Portuguese company with 5  base patents, 3 of them in the name of the CEO Joao Fonseca and 2 other in the company, she review it and there are some strange things around.

    2. Patents are in chinese  are filled in the chinese patent system so  difficult to know why he used it instead of a regular european patent process.

    3. The company is in a field where new gadgets and microreactors are coming to market  very quickly  there are better options (technical point of view) like  Theranos (

    In Europe, most of medical and analysis expenses are done by social medical systems so market approach here is to convince a group of people who decides what is the best solution in cost and technical reasons, actually Theranos is applying in different sanitary systems in Spain and France etc., here I believe everything is based in cost savings.  but analysis is a huge market in Europe where most citizens have at least 1 -2 per year as a way of prevention control , that means a market of 1 billion tests per year as a minimum.

    Good weekend.

  118. Advil 

    I asked about the company, I think they have a game changing product.

    Thank you and your daughter for the information.


  119. CBI/Phil – When you get a chance can you let me know how you like CBI here? I'm thinking 40 puts and then maybe a 45/60 BCS if it looks like we're going up from here. Too soon?

  120. Germ-zapping robot sets its sights on Ebola


    This would be a good business to start selling franchise  to sell, rent and a cleaning service

  121. That's just sickening Craig… Trying to cut millions that could save billions in the long run! But hey, job creators come first….

  122. How to break even on a put assignment ? Here a real live example.

    I was assigned the stock of MT , having sold the Jan15 17 put in Jan13 for 3.88. On Friday the stock closed at 12.40 so 17.00 – 3.88 = 13.12 so in deed no extrinsic left on this on.

    I am now the proud owner of MT for 17.00 – 3.88 = 13.12 (net cost). 13.12 – 12.40 (stock value) = .72 loss on the deal. Question is how do I get even again?

    I know I should have rolled the position before but it slipped under the radar.

    Now it is time to sell calls! I am looking for a caller which will give me at least my .72 cents back.

    Here I found the Jan15 12 call for a middle 1.18 (bid 1.11 + ask 1.26 = 2.37/2= 1.18) having an extrinsic value of .78 (1.18 – the .40 of the 12.40 stock price where the strike price is only 12.00!!! ). This will cover my loss of .72 if the stock would be trading over 12.00 Jan15.

    With the new position my downside protection is (12.00 – 1.18 = 10.82)

    Sorry for all the numbers but it could help some newbies to understand how I get to them.

  123. Ups and downs on a REIT (real estate invested Trust) stock STWD Starwood Property Trust and potential investment.

    How would I invest?

    Lows and Highs of stock


    11/12/12 17.11

    10/07/13 19.25

    12/23/13 21.88

    09/29/14 22.01


    02/01/14 24.72

    06/02/14 24.47

    Today 22.04

    Stock pays a div of .47 per quarter or a yield of 8.71 % per annum

    How would I invest?

    Buy 100 shares @ 22.04 (2204.00) paying me 94.00 until March 15 being 2 quarter payments.

    Simple no headaches. But now!

    Sell one (100) March 15 Option straddle (call/put) for a credit of 2.20. x 100 = (220.00)

    With 220.00 already in my pocket 9.98% on my capital outlay of 2204.00 expecting possible still 2 quarter payments of 47.00 total 94.00

    What could happen?

     Stock goes over 22.50 any time before div. payment date.

     I lose the stock I bought for 22.04 assigned at 22.50 my credit is .46 on the stock and I lose the div of .47! a 1 cent loss.

    Should the stock drop below 22.50 (now only being 22.04) I receive another 100 shares @ 22.50 losing .46 however in line for another 100 x .47 quarter div payment of 47.00

    Question is where am I losing on this deal?

    My lower side protection is 21.18 and my max profit is at 22.50 any rise above you capped your profit by the sale of the 22.50 call option.

    The loss accrues by the stock falling below  21.18 (loss on stock and put assignment) where you will lose on the value of the stock you hold and on the committed purchase of the stock which you guaranteed to purchase at 22.50.

    On the bright side this play can bring an income of max 3.55% per month or 17.85% at a stock price of 22.50 or higher, not taking any div payments in to consideration.

    If the stock price stays unchanged my return will be 2.37 % per month or 11.9% until march15

  124. From Bloomberg, Oct 18, 2014, 10:34:49 PM

    Falling oil prices may help India’s Prime Minister Narendra Modi narrow the budget deficit in the fiscal year through March 2015 to about 4 percent of gross domestic product instead of the targeted 4.1 percent, according to Mizuho Bank Ltd. Photographer Graham Crouch/Bloomberg

    India scrapped controls on diesel prices and increased natural gas tariffs in Prime Minister Narendra Modi’s biggest steps toward curbing subsidies, spurring energy output and reviving the economy.

