Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Friday Failure – Kaisa Bond Default Underlines China Housing Crash

What is Kaisa?

Kaisa Holdings is #1638 on the Hong Kong Stock Exchange and is currently trading at 50% of it's 2014 price at $1.50 per share.  That may make it seem unimportant but, in the Wacky World of Chinese Stocks – it's an $1Bn+ company.  Kaisa specializes in large-scale real estate projects and has borrowed $10.5Bn for various projects but, unfortunately, just went into default for lack of $52M as it also delayed the release of 2014 financials

Already the company's $800M worth of 8.875% 2018 bonds have dropped to 55 cents on the Dollar and 2020 notes are no fetching just 29.9% of face value and that's going to look generous as this situation rapidly spirals out of control.  It is estimated that, in a full default, Kaisa's bond-holders can expect about 2 cents on the Dollar because the company has generated no real value for them after spending $10.5Bn of other people's money.  

Kaisa last month postponed its results announcement for 2014, saying that auditors needed more time to verify its accounts. There may be a “significant adjustment” to the figures, the company said on March 31 without saying when the results would be released.

The earnings and profitability of some Chinese property developers may deteriorate further in 2015 and more defaults can’t be ruled out, S&P said in a report Friday. It said developers’ annual results for 2014 indicate many are in “significantly worse” shape than the previous year.

If you are an investor in Chinese notes or Chinese stocks, consider this a warning.  I will remind you that these are slow-rolling crises that take quite a long time (in the timeframe of the average investor) to unwind.  Well, maybe not so slow as this morning Glorious Property Holdings, who just had their debt cut to Ca (junky junk) is struggling to come up with $19.5M of the $300M it must provide on 13% notes due Oct 25th.  Since the end of last year, the company also failed to meet repayment deadlines on $83M of principal and $66 in interest on unspecified borrowings this year  

“Glorious is currently the most likely to default among Chinese developers with dollar bonds outstanding,” said Rui Guo, a credit analyst at Mitsubishi UFJ Securities HK Ltd. “The series of overdue debt payments reflects the very weak cash flow and liquidity profile and heightened default risk of Glorious, which are worsened by the sharp losses incurred by the company.”

Their just-released 2014 Annual Report shows $500M in losses vs $500M in claimed profits in 2013, sales at Glorious have been declining in the past three years and gross profit turned negative for the first time last year since its initial public offering in 2009, Bloomberg-compiled data show.  Compared to Kaisa, we don’t think Glorious’s current situation is much better off, since the company has been experiencing operation deterioration from 2012,” according to Kenny Wu, a credit analyst at Citigroup Inc.

I don't want to be overly dramatic about this stuff (and we are short on both China and Japan through FXI ($51.85) and EWJ ($13.26) as well as short the US markets as full disclosure) but I'm not going to let my people go through what people went through in 2008 if I can help it.  If you remember, it was a very slow roll to collapse while the markets made record highs in 2007/8 as well:

Now, reading all this in retrospect – it seems pretty obvious you should have cashed out in 2007 while the market was high but there were obvious signs of trouble, right?  But what actually happened?  Well, people have great gains and they decide to ride out a little 10% correction and, in fact, jump in "Buy the F'ing Dips" because it was working for the last 5 years (we rallied off 815 in 2002).

Then the market drops 10% more and now you are behind on your new purchases and just over even on your old ones but the Government is dumping money in and the Fed is dropping rates so things are going to be great so you stay in and then the market drops 10% more and 10% more and now you get religious because you BELIEVE it will all come back…

My theory (and we're mainly in CASH!!! at the moment) is that we're not going to miss much if we wait for the Nasdaq to hold 5,000 for a week or two while the other indexes catch up and confirm the next leg of the rally.  As I've mentioned, we still have our materials stocks and, if we're really in a huge Global Recovery – then they should do very well (and our Long-Term Portfolio just cracked +50% yesterday).

On the other hand, if I'm right and we shouldn't be ignoring these little warning signs in other parts of the World – then we can save ourselves a World of heartache AND be ready to buy the real dip when it comes (and we've found half a dozen bullish plays this week alone as earnings season gives us bargains).  Either way, I know I'm sleeping very well at night!  

Have a great weekend,

- Phil


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!

Comments (reverse order)

    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1. Oil Lines

    R3 – 61.25
    R2 – 59.83
    R1 – 58.60
    PP – 57.18
    S1 – 55.95
    S2 – 54.53
    S3 – 53.30

  2. Phil, I am liking JNJ here for a buy/write.  The 2017 $110 calls are $3.72 and $90 puts are $5.92 giving a net entry of $90.82 or there about.  Assuming the stock finishes at $110 you have at least $3 in dividends and stock appreciation of $9.54  as well.  This is 24.4% on cash and 12.2% on cash + margin in a retirement account.  Worst case is buying 2x JNJ at a net $84.08, averaging $92.27 on the share position.  Seems like a reasonable bet to me.  Your thoughts?

  3. I can't say that I am surprised by new from China since I have been posting about the upcoming disaster for a while but it seems that more people in China are signing up for rights to the casino and that is surely a sign of the top:

    More than 3M people opened a brokerage account last week! Talk about sheep being led to slaughter. This will look like sheep genocide when this all unravels.

  4. Inflation adjusted Nasdaq – still a long way to go:

    Nasdaq Inflation Adjusted

  5. I have a question that I would like to put out and get answers from anyone who has an idea for me. This is not the usual slow and steady approach Phil so wisely advocates, but rather try at finding something for quick gains. I have $5000 to invest for one of my children with no time pressure and no worry about being safe, but I would like to limit my timeframe to one or two years. My son wants to gamble and attempt to make this "found money" into more than just a nice little bundle. So the question is, what are your possible homerun investments right now and how are you playing them? I am looking for the investments that some of us have with the hope that they could take off at any moment or get bought out and make us a boatload of cash. What are your favorites? I had Opko as mine for the last couple of years as I have been telling you all, along with Apple, Phil has IRobot and Taser on this list and now I am looking for my next Opko/Apple/Taser/IRobot and thought I would enlist the help of my PSW friends.  The answer may be one of those four, but if their is another biotech or startup tech company that you think is on the verge of big things let me know. Thanks in advance. I am looking forward to your answers and compiling a nice list of ideas. I will not hold anyone responsible for suggesting something that turns out to be a loser and will never even mention it down the road. I just thought it might be fun to hear everyones ideas on this.

  6. Good column from Krugman who doesn't think that austerity measures imposed after the crisis came because of over optimism. They just believed that austerity was the way to go!

    So, in Rogoff’s version of austerity fever all that was really going on was that policymakers were excessively optimistic, counting on a V-shaped recovery; all would have been well if they had read their Reinhart-Rogoff on slow recoveries following financial crises.

    Sorry, but no — that’s not how it happened. When I wrote about fear of invisible bond vigilantes and belief in the confidence fairy, I wasn’t inventing stuff out of thin air.

    David Cameron didn’t say “Hey, we think recovery is well in hand, so it’s time to start a modest program of fiscal consolidation.” He said “Greece stands as a warning of what happens to countries that lose their credibility.” Jean-Claude Trichet didn’t say “Yes, we understand that fiscal consolidation is negative, but we believe that by the time it bites economies will be nearing full employment”. He said:

    "As regards the economy, the idea that austerity measures could trigger stagnation is incorrect … confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today."

