October 22nd, 2007 at 9:55 am | Permalink edit
ROFL – great, I couldn’t make my own plays on the Dow and the Qs and you know how I hate to chase… That’s ok, it’s kind of a half-hearted recovery so far.
FWLT has officially gone into my “Stay Away” pile, I’ve never seen something that wipes out callers and putters like that. It’s always so tempting but then it goes past the breaking point and then snaps back – almost like the guy you buy options from has total control of the movement.
Optrader, dead on with shorting bounces – or at least not taking them too seriously. That’s why I’d rather cover the upside with index calls than run out of our puts right away. Remmeber my general rule of thumb, anything less than a 20% recovery (that would be + 90 points, not + 60 points off another 90 point drop!) is nothing more than a small bounce and does not change the trend at all. If the drop lasted a day, the recovery should come in no more than that time. We have a huge 1 day drop from Friday to make up before we even begin to look at what a recovery from last Monday (Dow 14,100 at the open) would require.
LOOK AT THIS CHART! Bear (oops, don’t say bear!) in mind where we are when we “break” 13,500 or 13,600 before you get too sucked in:
October 22nd, 2007 at 10:14 am | Permalink edit
ADBE creeping up. PTR doing well with IPO in China coming soon.
Lots of buyers stepping in, let’s see how far we go as we test 13,500, 1,500 and 2,750 pretty much simultaneously!
October 22nd, 2007 at 10:22 am | Permalink edit
BA is still an accumulate down here.
AAPL – I’m mainly selling the $165s but I’m the nervous sort!
BSC trying to mount a comeback, GS at $220 and BSC at $118 are the spots to watch but we’ve got the Apple/Google/SOX/Nasdaq move that I said would be the best chance of sucess for today so we can buy some tech (anything with 4 letters in the symbol actually) until 2 of those 4 turn back down. XXX
October 22nd, 2007 at 11:01 am | Permalink edit
CAKE coming back nicely.
XOM heading to $90!!! COP with a nice move down too.
Sorry to say we are looking at a possible rejection on Dow, S&P, Nasdaq as well as Russ 800 AND NYSE 9,900 – when round numnbers start to matter that much (especially in a mild recovery) then it’s a sign that sentiment has really turned down if something as silly as arbitrary index numbers are going to stop people from buying.
Don’t say we didn’t get a retest of Aug lows.. The week is young. If Apple doesn’t wow us we could be there really fast. In-line will not do it for these guys.
Energy sector is finding a temporary bottom, which is great if you want to see us turn green on the Dow and SPX today but the financials aren’t really holding up their end yet, I’d like to see the XLF break 33 so add that to Dow 13,500 (really 13,600 but let’s keep low expectations), S&P 1,500 (1,515), Nas 2,750, Russell 800, SOX 480 and XLE 74… If we get 4 of those and the others start catching up, then we could start looking at the next levels.
I was hoping for an energy recovery to short more, if they keep going down it will make some sense to go long into inventories. SU is holding $100 and that’s pretty telling and XOM should be able to hold $90.
If GOOG keeps going up AND the market hits our levels, then I like the $4.50 spread of the CME (10/24) Dec $630s and the Nov $620s as they’d have to get whacked pretty hard for you to not get $6 back and the $25 premium paid by your caller more than covers the $10 gap between your positions PLUS the $6 you are throwing in. XXX
BA – I’m focused on the Jan ‘09 $95s, currently $12.60, holding them naked for now.
Fire Insurance plays – Absolutely AIG and ALL, both strong but AIG probably the best as people don’t understand how good a fire where they pay out maybe $100M in damages, is for their $122Bn in business. Just like a casino, insurance companies want SOMEONE to “win”, it keeps everyone else playing…
By the way, I watched the movie Casino over the weekend and, aside from being a great film, the narration about the overall scam of the gaming business is very appropos for option trading as you can see, from the house perspective, how it’s a sucker’s game. Until you learn to be a seller of options, it will be very hard to make a long-term “career” out of this end of the market for all but the very best market timers.
LVS trade – Not a good entry now as you missed a month and 35% profits, that means the trade has to get 70% profitable before you make as much as we did and, by then, we’ll be running for the exits! I’m very skeptical of their earnings and our current position is there to lock in profits as much as to make some more, not at all like our original entry. With earnings on Halloween, I think we could be heading to a very spooky $100 before this period’s over. I like the Dec $125/Nov $120 spread for .65 enough to put that in the $10KP & 25KP for 5 units as we already have upside protection through our put play in the $25KP and we’ve got room for a spread in the $10KP. XXX
October 22nd, 2007 at 12:04 pm | Permalink edit
SLB – I wouldn’t short them but we have to prove the world’s nt heading into a recession to buy.
AAPL Jan 175/Nov 165 – I like it other than the $10 margin requirement but that will be 1/2 taken care of tomorrow so no big deal.
AXP – I like them a lot because they are not as much a credit card as the others. If they do slow down then it’s all over I think.