    To read the entire article, go to

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  125. From Bloomberg, Oct 17, 2014, 4:38:17 PM

    Cliffs Natural Resources Inc. (CLF), the largest U.S. iron-ore producer, said it expects to take a writedown of about $6 billion on its seaborne iron ore and metallurgical coal assets after commodity prices slumped.

    To read the entire article, go to

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  126. From Bloomberg, Oct 17, 2014, 4:17:51 PM

    “I’m buying NFLX stock,” Mark Cuban says in Twitter post. Photographer: David Paul Morris/Bloomberg

    Mark Cuban, the billionaire owner of the Dallas Mavericks, said he’s buying shares of Netflix Inc. (NFLX) because the online-streaming service will probably be acquired.

    To read the entire article, go to

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  127. From Bloomberg, Oct 17, 2014, 3:54:20 PM

    Melvin L. Watt, director of the Federal Housing Finance Agency. Photographer: Andrew Harrer/Bloomberg

    Fannie Mae (FNMA), Freddie Mac and their regulator are nearing agreement with mortgage issuers on efforts to boost lending and ease banks’ concerns that they will get stuck with bad loans when borrowers default.

    To read the entire article, go to

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  128. From Bloomberg, Oct 18, 2014, 12:40:28 PM

    Oct. 19 (Bloomberg) — President Barack Obama is preparing to ask Congress for additional funds to combat Ebola, a move that could shift some political pressure from the White House to lawmakers in the last two weeks before midterm elections.

    To read the entire article, go to

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  129. From Bloomberg, Oct 17, 2014, 11:29:28 AM

    A coastal restoration project in the marsh coast of Louisiana, near the Gulf of Mexico on Sept. 8, 2014. A New Orleans levee board sued 97 oil and gas companies last year, arguing decades of drilling and dredging helped destroy coastal marshes that once shielded the area from flooding. Photographer: Derick E. Hingle/Bloomberg

    If acting on climate change hurts the economy, as the American Coal Council’s talking points suggest, it’s a lesson lost on some of the world’s most successful companies.

    To read the entire article, go to

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  130. From Bloomberg, Oct 19, 2014, 4:15:46 AM

    Nine days after halting Wisconsin’s voter-ID law, the U.S. Supreme Court justices refused to take the same step with a Texas measure that civil rights groups call the strictest in the nation. Photographer: Tom Pennington/Getty Images

    (Corrects dateline.)

    To read the entire article, go to

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  131. Watch this video at

    Hong Kong Police Use Pepper Spray on Protesters

    Oct. 17 (Bloomberg) — Scarlet Fu updates the latest news from the pro-democracy protests in Hong Kong. She speaks on “Market Makers.” (Source: Bloomberg)

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  132. Watch this video at

    Hong Kong Protests No Longer `With Peace and Love’

    Oct. 17 (Bloomberg) — Michael Degolyer, a political scientist at the Hong Kong Baptist University, talks about the pro-democracy protests taking place in the city.
    Student leaders of the protests agreed to talks proposed by Chief Executive Leung Chun-ying while vowing to remain in the streets. Degolyer speaks with John Dawson on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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  133. From Bloomberg, Oct 19, 2014, 7:23:05 AM

    Authorities in Donetsk said at least four people died in shelling after two days of talks between European and Russian leaders to shore up a truce failed to produce a breakthrough in the eastern Ukrainian conflict.

    To read the entire article, go to

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  134. From Bloomberg, Oct 19, 2014, 7:02:55 AM

    Shares in Dubai climbed the most in more than three months after global equity markets rallied with oil and as some investors speculated the selloff last week was overdone. Saudi Arabia’s shares advanced.

    To read the entire article, go to

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  135. From Bloomberg, Oct 17, 2014, 5:32:55 AM

    All Chinese couples will be allowed to have a second child in two years, said a researcher who advises the government on birth control policies.

    To read the entire article, go to

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  136. From Bloomberg, Oct 17, 2014, 4:02:00 AM

    Andrew Haldane, Bank of England Chief Economist. Photographer: Chris Ratcliffe/Bloomberg

    Bank of England Chief Economist Andrew Haldane said he’s less likely to vote for a rate increase than three months ago because recent data have made him “gloomier.”

    To read the entire article, go to

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  137. From Bloomberg, Oct 18, 2014, 8:22:20 AM

    Good Saturday morning. Settle into a comfortable chair with a strong cup of joe and enjoy our long-form weekend reads:

    To read the entire article, go to

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  138. From Bloomberg, Oct 17, 2014, 3:20:57 AM

    Japan’s two-year notes climbed, pushing yields to a record low, as a decline in domestic equities reinforced speculation the Bank of Japan will maintain its unprecedented debt purchases to sustain growth.

    To read the entire article, go to

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  139. From Bloomberg, Oct 15, 2014, 5:00:45 AM

      Manhattan, New York. Photographer: Stan Honda/AFP via Getty Images

    A political battle is brewing at the apex of New York’s property market.