    I can understand why a lot of people would like to pretend, perhaps even to themselves, that they didn’t think and say the things they thought and said. But they did.

  7. Craigsa620

    I'm talking my own book but you might want to look at Titan Medical TITXF. Coming to market in 2017 and I'm expecting a ten bagger.

  8. craigs….ACAD….they will be bought out most likely, and they will get approval.  Sell a put or so, then buy a Jan BCS. 

  9. Happy Friday!

  10. Amazon…Over $160B in market cap…and does not make a cent….that's a stock market juggernaut. 

  11. Craigs – Have a look at NVIV, INO and MDXG. These are biotech types with large potential. The "safest" of the three is probably MDXG – very exciting stuff. All are around $10 and actively traded. Ohh, one other idea – SZYM the company has been trashed by the market, but I believe in their technology and the growing potential innovations in food, cosmetic and industrial uses… good luck with the investments. 

  12. Another great call on oil!  

  13. Good morning!  

    I must say that watching that "Buy the F'ing Dip" video (circa 2007) and not being able to distinguish it from today makes me feel very good about my CASH!!!  I had forgotten what EXTREME measures the Fed and the other Central Banksters had already gone to to prop up the markets in 2007/8 (and those were just the highlights above) and how people kept going "see – the Government won't let the market go down".  I frankly got tired of warning people (I used that Chicken Litttle image a lot) and felt like one of those guys with a "The End is Near" signs after a while.  

    The Dollar is popping off 97 again and weakening the markets but I'm taking those index shorts and oil short off the table, as I think – based on this week's action – that there is just too much pushing going on for "THEM" to let it fall today.  

  14. CCJ/Phil .. thanks for the comment on rolling the Jan'16 $17 calls out to Jan'17 $15 calls. Would you let the short Jan'16 $22 calls expire before selling the Jan'17 strikes or just roll them now along with the $17 long calls.. rem I have the long Jan'16 17/22 call spread… cheers

  15. I was wondering if anyone got a fill on the arr options yesterday?.  A wide spread on the put ?

  16. Phill any thoughts what I should do with my long July  TZA 9 call … I have 60. 

  17. good morning – still waiting for oil correction

  18. I also have a july 20 / 24 dxd bcs… Thanks in advance 

  19. No fills on ARR-been trying for 2 days. My account is so down-will have to roll down these shorts, do something.

  20. The issue that biotechs are going to have in the near future, and most likely not the next 2 years, but 10 or so, is reimbursement.  Eventually, something is going to happen that will cause the populous to react, and then the wheels will be set in motion – ie GILD and HCV, other orphan diseases, etc. 

    My premise since being here at PSW (an many old timers will remember) is that a rotation would happen, which is now in place, where biotechs are the spokes that feed the wheel (big pharma) analogous to the large airline hub market model.  Pharma would consolidate (done), and biotechs would be bought based upon their ability for innovation (happening).  Big pharma has too much political infighting, and thus are stalled for success.  My next writing, yes it is slow in coming, is about the totality of the market for this space, and how personalized medicine will shape our future, and how reimbursement will drive that business model.  

    The last biotech/pharma frontier, so to speak, is the brain.  We have not even scratched the surface on this one.  Cancer is more like a super bug that is being worked out/understood, but bipolar, schizophrenia, and the likes are going to be the next great cycle in my field.

  21. Ok Phil, it's aapl time.   I'm not around much Monday so I'll ask my annoying question today. Since I've joined PSW I've learned a lot and feel that I've probably just completed the grade school of my stock education. As I look at my Aapl holdings, I sense that you'd tell me to sell the long 90's and buy more bcs. It now makes sense to me but I can't yet see the proper adjustments for the paired short calls. I can come up with some rolling strategy but it's not like looking at the long 90's and thinking "ok the delta is now .85 maybe I should turn these in before I loose some premium". Thanks for your help. All contracts are 2017 and were initially paired:  76 +90call    10 +110call    52-120call     9-125call     10-140call   15-150call

  22. JNJ/Sibe – The reason I stopped liking them was they seemed very sloppy to me in the medical device division with a lot of recalls and lawsuits.  Nothing huge yet but they did recall hip implants and heart stents – no small deals there.  Of course they are a huge company and will probably improve things but that kept me (a former fan) from participating for the last couple of years.  Not that I missed anything because we got out around $90 and now they are $100 two years later…  If they were $80, I'd like them as I think there's a 10% risk due to incompetence and, long-term,  I think they're OK so, if you REALLY want to own them through thick or thin – it's not a bad trade but I'm not seeing a compelling reason to take a position now.   If the traingle squeezy thingy resolvers over $103, you should be in good shape but, if rejected at that $101.50 line – GET OUT!!!  

    China/StJ – Same with any bubble, it spreads to the masses and increases at just the wrong time.  I remember a guy who had YHOO plates on his Ferrari in 1999 – that kind of stuff makes people think they are missing the boat and they start counting all the gains they are missing.  And, of course, while the retail suckers pour in, the "smart money" is heading for the exits.  

    I may have been premature taking that Futures money.  Oil even lower at $56.70 and /TF now failing 1,265 with /ES 2,106.  It will not be good if things fail today.  /NQ is the laggard at 4,510 if the others break lower.  

    Nasdaq/StJ – What inflation?  There's no inflation – just ask the Fed.  

    $5,000 gambles/Craigs – LQMT is a good gamble at 0.13 – could be $1 one day.  Gold is going on sale again ($1,175), we can look at gold stocks next week.  HMY is a nice, cheap one and the Jan $2s are just 0.30.  CLF is stupidly cheap (and popping 10% today) and, of course, an option spread on DBA is a way to intelligently leverage some money.  Jan $23/25 bull call spread is 0.50, so 300% upside potential on that one.  

    If I were you, I'd make him research 5-10 possible plays and pick the companies – he won't learn anything if you pick them for him.  If he loses, he'll learn the folly of investing and, if he wins – hopefully he'll remember the research, not the gambling!  

    Rogoff/StJ – Has that guy not been fully discredited yet?  

    AMZN/Pharm – I'm getting excited to short them again, even though it's like stepping on a Claymore.  

    Raymond James Amazon valuation model, April 2015.

    Most of their expected profits comes from AWS (Cloud) and I think that's where IBM, MSFT, VMW and 100 other people project their profits to come from too.  Like oil – excess capacity leads to price wars and cloud margins can turn ugly fast.  

    Amazon’s segmenting of its AWS unit was the big surprise of Q1 with AWS segment margins of 16.9% in Q1, 14.2% in FY14 — well ahead of general Street thoughts that AWS was in “investment mode,” and losing 5-10% (or more). As such, N.A. retail margins were 2.5% in fiscal 2014 — down from 2.8% in fiscal 2013 largely due to the Fire Phone mess which accounted for ~$100 million margin hit in Q3. Importantly, post the Q4 call where the CFO talked about focus on fixed and variable cost productivity, Q1 N.A. retail margins showed strong improvement at 3.9% (or within striking distance of prior expectations with incremental margins of 8.7% – underscoring productivity efforts and leverage on heavy Prime investments (contents/FCs, etc.)?????????????????????????

    I think we should give them room to run, in case they want to test $500 but, even with these "great" earnings, their forward p/e is still 150!  

    Already you can sell the June $500s for $3.  Maybe around $8 it will be worth the risk.  