I would like to call this spot down 440 points from Friday morning rather than down 60 for the day, it helps keep things in perspective until we go green.
S&P acting like 1,500 is an unbreakable wall after not having been below it since 9/18. This kind of calls into question the validity of the breakout, that came on Fed day, during expiration week at the end of the quarter. Other than a spike, you can see on the dailys that the run pretty much did top out at 1,550 but it’s the speed of this end of the retrace that’s alarming as there is little reason not for us to test 1,475 on the S&P if we lose 1,490, which was a reliable floor between May and June and acted as a cieling in Aug and Sept until the Fed goosed us over it (and don’t forget that came at the end of a huge pre-fed rally that got us off 1,450!
AAPL – I felt strongly about GOOG’s fundamentals and I was right but I’m still glad I have $620 and $630 callers protecting my massive gains… So I’m reasonable happy on a huge run up but I would have been even happier had I been wrong about the fundamentals as my callers bit the dust.
TASR rockin’ and rollin’
GS and XOM showing signs of life now. Looks like bargain hunting at the moment rather than conviction buying.
Oil plays. I’d play COP up and SU down IF I were going to play but I’m pretty much on the sidelines today unless we break out one way or the other. Up or down less than 90 points means little today.
October 22nd, 2007 at 12:22 pm | Permalink edit
DRYS – very dangerous to short them here. Watch out if they break $115.
UAUA – ah but what IF they can make money with $85 oil? If we imaine this to be the peak for oil and if they have gotten other costs down to compensate, then they become a great bet on oil going down.
LVS – that spread filled for me at $13.33 for the Dec $125s and $12.68 for selling the Nov $120s. Since the whole trade is .65 if you pay $1 you are overpaying by 50% to enter the trade. Since we should be thilled to make 50% on a spread, it isn’t the kind of thing you should be chasing. You need to keep things in perspective. I’m tying up $2,500 in margin and playing $325 in actual cash. If I make $300 today or tomorrow and can get out, take the money and free up my margin – I should do it! With a $10K virtual portfolio doing that twice a week for a year gets you $30,000 while riding it out means you will get perhaps 18 plays a year with some winners and some losers.
The trick is to get a GOOD deal on a spread and look to get out early. As you increase your virtual portfolio you can make more and more spreads and those 20% gains really start to add up!
GSK – the sector really fell out of favor last week but MRK gave a good report and GSK should hold $50 so going with the Jan $52.50s at $1.52 and selling 3/4 Nov $50s at $1.42 is a nice low-risk way to play them but I’d buy the longs first and see if we get a bounce. XXX
October 22nd, 2007 at 12:34 pm | Permalink edit
Dec UPLs – I wouldn’t touch energy to the upside now except as a mo play. I really think the majors are going to tank earnings and, if tech is performing, we could get a very big sector rotation that’s been a long time coming.
AAPL store – I could not believe the crowd at the one in the mall near me this weekend. You would have thought it was the weekend before Xmas BUT they had tons of staff who actually knew what they were doing, a computer area to dump your kids (with tons of games for all ages that they, of course sold right there) and the 4 people running checkout lines were way outnumbered by the tech support people who manned a much bigger desk. I don’t know if they’re all like that but this one (North Jersey) could have been a field model for a business school course in how to run a retail store…
Turkey Story – Good spot Daniel! Yes peace in Turkey could bring us below $85 really fast and that means we could get some real fuel for a bounce once the oil companies stop falling. I said before watch BA so watch BA here, finally breaking up a bit…
October 22nd, 2007 at 1:00 pm | Permalink edit
My take on the week? My take is wait and see. One of the tricks to making good predictions is making sure you have your facts straight before jumping to conclusions – that’s my main trick to seeming like I know what I’m doing, I wait longer than most people before having an opinion (I’m not supposed to tell you that, it blows the “mystique”) 
Losing 10,000 homes? That sucks but it won’t put a dent in the national overhang of unsold homes (neither did losing the city of New Orleans with 204,000 homes damaged or destroyed, probably about 50,000 still uninhabited – didn’t put a dent in US demand…
Hey Film, how about this: We could break 13,500 today. Happy now?
AIG – not puts, calls but not yet.
China bubble – that’s great Mrl! If you guys have time, check out the referenced MS presentation by Meeker, she’s very good! Note the comment “In 2003, the combined market capitalization of China’s publicly traded Internet companies was $5 billion. Today, it is $50 billion.” They also link to an NYT article that struck me as interesting as all those Japanese stocks that were listed as the 20 most valuable companies in the workd back in 1989 fell righ off the charts in 1999 and the 1999 group, of course, was half gone by 2007 – the one bet you don’t want to make is on stability!
YRCW following through on Friday’s move in a big way. Makes you think the whole sell-off may have just been option expiration shenanigans! Still not seeing a broad based rally but the internals are curving up and the S&P is seriously thinking about 1,500.