    To read the entire article, go to

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  140. These Time-Lapse Maps That Show How Much The World Has Changed In The Last 30 Years Are Completely Jarring

  141. Watch A Mountain-Sized Comet Zip By Mars During A Once-In-A-Million-Years Event Sunday

  142. It Sounds Like Google’s Radical Plan To Change How Android Phones Are Sold Isn’t Going To Happen

  143. If you believe the bond markets, we are all Japanese now

  144. It Was Only A Few Weeks Ago That Wall Street Was Sure Stocks Would Go Higher

  145. NASA Probe Just Beamed Back The First Pictures Of Icy Craters On The Closest Planet To The Sun, Mercury

  146. China’s developers park bulldozers in slack market

  147. Mind “The Asian Dollar Short” – Another Ticking Time Bomb Gifted By The Central Banks

  148. No talk of secession right now:

    Eventually CDC training will equip many hospitals to handle Ebola cases in ways that don’t actually spread the disease. But it would be helpful to see some after-the-fact reflection on why the resources of a central government are sometimes necessary to avoid catastrophe.

  149. Good morning!  

    Nothing too major in the weekend, in fact, the fear-mongers at the WSJ have had to resort to this BS:

    As the monitoring period winds down for some people exposed to a Liberian man who died of Ebola, local officials in Dallas tried to calm a city that remains on edge.

    That's right – no one got sick, nothing else happened so now they are running a countdown clock as if something could still explode any second – ridiculous.  

    In other disasters:

    Kobani Shaken by Further Violence

    Poll: Likely Voters Favor GOP-Led Congress

    Libyan Rivals Wrangle Over Oil

    TXN/Akad – I'll leave it in as an intended roll – in case we ever get another dip, but not executed at this time.  The others we can wait on until there are more 2017s but that is the general idea – try to improve our protection and buy more time whenever there's a sale. 

    SQQQ/IHS – It's not so much "per $100K" but how much you think you're mix will gain or lose on a 5%, 10% or 20% market correction.  Generally, we use our hedges to MITIGATE damages on the way down, not to attempt to completely eliminate them – that ends up making us bet against ourselves.  

    Generally, we don't care about a 5% drop – so we carry only minimal protection against such an event.  We also don't care about a short-term drop that quickly reverses.  Case in point – our all-bullish Long-Term Portfolio is already back to $579,000 after dipping to $550,000 (+10%) as the market crashed and it topped out at about $600,000 so it looks like a 10% drop in the indexes cost us about $50,000 (we're only 1/3 invested, so harsh leverage).  

    To protect ourselves against ANY loss would require a huge amount of hedging and the cost of maintaining those hedges would eat into our potential profits so we have employed various techniques in our Short-Term Portfolio to hedge our larger Long-Term and Income Portfolios.  

    One technique we use is LAYERING our hedges – in other words, we put bull call spreads at different time periods because the shorter-term hedges will gain value faster (and lose value less quickly) than the long-term ones and the key to that strategy is what we were able to take advantage of on Wednesday and Thursday, which was dismantling our shorter-term hedges in parts to take advantage of the reversal.

    There was no guarantee we had that right and, if not, we would have taken a loss and not a gain but, as it worked out, we were right and now the STP is up 94.6% and fairly neutral and, more importantly, our combined STP+LTP and STP+Income Portfolio totals have never been higher.  

    In the longer-run strategy, this is perfect because NOW there are bargains to be had and NOW we have cash to spend – this is exactly what is supposed to happen to us in a sell-off as the STP makes cash available to buy new positions or improve our existing one.  

    So, getting back to the basic question of how we would hedge SQQQ for a $100,000 block.  Assuming you are invested like the LTP (about 30% but with 3x leverage), then you expect to lose $10,000 on a 10% drop in the market and $20,000 on a 20% drop.  

    SQQQ is at $42.47 and the Nasdaq is 4,258 (200 points – 4,050ish) and we're not worried unless the Nas falls more than 5% and, at this moment, we're not worried at all until/unless they make new lows (below 4,100).  Of course, if they don't make back the 200 dma at 4,300 by Tuesday – I'd get more aggressive with the hedges but, for now, let's treat it as ordinary and that means I still like the aggressive but cheap SQQQ March $38/45 bull call spread that we have in the STP, which is now $2.40 on the $7 spread with 200% upside potential.  

    That means, if you want to offset a $20,000 drop in your portfolio, you need $7,000 worth or about 30 contracts but, in our STP we have 50 and we also have 50 of the Jan $40/50 bull call spreads, those are $3 and pay $10.  