  23. Thank you so much for the ideas so far. I like having research work to do since it helps me avoid doing household chores without feeling guilty for doing nothing. I really appreciate all of the help I get for all of you and of course Phil. 

  24. Pharm…any thoughts on SNTA?

  25. Cloud business / Phil – It does look crowded but if you look at MSFT numbers, their revenues from the cloud also increased over 40% so there is still a lot of growth there and the major players like GOOG, AMZN and MSFT will keep on growing for sure. I can speak for my own business because we are replacing the traditional desktop translation applications (not machine translation, productivity tools) with a cloud application. I actually just presented a webinar on that yesterday. But it's only a tiny percentage of the overall translation business now and we are talking about tens of billions of dollars in overall business and much more in years to come! When I talk to my customers, most of them are migrating to that model for some of part of their businesses. So the potential for big growth is there even though margins will suffer, but if you stick with the big guys (which is what we are doing at my company) they should be OK at the end as the weaker ones are killed or eaten!

  26. Phil et al- This is going to be our intro to investing course with an emphasis on this trade being speculative. It will give me the opportunity to sit down and show him all of the wonderful ideas you all have been so kind to share and we can analyze the pros and cons of each. I have done his investing up to now and it is time for him to learn, which was why I wanted a list of ideas to start with. Thanks again to all.

  27. Good Morning

    Phil—I have 25 of the JNPR Jan 17 short 22 put @ 3.49—-now 2.22—-is there anything I can do to protect some of the profit or leave it alone—--thanks

  28. The technology wow… of the day:

    Audi's Actually Making The Fuel That's Here To Save Internal Combustion

    Making diesel fuel from CO2 and hydrogen… Who knew CO2 could be re-used like that. Maybe a solution to global warming.

  29. SI made a low of 15.550. Had to double down a couple of times but made a nice little profit on the run back to 15.70.

  30. Phil//  AMZN is trying to lockup the gov as a customer.  They are building out gov cloud for the gov  Sure IBM/MSFT/VMW are in that space but for now AMZN is the leader with the gov.  Slowly I see lot of my gov clients moving to AWS. In fact lot of customers are moving from private cloud (hosted by VMW) to AWS.

  31. Good ideas Eric. 

    Thanks Bruce.  Turns out oil bottomed (so far) at $56.50, now we'll see how they bounce. 

    CCJ/DM – Jan $22s are 0.75 and the 2017s are $1.95 and you own the $17s so can make $5 on the spread.  Since I'm bullish on CCJ, I'd just leave the short Jan $22s because they can roll to the 2017 $27s (0.85) if all goes well, so much more upside.  If CCJ goes lower, before the 2017 $20s (now $2.50) fail $2, you can sell those and put a stop on the Jans and roll your longs lower (the 2017 $13s are +$2) – so no hurry, right?  

    ARR/LTP, Tri – Plenty of fills on the calls at 0.20 and the puts were easy to fill at 0.25 at first, but then dropped to 0.20 on anxious bidding.  There's no emergency to get the fills – I'd hold out for the 0.05.  

    TZA/Tri – We rolled them to Jan $9s (now $2.05) and sold $17s ($0.70) to pay for most of it.  That means it's no longer a bet, but a hedge.  

    Oil/Batman – If $58.40 yesterday afternoon to $56.50 this morning doesn't make you happy – nothing will. 

    DXD/Tri – The July $20s are $1.35 so I'd roll those to Oct $19s ($2.30) as you're getting $1 intrinsic + 3 months for $1, so the 3 months are free.  

    Biotech/Pharm – All is going as you have foreseen so far.  Great job.  I think the next next frontier in Pharma will be nanobots, but that's 10 years out.  Little robots that clean your teeth and arterieshunt down tumor cells and repair stuff - a couple of breakthroughs and we're there.  

    AAPL/JMD – Are they still a thing?  Yes, you are correct (and greedy) that I would say take the money and RUN ahead of earnings at $130.  Just take the money ($40+) off the table and, if you think you will miss a party, you can buy some 2017 $120/150 bull call spreads for $11.50.  That way, if AAPL goes up, you still capture the next $20 move with 70% of your dry powder still to play.  If however, AAPL goes lower, you save yourself from losses and you can then (if you still believe) deploy some more your $28.50 CASH!!! to improve the 2017 spread.  

    Oops, now I see you already sold stuff.  Hmmm, your positions are a mess but it looks like you have 86 long and 86 short so let's say you cash 76 2017 $90s ($42.50 = $323,000) and 10 $110s ($28.50 = $28,000) and then you have the 52 short $120s ($22.80 = $118,560), 9 short $125s ($20.40 = $18,360), 10 short $140s ($14.20 = $14,200) and 15 short $150s ($11.25 = $16,875).  That's $184,870 worth of shorts vs $351,000 worth of longs so you net $166,130 out by cashing in now and 50 of the $120/150 spreads would be $57,500 leaving you with $108,630 the you CANNOT LOSE and $150,000 of upside potential on what's left – how is that a bad thing?

    You're welcome Craigs.  It's a good father/son project, let us know how it goes.   

    Cloud/StJ – Yes, it's in the explosive growth phase but next comes the price war phase.  I'm not down on the industry, the growth will be huge – but it won't justify a 150 p/e that AMZN is carrying.  

    JNPR/Savi – I think it's a solid target and a good long-term stock.  I wouldn't change it – it's just "on track."   Actually, it's far enough ahead that, at $2, I'd consider taking it off the table and waiting for a pullback maybe make an offer on 10-15 and see what happens?  

    E-diesel/StJ – Cool stuff.  Hopefully they can make it commerically viable.  

    Silver/TraderD – Nicely played.  Stopped at $15.75 though, not an encouraging sign.  

    /RB just got rejected at $2.

    AMZN/Rookie – Well that's smart.  Nobody overpays for things like the Government does!  

  32. Thanks Phil (appl). So you would close the whole BCS, not just the longs. What happened to closing the long calls, opening a new bcs and leaving some of the shorts to "protect the spread". When do you decide to do that and then when do you roll the protective shorts?

  33. Phil / CBI –  It's not low in channel now…  They posted good earnings on OK revs, and they should be able to leverage up margins next 24 months.  At 5.55 earnings in 2015 and a 12X multiple it looks like a 65 dollar stock.  I'm thinking of buying the stock and selling the 2015 60 calls for 10 … i knw they don't have a dividend, but i can't find a good spread at the moment,  Any alternate plays on this.  You're earlier recommendation has gotten away from me

  34. Phil-SI- Relentless selling the last 2 weeks. Makes me think that we might see 15.00, where I would probably be an aggressive buyer. Although I read one opinion that we will see 14.00 this year. And that is worth as much as the one for 30.00 oil. Could happen but doesn't seem likely.

  35. CBI 30 puts at 5.5 and 40 /55 BCS

  36. Still don't understand how SHAK doesn't have options.  It's getting to a very shortable level.

  37. The Hound of Hounslow/ should be an inspiration to all the futures traders on this board :) Apparently he started in 2006 and his first year profits were UKP 33,000. Man, he has been a busy bee during the ensuing years. He traded at a prop firm for a number of years (Futex) and according to the head trader was their star performer. Strange that with his $70,000 fortune he hasn't been able to post the bond to buy his get out of jail card. A like this passage from today's FT:

    High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.


    By 2012, Mr Sarao had almost $17m in an account at Hinduja Bank in Switzerland, but later that year, he proposed transferring funds to the United Arab Bank in Dubai, according to court exhibits filed by the CFTC.