    Keep in mind they are both in the money, so we only lose if the Qs go higher and in both the LTP and especially in the Income Portfolio, we are AAPL-heavy – so protecting ourselves with a primary Nasdaq hedge is sensible.   With 100 contracts at about $27,000 we have the potential to collect $85,000 if the Nasdaq is down 5% more (they are already down 5%) into March – that's very well-protecting our larger portfolios for the moment.  

    So, if you want to protect against a $20,000 loss using those spreads, you only need to spread about $5K on the two but, if your long-term positions are not set up so a flat or up market will not make you at least $5K by March – what's the point?  I think some people miss that part of the strategy – we can afford these hedges because we SELL a lot of premium and we KNOW that, in a flat or up market, the premium we sold will diminish by more than cost of our hedges. 

    That means that the only way we don't make money is in a sell-off and, since our long positions are internally hedged as well – we don't need to protect them against a small downturn – they may lose money on paper, like our 20 AAPL short 2017 $80 puts, which went from $7.50 to $10 this week.  That's 33% against us on paper but AAPL never even failed $95 and that's still 32% ABOVE our $71.70 break-even point. 

    On paper, we lost $5,000 on those short AAPL puts but spending money to hedge that loss is silly.  We sold them for $16,600 and, as long as AAPL is over $80 in 2017, that money goes into our pockets.  You have to UNDERSTAND the options process and the dynamics of your positions to hedge properly and I haven't seen a portfolio analyzer yet that does a good job of working with option hedges.  

    Anyway, back to the other point which is that the AAPL put position (not counting our bull call spread) alone pays us $16,600 in a flat to up market (assuming AAPL is with the market and, with the Qs – it certainly is) and, as long as we REALLY want to own 2,000 shares of AAPL at $80 per share in 2017 – then that $16,600 is found money we can use towards hedges and, if those hedges pay us 3:1 then we have about $50,000 of downside protection.

    That's the key to the LTP/STP and Income Portfolio/STP strategy – using some of our almost guaranteed (in flat to up markets) income streams to hedge against the possibility of failure.  We don't want to spend so much that we stop ourselves from making money, though.  Generally, using about 20-30% of our gains to hedge is a good rule of thumb.  

  150. DIA/Streth – Out of the money at that price, for sure.  As a rule of thumb, you want to pick a strike that gives you roughly 10-15% delta.  That's not a delta of 0.15 but a delta that is 15% of what you are paying so, for example, if I wanted to get one now, I'd want to be at least 45 days out (so Nov too close) and that would be the Dec $152 puts at $1.80 with a 0.23 delta (13%).  

    Now let's talk mechanics.  If I put $3,600 into 20 of those, what happens if the Dow drops 300 points (1.8%)?  On DIA, that's roughly $3 so I can assume the $152 puts will be worth what the $155 puts are now and that's $2.32 – up 29% or about 15x what the Dow dropped.  Keep in mind, like SQQQ above, we're not terribly concerned about a 3% drop and the nice thing about put-hedging like this is that the delta increases as you get closer to the money and the VIX goes up, which also drives up the price of the puts you own – so they get more powerful the more the Dow drops.

    Of course, if you don't remember to combine that strategy with ALWAYS selling into the initial excitement – you may as well leave your money in your pocket!  

    To maintain a mattress spread, there are two possibilities – the market is flat or up, in which case you spend more money (20% of your long gains) to roll your protection to longer months and higher strikes OR, the market goes down, in which case you keep adding layers and, each time you add a layer, you put a stop on your top layer – so you are stopping out the puts with the highest delta as soon as they turn against you – and then you roll up the new puts as the market bounces and the roll gets cheaper.  

    It's like a constant game of leap-frog, but works very well with practice.  

  151. You're welcome, Z.  Unfortunately, all the examples in the World are no substitute for experience.  

    Ruble/ZZ – Having a weak currency only works if someone actually wants to use it for something.  In other words, oil trades in Dollars so, no matter how weak the Dollar is – every day 90M barrels are purchased for $100 a barrel, so we use $9Bn per day in exchange for something we light a match to, creating a new need for $9Bn more Dollars tomorrow.  That, by itself consumes $3.3Tn a year in hard Dollars.  

    Russia sells oil and commodities for Dollars, so they get 100 Dollars and, because the Ruble is weak, call it 40 Rubles to the Dollar at the moment, that's 4,000 Rubles they get for the a barrel of oil vs 3,000 earlier in the year but now who wants the 4,000 Rubles?   If no one overseas wants the Rubles then they have to spend R160,000 for a Toyota that cost R120,000 last year – that's no net benefit at all for the oil exporter and likely to be tremendously detrimental to workers, who have only their labor to trade for Rubles.  

    Immigration/ZZ – Drop in the bucket these days:

    Also huge cutback in illegals:

    Of course, we don't want to confuse our Republican friends with facts:

    So, if you take Europe as a whole, they take in a lot more immigrants than we do.  And here's the overriding demographic that will kill us all if we don't ENCOURAGE young people to immigrate to the US:

    What's the plan to have a steady population base with little or no immigration while 60M people (20% of our population) goes over the age of 65 over the next 35 years?  How will those people be supported by a shrinking work-force?  Where will the health-care workers come from and, more importantly, who will pay for them?  No wonder Japan is spending whatever it takes to develop robot care workers, they are ahead of us on this curve and also a xenophobic country with little immigration.  

    That's why our Debt to GDP is catching up to them:

    Japan "only" went from 150% in 2002 to 225% now (up 50%), we jumped from 50% to over 100% (up 100%) in the same time-frame.  

  152. Phil / Anyone

    Has anyone experienced "forced buy-ins" on their short positions on ThinkOrSwim the 1st trading day after the option was assigned and without being notified by the broker?

    My short OCT SCO Calls were assigned on 10/16/2014 after market closed.  It was bought back by ThinkOrSwim without notifying me on 10/17/2014 during market hours.  I thought according to SEC rules, the settlement period for equities is 3 days.  In additional, the brokerage film will notify and ask the account holder to cover the short positions by a certain date before buying them back on his/her behalf.  At least that's what my experience was at Schwab.  Comments anyone?

    Thanks, Brian

  153. This is great:

  154. Big Chart – Well, that's the best illustration of a weak bounce ever.  Still, the key is we don't look for a bottom but, when a bottom comes, we measure a bounce and, if it's a strong bounce, than we should see the right side of a V forming as fast as we dropped so now we can calculate where we should be and when.  I'll run those numbers tomorrow morning but, conceptually, we have Dow 17,200 to 15,480 BUT now we're going to throw out the spike below the -7.5% line (since it reversed so quickly) and just chart the 5% drop from the -2.5% line (17,160) to the -7.5% line, which held (16,280) and that's 880 so 176 bounces off the -7.5% line are 16,466 (weak) and 16,632 (strong) and 16,586 is the 200 dma so let's say we need to take that back in the 3 days it took us to fall from there so 16,600 by Wednesday or bust again.  

    Not much data or Fed speak in the week ahead so it's all about earnings.  Home sales may be some improvement (because they've been sucking, so hard to get worse and expectations are low) and Powell and Tarullo are two of our biggest Fed doves so we SHOULD start the week off with a bang.  

    Good article Craigs.  

    Biosurfit/Advill – Maybe they bought the patents or co-developed?  If their product works as advertised, you could make good money shorting blood-test labs (not my field of expertise) because, even if they are not the ultimate winners in instant blood tests – it's still game over for the outsourced lab model.  I do have a bit of faith in this concept as there's nothing revolutionary about what they are doing – blood tests have been around for decades and it's not very far-fetched to imagine that the process could be simplified to this extent but, again, not my field of expertise.   

  155. CBI/Ivan – Good, solid company back at a good price.  Berkshire owns 10% of them, so there's a good endorsement and I think they just got ahead of themselves in anticipation of more infrastructure spending and the general market-mania and now they are back to a realistic price.  They also got sold off with the energy sector, as that's part of their business (building refineries and such) – but that's kind of silly.  Raw materials (the iron) are cheap and I think that may greenlight a few projects if Obama gets a budget passed (not a slam-dunk by any means).  So yes, I like the trade but nothing you wouldn't be happy to DD and roll on if the market collapses and they are back in the $30s.  

    Zappers/QC – Those things should be a must for hospitals everywhere.  

    Good note on puts and STWD, Yodi.  Thanks.   I like STWD, they were one of our REIT picks last year in Vegas (still under $20 then).  

    Reflection/StJ – I see lots of reflection on Fox – it's all Obama's fault, apparently…

    Forced/Bshing – If you don't have the cash or margin to support the position, I think the broker can use their discretion but you'd have to talk to TOS and ask them why they made the move.  Also, I find that if you do talk to people there and get them comfortable that you are a sophisticated investor who understands the risks and responsibilities – they tend to cut you more slack over time.  

  156. Phil, Thanks so much for that explanation. I see the complexity and the opportunity. So, start small…, and practice, practice, practice. Thanks again. Strether.

  157. Thanks Phil!

  158. From Bloomberg, Oct 19, 2014, 8:28:58 PM

    Asian stocks rose, with the benchmark index rebounding from an almost seven-month low, after U.S. equities rallied. Japan’s Topix (TPX) index surged amid optimism the nation’s $1.2 trillion pension fund will buy more shares.

    To read the entire article, go to

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  159. From Bloomberg, Oct 19, 2014, 4:00:04 PM

    Russian President Vladimir Putin and European negotiators are struggling to hold together a six-week truce in eastern Ukraine, inching forward in talks to prevent the fighting from escalating. Photographer: Vasily Maximov/AFP via Getty Images

    Russia’s credit rating was cut to the second-lowest investment grade by Moody’s Investors Service, which cited sluggish growth prospects and an erosion of the country’s reserves amid sanctions over Ukraine.