    The sums are starkly different from those he started with. UK company filings show Mr Sarao launched his company in 2005 with a zero balance. He ended his first year in operation with a profit of £33,085 and a balance of £23,085, according to a filing for the year to July 31 2006.

    By 2007, however, he claimed to be making such sums in a matter of hours. That November, Mr Sarao emailed the publisher of a shortlived glossy Wall Street magazine called Trader Monthly, asking about the criteria for its 30 under 30 list, according to court exhibits.

    “If I trade well on a volatile day I normally make circa $133,000. On quiter [sic] days I look to make between $45,000 and $70,000,” he wrote. He preferred to keep a low profile, he added, but some publicity could help him set up a trading arcade — a facility where several “local” or individual investors can have access to the trading technology they need.

    “You must understand that for me to be in the top 30 is not a vanity thing.”

  38. Craig I think oil could come back so there's a way to leverage up for a 10-bagger or pick some energy stocks that got beaten down but will probably survive to bounce back. We've been talking about these stocks for a few months here so I don't mention them.

  39. Phil – any USO and UCO plays you can recommend? Cashed out most of mine on this run up and eager to get back in.  Thanks. 

  40. ganetespib is SNTAs mainstay.  Sell a few puts OTM, but huge risk going forward, as the resistance to their drug over time is a concern.

  41. Thanks Phil—--took 15 off and can get back in if the market ever goes down

  42. CCJ / Phil – thanks for the note.

  43. Talk about the top 1%, Jeff Bezos is having a pretty good day.  His net worth has increased by close to 5 billion ! ! !

  44. Phil using your pivot points of 57.75, 57.20, 56.65, and 56.20 has made me some serious money the last two days. Thanks, Amazing how close the moves were on these.

  45. Cloud / Phil – Not much but irrational exhuberance can justify that 150 P/E on AMZN but apparently not irrational enough! I think that long run, MSFT makes for a nice bet on the cloud. Not a 10-bagger, but a nice mellow play especially now that Ballmer is gone.

  46. I got a alert on /SI.  Are you long off 15.50?

  47. Batman/CBI, I have a strangle selling 2017 35 puts and July 60 calls. Plan on selling more calls if July's expire – just another way to look at it. Got in @ 5.52 for the puts and 1.05 for the calls.

  48. INSY…short?  I think so.

  49. INSY….Aug 60/55 BPS for 1.80…..

  50. What is the deal with SI? In the last year it has only been this low a few times and almost never stays for any legth of time. Is it just the dollar driving it down or is their some other factor at work?

  51. JMD/Phil – AAPL trade of the year. I have to say I am a little lost on these adjustments. Yes, I see a profit is realized, but without wanting to sound too Luddite in this matter, the original idea when placing the trade with a Jan 17 LEAP BCS was to have patience and let time do its work on burning off the premium on the short call and realizing the full price of the spread. All the time knowing that the spread would hold much of its premium until the final months to Jan 17 expiration. I well remember a few months ago a howl of protests on the board against people wanting to adjust the trade of the year with the admonishment that the whole purpose of a 2017 BCS was to be patient. Of course the trade of the year has been taken off the table, and no one is going to argue that a profit is nothing to be sniffed at, but has something fundamentally changed in the 'planting trees' thesis that we should have the strength of mind to be patient with these trades. I'm obviously trying to be provocative in the pursuit of learning, but I am sure I am not the only who does a double take in trying to reconcile how to manage our individual real money portfolios with long term LEAP BCS that we know before we put them on will require us to be patient. I would have said the trade of the year (the Jan 17 90/120 BCS) is still on track, that yes, we are going to have to ask that same question a number of times before quarterly earnings until Jan 2017. It begs the question of what is the hedging strategy that we need to put in place – I'm not sure we have cracked that one yet. For what its worth I just added the Jan 17 120/150 BCS because it seemed such a no brainer!

  52. Wow CBI Crashing…. down 6%

  53. Profits being slowly removed from the market in today's afternoon trading. Early next weak market will need good Apple earnings to sustain upward momentum as Chicago PMI and manufacturing ISM confirm underlying weakness in economy. With Google, SBX, MICROSOFT and AMZN news, if market was ready for next leg up I would have thought we would see more enthusiasm spreading to other stocks.

  54. what is SI?

  55. Phil--Russell lagging today? Strether

  56. @bdc

    Sports Illustrated or a diamond clarity grade

  57. Silver futures BDC. I should have used /SI perhaps to be more clear.

  58. /SI, silver

  59. BIIB down on safety concerns for main MS drug.  TEVA is also actively pursuing other MS options….how about RCPT…???

  60. Long /TF @1265   Keepin my finger on the mouse and no bathroom breaks :)

  61. AAPL/JMD – Well it's such a mess I think it's better to just clean it all up.  Really, you don't have to change the short $140s or $150s, you can just roll the rest to the $150s.  You can't "protect the spread" because you are already all in 2017 and AAPL may pop $30 higher so it's not worth messing around to take a risk – AND WHAT IS WRONG WITH MAKING $30 on $11.50 THAT YOU AREN'T HAPPY WITH IT???  

    Your protection for the simple bull call spread that's $10 in the money is the $108,000 CASH!! on the side which you will use to spend $25,000 ($5 per contract) to roll the $120s to the $110s if APPL sells off and another $25,000 to roll the $100s to the $100s if AAPL falls further and, if AAAP falls further (and you still want to stick with it), you could roll another $25,000 and you'd be in the $90/140 spread and you'd still have $33,000 off the table!  

    So, assuming you REALLY want to stay bullish on AAPL – there is no downside move that will bother you here and, to the upside, you make 50 x $30 = $150,000 plus the $108,000 you have in your pocket, less whatever you laid out.   When 2018s come out, THEN you can get fancier.  

    CBI/Batman – I would point out that you could have said the same thing in 2008 at about the same price for all the same reasons.  There was a lot of QE and China was building whole cities, airports, railways, etc. to create demand and Bush said he would fix everything and the Fed was dropping rates and handing out cash….

    Just be careful with stocks like this in this kind of economy.  My comfort zone here is NOTHING like it was when they were $35 on 2/5, when I said:

    Submitted on 2015/02/05 at 2:52 pm

    CBI/Jbur – I like them but in the CLF, FCX family of LONG TIME for a turnaround. 

    I think they are a good buy down here and you can sell the 2017 $30 puts for $5.10 and net in at $24.90 and leave it at that.  If you want to be more aggressive, you can add the $40/55 bull call spread at $4 and you still have a $1.10 credit (net $28.90) with a potential upside of $16.10 at $55 (up 1,463%).  I like this because it's conservative and, if CBI does drop another 20% to $28, you're still not hurting on the puts and you can invest in rolling the $40s to the $30s for less than $5 more.  

    I don't mind owning CBI at net $29, even if they drop to $15 and you have to DD to net $22.50 – it still works as a long-term hold.  You missed that entry by 40% – you should walk away and just put it on a list of things you'd like to buy if things collapse again.  If you can't live without it, the 2017 $35 puts can be sold for $4 for net $31, but I wouldn't blow that money on a bull call spread and double my exposure.  

    Silver/TraderD – Well $14 is getting down to about the net mining cost (all in) but the production cost is only $9.50 – keep that in mind.  With gold it's $1,050 – so silver much higher to production cost (+50%) than gold is (+10%).  Not so much with the Futures but with options, we can give ourselves an additional 15-20% discount so I'm in favor of playing that way but I generally don't touch silver Futures because they are insanely volatilie and very expensive when you are wrong.  

    There's no such thing as a "real" bottom for silver (or top) – it's very thinly traded compared to gold and can be pushed around by events very quickly. 

    SHAK/Rustle – Maybe that's why they don't want options?  Maybe waiting for lockups to expire?  

    Shake Shack Shares Persist On The Hard To Borrow List …

    USO/Pfehl – I'm not bullish on oil here as I'm pretty sure $60 won't crack until at least the end of May and, even then, I think we'll be back under by Sept unless something major changes.  Around $50 I'll be into going long again but consider this channel $52.25 to $57.75 (2.5% either side of $55) for now and that's certainly not worth buying options for – especially near the top of the channel.  

    15 off/Savi – And don't you feel better now?  

    SNTA/Pharm – Why beaten up today then?  

    You're welcome DM.  

    Bezos/Albo – He deserves it, he's actually created something that has changed the World (for good or bad) and, though it doesn't make money, per se – it doesn't lose it either and he's constantly pushing and innovating.  Guys like that should be rewarded – though $5Bn a day may be a bit much…

    Do you realize every single person on this planet had to give Bill Gates $8.50 to make that fortune (and he's already given half of it away plus there were taxes).  Figure he got 20% of MSTF profits on product sales over time and that means (counting what he gave away and tax to get to $20) that every single person on the planet has spent $100 on MSFT products, which is about right at they are currently doing $90Bn a year in sales.  Now THAT is how you redistribute the wealth!  

    The Dooh Nibor Economy (that’s “Robin Hood” backwards!)

    Ha!  I just tried to look that article up and it used to come up right away on Google (I wrote it in 2007) but now it's on the 2nd page of Dooh Nibor as it's fallen into common usage (even made Urban Dictionary).  There – I've left my mark on the Universe… cheeky

    Pivots/Craigs – It is funny when you can see how closely the Bots follow those guidelines.  

    MSFT/StJ – I agree, I'd buy them on a F'ing dip.  

    Phil - MSFT looking at BCS Jan 16 40/45 for 2.38 selling Jan 16 put for 2.75 for credit

    Phil Submitted on 2015/02/06 at 11:42 am

    MSFT/QC – I like that as they are likely coming into a good cycle as they are forcing upgrades from their server package and there are no realistic alternatives because to have alternatives you have to have extra staff who will be able to transition you and that's not a luxury many corps have.  Of course it may drive a lot of people to the cloud…

    /SI/Burr – I'm long on steaks today, not really in the mood to play – especially with silver (see above).  

    AAPL/Winston – AAPL is up 25% since we picked it and, when things are running too hot, it's good to take profits off the table.  That's what I said when we cashed them out and they've been topping around $130 since.  If you want thing to always be absolutely one way or the other – trading is not where you will find it – not in proper trading anyway.  In this particular situation, with the particular macros – the risk of leaving huge AAPL profits on the table vs the reward of taking them off the table is simply no contest.  Those are decisions we have to make every day – not just the day we enter a trade.   The cost of hedging (SQQQ, TZA) was simply not worth it to keep the trade on to protect about $40,000 of profit we already had in the trade.  That's all.  

    I'm not particularly worried that the 2017 $90/120 bull call spread will fail but it's already $20 and the short $85 puts are $3.35 for net $16.65 off the original net $4.  So, originally we had $4 looking to make $26 (650%) in 24 months but now we have $16.65 (+300%) in 5 months – WAY ahead of schedue and now we are risking $16.65 to make $13.35 (80%), which is nice, but there's 100 ways we can make 80% in 20 months SO WHY RISK IT????

    CBI/Batman – Hope it wasn't something I said….  blush

    Weakness/Den – I agree but they are still painting a pretty picture.  

    Russell/Streth – Well it's been leading for a while so it needs a rest.   Also, weak Dollar not bullis for RUT stocks. 

    /TF/Willsons – Good gamble and good plan to stay seated for the duration.  

    /RB again rejected at $2 – trying really hard.  I almost want that short over the weekend as the move up is BS. 

  62. Out of /TF 

  63. Thats what i call a quickie

  64. Got it. Thanks Phil. Strether

  65. Phil/Black & White – yes, my wife tells me I'm either one way or the other. A lot of good points made in your post. After all these years I still feel like a raw recruit. The challenge is that you are managing officer training. I've got to step up or be left behind.

  66. Phil / CBI – Thanks,  i just bought a small 5x 35 puts for 4.4…. see how it goes…  13.5% of float is shorted now…

    I'll hold off on the BCS / buy / cover  - but if it hits 43 isn range we should revisit.  

  67. From Bloomberg, Apr 24, 2015, 1:37:27 PM

      Serono Chief Executive Ernesto Bertarelli speaks at a press conference in Darmstadt, Germany, Thursday, September 21, 2006. Merck KGaA, the German drugmaker that lost a bid for rival Schering AG this year, agreed to buy Switzerland’s Serono SA for 16.6 billion francs ($13.3 billion) to become Europe’s largest biotechnology company. Photographer: Martin Leissl/Bloomberg News

    Ernesto Bertarelli has every reason to be happy. His $15.8 billion fortune makes him the richest person in Switzerland, the world’s happiest place, according to a new survey. The World Happiness Report 2015 names the alpine nation of 8 million people as the happiest country in the world, followed by Iceland, Denmark, and Norway. 

    To read the entire article, go to

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

  68. From Bloomberg, Apr 24, 2015, 1:23:17 PM

      The silhouette of pumpjacks is seen on the site of an oil well outside Williston, North Dakota, U.S., on Wednesday, Feb. 11, 2015. A plunge in global energy prices that has put some North Dakota oil rigs in a deep freeze has yet to chill the state’s hiring climate. Photographer: Daniel Acker/Bloomberg

    You can now hear the echo of weak first-quarter economic reports in forecasts for the second quarter.

    To read the entire article, go to

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

  69. From Bloomberg, Apr 24, 2015, 1:04:56 PM

    German Chancellor Angela Merkel called for calm after a euro-area finance ministers’ meeting on Greece descended into acrimony and name-calling.

    To read the entire article, go to

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

  70. From Bloomberg, Apr 24, 2015, 1:03:11 PM

    If not for a steady stream of disappointing economic news, what would corporate-bond investors do?

    To read the entire article, go to

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

  71. From Bloomberg, Apr 24, 2015, 12:48:36 PM


    In Shenzhen’s famous Huaqiangbei electronics shopping district, you won’t need to stand in any lines or make an appointment for these smartwatches.

    To read the entire article, go to

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

  72. From Bloomberg, Apr 24, 2015, 12:16:25 PM

    Elaine Wynn lost her bid for re-election to the board of Wynn Resorts Ltd. after failing to win over enough shareholders to back her dissident campaign.

    To read the entire article, go to

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

  73. From Bloomberg, Apr 24, 2015, 12:00:21 PM

    Forget high-yield bonds. The real froth in markets can be found in the swelling pool of negative-yielding government debt from Europe to Japan.

    To read the entire article, go to

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

  74. From Bloomberg, Apr 24, 2015, 12:07:21 PM

    Puerto Rico’s power utility disagrees with a proposal from bondholders to modernize the agency and fix its finances as a contract between the parties is set to expire at month-end.