    To read the entire article, go to

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  160. From Bloomberg, Oct 19, 2014, 1:23:51 PM

    Oct. 20 (Bloomberg) – After a weekend of rising tensions, Hong Kong protest leaders and government officials pledge to move ahead with talks with the hopes of ending more than three weeks of demonstrations. Bloomberg’s Yvonne Man reports on “First Up.” (Source: Bloomberg)

    Hong Kong protest leaders and government officials pledged to move ahead with talks aimed at ending more than three weeks of pro-democracy demonstrations, even after a weekend of violent clashes that injured dozens.

    To read the entire article, go to

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  161. From Bloomberg, Oct 19, 2014, 7:00:01 PM

    The correction that swept European stocks last week induced a full-blown bear market for lenders’ shares. Investors are betting central-bank stress test results later this month will provide relief.

    To read the entire article, go to

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  162. From Bloomberg, Oct 19, 2014, 6:00:01 PM

    Russia’s budget deficit plans are increasingly strained as the drop in oil prices outpaces the concurrent ruble slide stoked by U.S. and European sanctions.

    To read the entire article, go to

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  163. From Bloomberg, Oct 20, 2014, 4:34:52 AM

    European stocks fell, following their longest streak of weekly losses in more than a year, as worse-than-estimated financial results added to concerns over the region’s recovery.

    To read the entire article, go to

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  164. From Bloomberg, Oct 20, 2014, 3:13:15 AM

    Oct. 20 (Bloomberg) –- Bloomberg’s Manus Cranny reports earnings for SAP, the world’s largest supplier of business-management software on “Countdown.” (Source: Bloomberg)

    SAP SE cut its full-year earnings forecast as software customers move to applications delivered through the Internet, a trend that’s brought sweeping changes in the technology industry.

    To read the entire article, go to

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  165. From Bloomberg, Oct 20, 2014, 12:01:00 AM

      Eric Rosengren, president of the Federal Reserve Bank of Boston. Photographer: Brendan Hoffman/Bloomberg

    Federal Reserve Bank of Boston President Eric Rosengren said the Fed shouldn’t overreact to turmoil in financial markets as it approaches its next policy making meeting at the end of the month.

    To read the entire article, go to

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  166. From Bloomberg, Oct 20, 2014, 4:23:08 AM

    Mark Carney, governor of the Bank of England. Photographer: Andrew Harrer/Bloomberg

    The edge might be coming off Britain’s economic recovery.

    To read the entire article, go to

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  167. From Bloomberg, Oct 20, 2014, 5:26:17 AM

    Reebok is seeking to reposition itself as a leader in fitness gear after being replaced as the National Football League’s apparel supplier in 2012. Photographer: Guenter Schiffmann/Bloomberg

    Adidas AG (ADS), the world’s second-biggest sporting-goods maker, jumped in Frankfurt on a report that a group of investors plans to bid about 1.7 billion euros ($2.2 billion) for the company’s Reebok unit.

    To read the entire article, go to

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  168. From Bloomberg, Oct 20, 2014, 3:28:04 AM

    Japanese shares surged, with the Topix (TPX) index climbing the most in more than a year, after a rebound in global equities and a report the nation’s pension fund will boost domestic stock holdings.

    To read the entire article, go to

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  169. From Bloomberg, Oct 20, 2014, 12:00:01 AM

    Warren Buffett, Chief Executive Officer of Berkshire Hathaway Inc., has said he is waiting for a “fat pitch,” his phrase for an opportunity to buy a stock at a favorable price. Photographer: Jeff Kowalsky/Bloomberg

    Eric Cinnamond had 75 percent of the money in his mutual fund in cash at the end of July because he couldn’t find enough cheap small-company stocks to buy. The stock-market selloff this month hasn’t changed his mind.

    To read the entire article, go to

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  170. Watch this video at

    FBI Warns Tech Companies of Hackers Affiliated With China

    Oct. 17 (Bloomberg) — The Federal Bureau of Investigation says hackers affiliated with the Chinese government have heavily targeted makers of microchips, computer networking equipment and data storage services to steal company secrets. Bloomberg’s Jordan Roberston reports on “Bloomberg West.” (Source: Bloomberg)

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  171. Watch this video at

    Why Wall Street Banks Are Dumping Corporate Debt

    Oct. 17 (Bloomberg) –- Bloomberg’s Lisa Ambramowicz discusses why banks are cutting debt holdings with Mia Saini on “Money Clip.” (Source: Bloomberg)

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  172. Watch this video at

    Obama Unveils Steps to Secure Consumer Payment Data

    Oct. 17 (Bloomberg) — President Barack Obama speaks about efforts to improve financial protection for consumers and plans to increase security for payments to and from the U.S. government by incorporating security chips on cards and requiring personal identification numbers.