    To read the entire article, go to

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

  75. From Bloomberg, Apr 24, 2015, 11:58:48 AM

    Resale tickets for the May 2 fight between Floyd Mayweather and Manny Pacquiao are selling at an average of $10,350 following Thursday’s public sale, still at record levels.

    To read the entire article, go to

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

  76. Watch this video at

    Burning Man for Water Geeks

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

  77. From Bloomberg, Apr 24, 2015, 11:01:03 AM

      Venezuelan bolivar notes and various denominations of U.S dollar bills are arranged for a photograph in Caracas, Venezuela, on Sunday, Feb. 22, 2015. A decline in oil revenue has exacerbated the drop in the bolivar, which has lost 90 percent of its value against the U.S. dollar on the black market since President Nicolas Maduro came to office two years ago. Photographer: Meridith Kohut/Bloomberg

    Every time Venezuela introduces a new, weaker currency exchange rate, some of the world’s largest companies face the decision of whether or not to adopt it. If they eventually do switch to the less favorable rate, it can result in multimillion-dollar charges that drag down balance sheets and earnings statements.

    To read the entire article, go to

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

  78. Phil – Thanks for the USO and UCO comments. It's hard to wait sometimes and I wasn't sure if your outlook had changed.  

  79. From Bloomberg, Apr 24, 2015, 12:00:04 AM

      Alice Aycock’s series of sculptures, “Park Avenue Paper Chase” were displayed along Park Avenue in New York in March 2014. Source: Alice Aycock via Bloomberg

    Traffic on New York’s Park Avenue came to a standstill for two nights in March of last year while a construction crew unloaded seven massive metal sculptures by Alice Aycock.

    To read the entire article, go to

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

  80. From Bloomberg, Apr 24, 2015, 11:46:30 AM


    An unforgiving job market and insufficient emotional support can make graduate school a tough slog—so much so that, at the University of California at Berkeley, 47 percent of Ph.D. students and 37 percent of master’s students appear to be depressed, according to a new report.

    To read the entire article, go to

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

  81. From Bloomberg, Apr 24, 2015, 9:43:55 AM


    American Airlines put off delivery of five Boeing Co. 787 Dreamliners to curb growth in international markets where a glut of seats is crimping fares.

    To read the entire article, go to

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

  82. From Bloomberg, Apr 24, 2015, 6:00:11 AM


    Nearly a fifth of the National Football League settlement approved this week compensating former players with head injuries could go to their health insurers instead. 

    To read the entire article, go to

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

  83. From Bloomberg, Apr 24, 2015, 8:30:02 AM


    Business investment is slowing and U.S. machinery makers are suffering the brunt of the damage from slumping energy exploration, a stronger dollar and tepid overseas markets.

    To read the entire article, go to

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


    The news leaked yesterday, but now it’s official — the merger deal between Comcast and Time Warner is officially dead. Comcast was offering $45 billion …

  85. Greek Finance Minister: It's not complicated – we just have to convince our creditors we're right, and they have to realize they're wrong / Shane Ferro

    Yanis Varoufakis, the finance minister of Greece, is back to blogging. He posted on Project Syndicate Thursday, laying out his government’s position and…

  86. The Old Models Of Work Are Broken / Tyler Durden

    Submitted by Charles Hugh-Smith via OfTwoMinds blog , The only sustainable way to avoid being commoditized is to learn to create value in ways that cann…

  87. See the 50 Best Images Taken by Hubble / Jeffrey Kluger

    After a quarter of a century on the job, the Hubble Space Telescope has returned some of the most extraordinary cosmic images ever captured The best spa…


    PARIS (Reuters) – The risk that Greece would have to leave the euro if it has to accept more austerity is no bluff, Greek Finance Minister Yanis Varoufa…

  89. The happiest countries in the world, according to neuroscientists, statisticians, and economists / Erin Brodwin

    An international team of economists, neuroscientists, and statisticians just released their third World Happiness Report, which measures well-being in c…

  90. Apple Outlines Types of Apple Watch Damage Eligible for Warranty Service / by Joe Rossignol

    MacRumors has obtained official Visual Mechanical Inspection information for the Apple Watch that reveals what type of damage is eligible for warranty …

  91. "I’m Not Crazy, I’m Scared" - Why For One Trader, This Time It Is Different / Tyler Durden

    Bloomberg’s Richard Breslow, author of “Trader’s Notes” is painfully accurate with his latest take on the “markets.” I’m Not Crazy, I’m Scared The SPX f…

  92. went long /RB but got out at 2—penny and a half

  93. James Bond needs $5 million to hold a Sony phone, and he still doesn't like it / James Vincent

    James Bond doesn’t work for free. He isn’t just some gun for hire. He has standards, and values, and if you want him to use your smartphone in a movie y…

  94. / Tyler Durden

    We’ve all seen Chinese stocks explode in the last year; we’ve all seen margin lending soar to fund this exuberance; we’ve all read the dominant buyer in…

  95. Free Lunch: The IMF's big stick / Martin Sandbu

    Foreclosing on the ECB? Few have great hopes that an agreement between Athens and its creditors will be struck at the eurogroup meeting in …

  96. Little Change in Percentage of Americans Who Own Stocks / Gallup, Inc.

    Story Highlights Fifty-five percent of Americans are invested in stock market •  That remains down from 62% in early 2008, before the financial crisis W…

  97. Statue Of Liberty Evacuated Following Bomb Threat, Suspicious Package

    The Statue of Liberty was evacuated Friday afternoon after someone called in a bomb threat and parks police reported a suspicious package, law enforcem…

  98. “For all intents and purposes, these are parking lots”: Oil and gas drilling is destroying our landscapes / Lindsay Abrams

    50,000 wells are drilled every year in North America — and the damage, researchers say, may be permanent Spurred by the advent of fracking and other hi…

  99. Significant Slip-Or Just A Blip-In Emerging Markets’ Foreign Exchange Reserves? / Posted By: Franklin Templeton Investments

    Significant Slip-Or Just A Blip-In Emerging Markets’ Foreign Exchange Reserves? by Mark Mobius, Franklin Templeton Investments. For those looking to inv…

  100. The 7.5 Year Itch Starts Next Week / Tyler Durden

    A gentle reminder that next week sees the beginning of the market’s seven-and-a-half year itch … Stranger things have happened… Remember the stop-o…

  101. MSFT – yes, its not a good sign to have MSFT up this much and INTC down and CSCO barely move.


    From economists at Nomura: US Q1 GDP: It will likely show that final sales barely grew, but April data should be better. Adverse weather conditions, Wes…

  103. What it's like to eat a $225-per-person, 3-hour dinner at Eleven Madison Park, the best restaurant in America / Melia Robinson

    Eleven Madison Park was just named the best restaurant in America, and we can see why. With Michelin-starred chef Daniel Humm at the helm, the French-in…

  104. You're welcome, Streth.  

    Training/Winston – Rigidity can be a bit dangerous in trading as it's a very dynamic environment.  That's why I am loathe to call things "rules" because it's very often adapt or die in a live market.  

    CBI/Batman – That's the right attitude, if it gets cheaper (and you don't mind why it did) THEN you can step up with some more cash.  

    You're welcome Pfehl.  No change unless the facts do and, so far, it's just the spin that's changed.  

    Good time to look at the strip, though:

    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Jun'15 57.53 57.95 56.50 57.18 14:39
    Apr 24

    -0.59 286912 57.74 440126 Call Put
    Jul'15 59.03 59.49 58.25 58.93 14:39
    Apr 24

    -0.36 85021 59.26 232741 Call Put
    Aug'15 60.03 60.36 59.25 59.86 14:39
    Apr 24

    -0.28 44970 60.13 75281 Call Put
    Sep'15 60.58 60.92 59.92 60.52 14:39
    Apr 24

    -0.17 52241 60.67 157161 Call Put
    Oct'15 61.00 61.30 60.46 61.00 14:39
    Apr 24

    -0.07 26912 61.11 82731 Call Put
    Nov'15 61.47 61.71 61.04 61.56 14:39
    Apr 24

    -0.03 13288 61.57 55872 Call Put
    Dec'15 61.92 62.32 61.48 61.97 14:39
    Apr 24


    -0.07 55455 62.04 216315 Call Put
    Jan'16 62.24 62.59 61.90 62.39 14:39
    Apr 24


    -0.02 5247 62.41 53217 Call Put

    Wow, 904Mb of front-month orders – where are they going to put those?  I've never seen 1Bn (1M open contracts) but we're heading that way at this pace.  Already Sept is getting jammed up so, even if we survive the Summer, the Fall is going to be catastrophic if they can't bring down that barrel count.  Longer-term it's pretty flat with $64 coming on 9/16, $66 on 10/17 and $68 on 6/20 so no true believers in a recovery just yet.

    By the way, if you're ever in NYC and want an indulgent meal – that 11 Madison Park kicks ass!  (news item above).  15-course tasting menu from a great chef is one of those experiences you just have to have in life.   It's still wait-listed, so you have to plan it – but worth it!  

    /RB/Savi – Very nice and smart exit.  

    MSFT/Deano – Trouble in tech-land?  Well, if everyone is going to the cloud, less biz for local network guys, though CSCO has a foot in both worlds.  

  105. JDM:APPLE  On your thesis of the 2017 AAPL, BCS, if you could recognize 50% of the profit potential in 6 months why would you not want to take profits and go on to another trade. That said, there is a difference in being a long term investor ie., planting trees vs a trader who looks at the return on margin during the investment period.  I just closed a AAPL January 16, 90/105 BCS at a 50% profit in 6 months. Now I can take that profit and trade another LEAP for 2017 which has more time premium.

  106. TWTR diving back to $50.  

    CLF actually staying near $6!  

    Funny what you can be happy with after months of abuse….

    Uh oh, sellers coming in and not finding buyers!   /TF 1,263.50.  /NQ still the laggard at 4,527, /ES a good short below 2,110 and /YM below 18,000 is certainly a good line. 

  107. Pharmboy

    I am looking at companies that are Diagnostic with Products & Companion Diagnostics

    Do you have any opinion, thoughts on these three?

    CGIX Cancer Genetics, Inc.

    CLVS Clovis Oncology, Inc.

    MYGN Myriad Genetics Inc.

     Thank you for the time and advice

  108. IHS Winston Phil

    On the take the money and run thesis.

    I am in the JUL UCO 5/9 BCS with the 5 put. In at net 1.4 one Month ago.  Now at 2.88 on the way to 4. 100% + Gain so far still another 38% to gain in 3 months. Normally I'd be happy for a 38% gain in 3 months!  

    From comments today on oil and gains in general  it sounds like :Get out take the money and wait for another similar entry….at least on oil. 

    Is that correct

  109. SNTA….the dive was due to an offering @ 1.75 (22M shares)…the rise was due to ??? short covering?  Now, they are pounding it back down.  Someone put a $6 target on it…and that was on Saturday.  So, go figure.

    CGIX – they have approved test for cancer types and could be a good contender.  The other is GTHP…and I have been in them for several years.  Now 21c.  Their product is for detection of cervical cancer from HPV, etc without doing cervical scrape.  Just incompetent management I guess.  This should be a no brainer.

    CLVS – interesting company but not really a diagnostic.  They have drugs in the pipeline for cancer.

    MYGN – eh, they have patent issues.

    ILMN…this is the best one.  I am sad we are not in them from our $30 to $40 run…. :(

  110. ARIA has been on a tear lately….

  111. Wow, this is sobering (one would think):  

    I mentioned this statistic before but the chart hammers it home – $5 out of $6 of purchases of shares in the US markets are companies buying back their own stock!   How is this going to be sustainable when they aren't earning more money?  As the shares get more expensive – they simply can't afford to keep up the pace and, eventually, they run out of money – even free money….

    SCO/Gerry – I believe in our target for July but I also expect a pullback in between.  You can get $4.40 for the $5s now and that's more than the spread and you can buy back the short $5 puts for 0.10 and that leaves you with just the naked short $9s ($1.20), which you can roll to the May $8.50s (0.95) for 0.25 and then buy the Jan $10/14 bull call spread for 0.90.  If all goes well, the May calls expire worthless and you have $3.25 + whatever value the Jan spread has left.  You can then use that money to adjust it back to July if we get a nice May dip first.  If not, lots of room and time to roll and you haven't even sold puts yet and you have $3.25 on the side – just in case.  

    SNTA/Pharm – That's a fun ride!  ARIA seems to often be on a tear.  

    Of course, before that, there was that day (Sept 2013) when it fell from $20 to $4…

  112. ARIA…that's when we got in!!!!  PSW motto, no?

  113. CBI/Batman:

    I have positions in all accounts with an array of spreads. stock and short puts. I am having trouble with your logic. If you believe that CBI is a good value with earnings of about $5.55, and you think there will be mutilple expansion in the future (as I do), why would you purchase 5x Jan17 30 puts for $2200.00 + comissions. Or maybe I misunderstood your post??

    If you did purchase them it is an agressively bearish trade, since you bought all intrinsic, and you will not even breakeven until, and if, CBI gets to  $30.60. Unless we have a 20% market correction, this isn't likely. I listened to their conference call, and the only problem I detected at all is slowness in collective current receivables. 

    I have made many trading mistakes over the years,  and am simple trying to put some perpective on your trade.

  114. I think/hope he meant sellling the puts to get cash and establish a cheap position.  

  115. Pharm…ISCO soaring today!! What’s 8% of .07$? I need an abacus to figure it out!

  116. So much for selling off – pushing it real good into the close now.  Going to be record high for the Nasdaq on the cover of the magazines this weekend.  S&P too.  Dow 18,000 – BUYBUYBUY!!!  

    Here's someone not having a great day:

    • Unisys (NYSE:UIS) is down sharply after missing Q1 revenue estimates (while beating on EPS) thanks to a 16% Y/Y drop in non-U.S./Canada revenue. A strong dollar exacted a heavy toll: Non-U.S./Canada sales were down only 5% in constant currency.
    • Along with its results, the mainframe/IT services provider (4 months removed from gettinga new CEO) has announced it's launching a restructuring expected to cut headcount by 8%, and yield $200M/year in savings by the end of 2016. $300M in restructuring charges are expected over the next several quarters.
    • The services backlog was $4.5B at the end Q1, -$300M Q/Q (seasonality) but flat Y/Y. Services revenue fell 6% Y/Y to $639M, while Technology (mainframe/server) revenue rose 3% to $82M. U.S. federal revenue +13%,, other public sector -10%, financial industry -10%, commercial industry -7%.
    • Gross margin fell 130 bps Y/Y to 16.2%, and operating expenses fell 4% to $147M. $128.8M was spent on SG&A, and $18.2M on R&D.
    • Q1 resultsPR

    MSFT up 10% and AMZN up 14% is the whole story on the Nas today – covering the retreat of chip stocks.  MSFT also boosting the Dow by 40 points (out of 28 gained) and both boosting the S&P.  