    Obama speaks at the Consumer Financial Protection Bureau in Washington. (Source: Bloomberg)

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  173. Watch this video at

    Street Protests Are Out of Control: Leung

    Oct. 20 (Bloomberg) – After a weekend of rising tensions, Hong Kong protest leaders and government officials pledge to move ahead with talks with the hopes of ending more than three weeks of demonstrations. Bloomberg’s Yvonne Man reports on “First Up.” (Source: Bloomberg)

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  174. From Bloomberg, Oct 20, 2014, 2:00:00 AM

    Africa’s economy will probably expand this year at the same rate as previously amid the outbreak of the Ebola virus in four west-African nations, and insecurity in at least five other countries.

    To read the entire article, go to

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  175. From Bloomberg, Oct 16, 2014, 4:35:25 PM

    Kobani’s Kurdish defenders say that intensified U.S. airstrikes against Islamic State militants battling to capture the Syrian town are turning the tide in their favor.

    To read the entire article, go to

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  176. From Bloomberg, Oct 20, 2014, 5:13:23 AM

    An aerial view of the city of Lappeenranta, that lies on Lake Saimaa in Finland. Nestled in the southeast corner of Finland is a pristine region filled with lakes, tall pine forests and a stony landscape that is the euro area’s first point of call for many Russian shoppers. Photographer: Raimo Suomela/City of Lappeenranta via Bloomberg

    Nestled in the southeast corner of Finland is a pristine region dotted with lakes and pines that’s the euro area’s first point of call for many Russian shoppers.

    To read the entire article, go to

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  177. From Bloomberg, Oct 19, 2014, 5:12:40 PM

    It seems that a whole lot of Mitt Romney supporters just won’t take “not running” and “done” for an answer. In a new Washington Post/ABC News poll 21 percent of Republicans and GOP-leaning Independents still want Romney as the 2016 nominee for president, almost double the number of those who want Jeb Bush, the second place candidate. 

    To read the entire article, go to

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  178. From Bloomberg, Oct 19, 2014, 4:43:04 PM


    In Freudian terms, if Hillary Clinton represents the ego of the Democratic Party, Elizabeth Warren has staked claim on the role of unabashed, unrestrained, unrelenting id.

    To read the entire article, go to

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  179. From Bloomberg, Oct 20, 2014, 3:15:36 AM

    After a week when European stocks went into meltdown, leaders including German Chancellor Angela Merkel and French President Francois Hollande will meet for a two-day summit beginning Oct. 23 with the region’s economy back on the agenda. Photographer: Olivier Morin/AFP via Getty Images

    European leaders jolted by the sudden return of debt-crisis turmoil will gather for talks in Brussels this week as they attempt to restore investor confidence in the euro area.

    To read the entire article, go to

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  180. From Bloomberg, Oct 19, 2014, 5:00:00 PM

    Oct. 20 (Bloomberg) –- China’s communist party heads hunker down in Beijing for four days beginning today – for what’s known as the fourth plenum. It’s where leaders chart the course for policy in the coming year. Bloomberg’s Stephen Engle reports. (Source: Bloomberg)

    China needs a new prescription for growth: Cram even more people into the pollution-ridden megacities of Beijing, Shanghai, Guangzhou and Shenzhen.

    To read the entire article, go to

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  181. From Bloomberg, Oct 20, 2014, 3:47:00 AM

    European Commission President Jose Barroso warned U.K. Prime Minister David Cameron that he is making a “historic mistake” trying to curb immigration, and urged him to make a more positive case on the issue.

    To read the entire article, go to

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  182. Good morning!  

    Japan jumped 4% on more stimulus talk and India gained 1.23% but Hong Kong flat and Shanghai up 0.66% and Singapore up 0.4% not too impressive.  

    The European majors are down 1% but Italy is flat and Spain down half a point.  

    Our Futures were up and now down a bit and likely to get worse with IBM off 5% on lower revenue growth and a huge miss ($3.68 vs $4.31 est).  

    16,250, 1,875, 3,800 and 1,075 are our shorting lines (short the laggard but /YM should be best one, tight stops).

    Also, the Fed was no help this weekend:

  183. That's one of those really obvious times when it's great to be able to trade the Futures – a big miss from a major Dow component is almost certain to drag down the index.  

    Leveraged Money Spurs Selloff as Record Treasuries Trade. When markets are buckling and volatility is signaling a crisis, you sell what you can, not what you want. That’s what happened last week on Wall Street, where slowing economic growth in Europe, Ebola anxiety and escalating conflicts in the Middle East and Ukraine tore through the calm with a force not seen in three years. Loath to find out what their record holdings of corporate bonds and leveraged loans were worth as liquidity thinned and markets slid, professional traders turned to stocks and Treasuries to defuse risk.