    • Janney, JPMorgan, and Raymond James have upgraded Amazon (NASDAQ:AMZN) after the company beat Q1 estimates on the back of a 24% Y/Y increase in North American segment revenue, guided in-line, and (importantly) reported AWS had a $265M Q1 op. profit on revenue of $1.57B ($680M and $5.16B for the trailing 12 months). At least 7 other firms have hiked their targets. Amazon's market cap is at $181.6B.
    • JPMorgan's Doug Anmuth (upgrade to Overweight, $535 target) now values AWS at $66.3B, or 16x estimated 2016 EBITDA. "[W]e think the reported profitability level far exceeded virtually all expectations. CSOI margins of 17% in 1Q15 and 14% in 2014 have been driven by increasing scale and greater utilization, along with additive servicesbeyond core EC2 and S3 [computing and storage] services. When factoring in heavy depreciation, AWS has EBITDA margins of around 50%."
    • Janney's Shawn Milne (upgrade to Buy): "AWS segment margins of 16.9% in Q1, 14.2% in FY14 — well ahead of general Street thoughts that AWS was in 'investment mode,' and losing 5-10% (or more)." He does note Amazon's North American retail op. margin fell 2.5% in 2014 from 2.8% in 2013 (thanks largely to the Fire Phone debacle), but adds it rebounded to 3.9% in Q1.
    • Raymond James' James Kessler (upgrade to Outperform) focuses on Amazon's total margin improvement. "Non-GAAP operating margin of 3.1% was ~100 bp above our/consensus estimates driven by improved gross margins and modestly lower than expected operating expenses. Amazon also guided 2Q margins above consensus at the high end."
    • On SA, Brian Nichols argues AWS would be worth $50B at 45x forward op. income, and thinks the business could be valued at $85B if publicly traded by itself. The Panoramic View: "Facebook and other leading tech companies used to garner a 10x revenue valuation when they were in similar stages of development. I think that the same can be applied to AWS."
    • On the CC (transcript), Amazon stated active customer accounts rose by 8M Q/Q to 278M (260M paying customers). Y/Y paid unit growth was steady at 20%, and 3rd-party sellers made up 44% of sales vs. 43% in Q4.
    • Prior Amazon earnings coverage


    Chips going the other way:

    • Though the Nasdaq is up 0.7% thanks to market-pleasing earnings from Google, Microsoft, and Amazon, chip stocks (SOXX -2.1%) are adding to their Thursday lossesafter FreescaleAlteraMicrosemi, and Maxim joined the ranks of chipmakers offering soft Q2 guidance; Texas Instruments, Xilinx, and Qualcomm did so on Wednesday afternoon.
    • NXP (NXPI -4.3%), set to merge with Freescale in a cash/stock deal, is selling off ahead of its April 29 Q1 report. RF chipmakers Skyworks (SWKS -3.8%), Qorvo (QRVO -4.4%), and Avago (AVGO -5.2%) are also seeing steep declines.
    • Other decliners include a slew of telecom/networking, microcontroller, and analog/mixed-signal chipmakers. The group includes Marvell (MRVL -3%), ON Semi (ON -6.9%), Atmel (ATML -3.3%), Cypress (CY -4%), Lattice (LSCC -3.9%), Semtech (SMTC -6.9%), Cavium (CAVM -6%), PMC-Sierra (PMCS -2.9%), InPhi (IPHI -3.8%), and Silicon Labs (SLAB-2.9%). Chip packaging/testing firm Amkor (AMKR -5.7%) is also off; its Q1 report arrives on Monday.
    • As was the case with TI and Xilinx, soft telecom equipment chip demand was often blamed by those guiding light yesterday afternoon. Freescale (FSL -3.5%) stated it expects network processor division sales to be down Q/Q and RF (base station power amplifier) division sales to be flat. Microcontroller, automotive, analog, and sensor division sales are expected to rise.
    • Altera (ALTR -3.3%) stated its "telecom and wireless business, and particularly our wireless business globally looks to be quite weak in [Q2], while the rest for our business will in aggregate be flat to slightly up." Regarding its Q1 miss, the company notes "Industrial, test, compute and storage, and to a lesser extent military, fell short of our forecast" (share loss to Xilinx?).
    • Maxim reports seeing "broad-based softness in communications infrastructure demand" and soft industrial bookings to go with healthier mobile/auto demand. The Galaxy S6appears to be giving a lift to Maxim's mobile sales.

    LOL – Guy on CNBC says "earnings are OK in spots" – Wow – what a ringing endorsement! 

    • U.S. oil drillers took another 31 rigs out of service last week, falling for the 20th consecutive week and bringing the total number of active rigs down to 703 from their October peak of ~1,600, according to the latest weekly survey from Baker Hughes (NYSE:BHI).
    • More than half of the oil rigs idled this week were in in Texas, as the state’s rig count fell by 19 to 393, down from 894 a year ago; of that number, a dozen were sidelined in the Permian Basin in west Texas.
    • The total U.S. natural gas rig count rose by eight to 225 rigs; the overall total U.S. rig count declined 22 to 932 (four rigs were listed as miscellaneous).
    • Vale (VALE +9.1%) continues to surge, headed for its biggest weekly gain in 16 yearsand gaining nearly 50% since Wednesday's announcement that it produced record-high levels of iron ore, nickel and other commodities during Q1.
    • Also on Wednesday, BHP Billiton (BHP +3.4%) said it was curbing expansion plans and supplies from higher-cost mines dropped, easing concerns over a global glut and sparking iron ore biggest one-day price jump since 2012.
    • "Vale is reacting to the rebound in iron ore prices,” said an equity analyst at CM Capital in Sao Paulo. “Most of Vale’s costs are fixed, so whenever there’s an increase in prices, there’s a direct impact on earnings.”
    • Iron ore prices jumped 5.5% overnight to $57.81/dry ton and have rallied 23% since bottoming out at $47.08 on April 2.
    • Also: RIO +1.6%, CLF +3.7%.

    OK, that's that for the week! 

    Have a great weekend everyone, 

    - Phil

  117. Gerryf: Take the money and run….. 38% in 3 months is great, but in my case I had already made 50% in 6 months and to get the remaining 50% would have to wait another 18 months. You do the ROM calculation.

    Have a great weekend.

  118. Who is buying this?

  119. 11 Madison – My wife's birthday.  Taco Bell -My birthday, after I sold the rolls from 11 Mad.

  120. Jburr / Phil / CBI – Sorry – i meant i sold the 35 puts for $4.4 – Thanks for noticing…  I Think they have a very good business model..  They reaffirmed the 2015 outlook, and i'd like to get a position on them.  I am concerned at the high short ratio on the stock, but with the pullback today i thought it was a good oppy. I'm setting an alert at 43 to review again.

  121. CSCO raised to a conviction buy at GS.

  122. Batman-   Phew! You had me and Phil a little worried there. Have a good weekend.

  123. Weekend comments now moved to new post please (Top Trade Review).  Though no one seems in a chatty mood this weekend so far…