    Heavy borrowing to buy equities adds investors’ anxieties to skittish market. Investors borrowed a record amount of money to buy US equities during the bull run, a risky strategy now casting a shadow over the S&P 500 amid market turbulence. An upsurge in market volatility as US stocks dropped 6.2 per cent from last month’s record peak has put the spotlight on those investors that borrowed money – known as margin trading – to help boost returns.

    Yellen Translated: "Let Them Eat Cake"

    Jim Chanos: "The Lesson That Shaped My Understanding Of How Fragile The System Is"

    Einsteinian Insanity? FHFA Head Mel Watt Pushes Banks To Make Extreme Risk Home Loans

    Europe’s Fatal Flaw Laid Bare For All To See. Again

    Europe Is Flirting With A Bizarre New Kind Of Economic Meltdown That Hasn't Been Seen Since The 1930s

    Why The Euro Crisis Is Far From Over

    China Q3 GDP expected to show slowing growth rate

    • China is due to report Q3 GDP tomorrow, in what could turn into fresh panic over the state of the global economy.
    • The economy is forecast to have grown 7.2% in the July-September period, the slowest pace since the first quarter of 2009 and down from 7.5% in the previous three months.
    • Over the weekend, media outlets reported that the People's Bank of China is planning an injection of about 200B yuan ($32.7B) into some national and regional lenders to keep liquidity ample and bolster growth.

    Russia Rating Cut by Moody’s on Sluggish Economic Growth

    Halliburton beats by $0.09, beats on revenue

    • Halliburton (NYSE:HAL): Q3 EPS of $1.19 beats by $0.09.
    • Revenue of $8.7B (+16.5% Y/Y) beats by $170M.
    • Press Release

    Iron Ore Risks Extending Collapse on Supplies, Moody’s Says

    The World's Biggest Iron Ore Miner Says Lower Prices Are Here To Stay

    Sears Holdings approves debt and warrants plan

    • Sears Holdings (NASDAQ:SHLD) says it board approved a plan to offer $625M in debt and stock warrants.
    • The company says the warrants will be exercisable for five years following the offering.

    International Business Machines misses on revenue

    Philips -3.5% premarket as profit misses estimates

    • Philips (NYSE:PHGreports a net loss of €104M for the quarter ending Sept. 30, compared with a €282M net profit in the same period in 2013.
    • The Dutch technology company missed analyst estimates due to several factors, including unfavorable exchange rates, sluggish demand in Europe and China, and the continued fallout from sanctions against Russia.
    • Philips' results were also hit by a $467M charge after losing a legal battle to Masimo, which accused Philips of infringing on tech patents.
    • PHG -3.5% premarket

    Yahoo to announce turnaround plan tomorrow

    • Yahoo (NASDAQ:YHOO) is expected to outline cost-cutting efforts and give details of how it is evaluating possible acquisitions tomorrow, as the company faces pressure from activist investor Starboard Value.
    • The struggling Internet business is considering buying one or more large technology start-ups with some of the $5.8B it made off of Alibaba's IPO.
    • Acquisitions could trigger significant new streams of revenue at Yahoo, where sales have declined in four out of the past five quarters.

    Forbes: Microsoft to launch wearable within weeks

    • Microsoft (NASDAQ:MSFT) is readying the launch of a smartwatch, which will hit stores before the holiday season, Forbes reports.
    • The wearable device can passively track a wearer’s heart rate and will work across different mobile platforms.
    • A major advantage of the gadget includes its robust battery life, which can last more than two days of regular use.

    Ebola Front-Line Doctors at Breaking Point. At 3:30 a.m. in the world’s biggest Ebola treatment center, Daniel Lucey found the outbreak reduced to its essentials: patients lying on mattresses on the floor and vomiting in the dark, visible only by the wavering flashlight beam of a single volunteer doctor. “I don’t see a light at the end of the tunnel,” said Lucey, a physician and professor from Georgetown University who is halfway through a five-week tour in Liberia with Medecins Sans Frontieres, the medical charity known in English as Doctors Without Borders. “The epidemic is still getting worse,” he said by phone between shifts.

    China Bans The Term '50 Cents' To Stop Discussion Of An Orwellian Propaganda Program. The Chinese government doesn't just censor its internet. It also pays people to leave fake comments that make the country and its communist regime look good. As detailed in "Blocked on Weibo" by Jason Q. Ng, one of the many phrases that gets censored in China is "50 cents." This term references a huge set of people hired by the government to post internet comments spinning the news in China's favor — people who are supposedly paid 50 cents of Renminbi for every post. 

    Look how fast we worked off an oversold signal on a weak bounce – that's not good:


    Longer-Term NYSI indicates we may head a bit lower:


    Somebody's nervous somewhere:


  184. Not too much damage from IBM so far, just 50 points but good for $250 per contract – so we'll take it and go buy breakfast, right?