COH (10/23) – they’re Jan ’09s and up 60%. I like them too much to cover them as I think they should be over $45 and I have enough time to recover from being wrong.
TASR – I am covered with Nov $20s from 10/9, down here I’m actually taking the opportuntiy to roll my Jan $20s to Mar $17.50s and I’ll sell Nov $17.50s if I think it looks toppy but, for now, I’m content to let it go a bit.
October 22nd, 2007 at 1:10 pm | Permalink edit
AXP – No cover. Also ’09s and they weren’t worth rolling ($60s) and I sure wasn’t going to bother with .85 to cap my gains at $61 when I think they’re way oversold. For $1.50 though, I’ll sell the $60s. If you want protection, the $57.50s for $2 are the way to go but I’m in the mode that I can afford to wait and see and, if AXP misses, I’ll be moving a lot more than that position to cash!
FNM – yeah there’s a real danger of gettin whipped on all puts so why be so in the money. You can roll to 2x the Jan $60 puts for $12, and sell the current $60 puts for $4.30, perhaps a 3/4 sell if you think they may go much further down but it puts 2/3 cash back in your pocked and locks in half your gains while having the putter pay more than half your premium with a 2 month spread.
October 22nd, 2007 at 1:19 pm | Permalink edit
Check out LEN, HOV, BZH.. I smell bail out!
Very bullish action now, remember what I said about mattress plays going both ways if you are too bearish but I’m still watching the SOX, who are dragging a bit but I’m stopping out of puts and leaning back towards establishing downside hedges while the market goes up and letting my positions enjoy a bullish bounce.
October 22nd, 2007 at 1:40 pm | Permalink edit
FNF – oh yeah, ahead of earnings… Hmmm, I wouldn’t sell right now with all this housing rally going on but earnings are Wednesday and if they don’t break $17 before the Dow turns down then I guess taking half off would be prudent although I’d rather sell $17.50s against half for .50 so let’s see if we can get that. XXX
The turn we want to watch for is a 20% bounce from Friday like 13,600 – if we get past that we’re in decent shape (providing we close above it).
OXPS – DD, hell yes!
FXI – good idea if we hold 13,600 as they could have a much more pronounced bounce.
Oil bouncing back to $88 – whoopie!
October 22nd, 2007 at 2:34 pm | Permalink edit
Nasdaq couldn’t hold 2,750, I’m not happy about that!
Lots of annoying action right now but the NYSE turned red again and that’s really bad. Pisani says a lot of the builder rally is short covering based on “someone” coming in to rescue the builders – more rumor BS. This is why I like cash, it takes a while for the truth to sort itself out.\
T – I’m giving them a chance. They are my upside risk to what may be an overhedged Apple position.
Gold stocks held up well today despite a dip in POG. Got my MRBs at $5.15 and NAKs at $11, both stocks I really love.
COP may be ready to rumble. $85s are $1.65 and make a nice hedge against bearish oil plays. XXX
Those were not my SPYs! As to the $149 puts at $3, you can take 1/2 off the table by moving to a Dec/Nov $151 spread where your caller will pay $2.25 in premium and, if you time it well, you can take him out on a spike and then enjoy the ride down until you sell again – hopefully next time to the $150 putter.
Welcome Jimmyo! We make several new $10KP and $25KP picks a week so don’t feel like you have to “catch up.” I always say to new members though that the best plays to make are the ones we got wrong and are still either rolling or doubling down on. That way you get to skip the collapse part of our ownership and go straight (hopefully) to the recovery. OXPS is one we just did a DD on at .35 on the Nov $30s as our original entry was .70 back on the 12th.
OXPS – max amount? In the $10KP it’s just buying 10 more contracts for $350 to reduce our basis. Double downs are in contract size, not money. That way if you have a $5K budget for a positon and you buy 1/4 for $1,250 (let’s say 10) and it goes down 20%, you can buy 10 more for $1,000. If it drops another 20% and you decide to DD from there, you buy 20 more for $1,600 so you now have 40 contracts at $3,850 when your original goal was to buy 40 for $5,000.
Most likely, you can use the extra $1,150 to roll all 40 to a better position, setting yourself up for a nice gain if they have even a mild recovery. Of course this is supposing your original premise is still intact…
SPWR and CY on a tear!
GS puts terrible idea. You do know they run the Treasury department right?
October 22nd, 2007 at 2:54 pm | Permalink edit
Hard stops are very bad as they trigger on 1-min spikes, which is pretty much all the time. One trick I have is to set a hard stop for one share, I get an Email alert that it triggered which causes me to focus on the position so I can decide if the move is real or not and, since the trade is already in my execution pile, I can simply reopen the order and sell the rest if I need to.
The best use of hard stops is, of course, if you have to leave and you set them up as disaster protection. I’m up 25% on the LVS puts in the $25KP so if the stock breaks $130 and I lose 5% of my gain, it’s definitely time to say goodbye to them (or cover).
AMZN – try this:
Buy the ’09 $100s for $16.95
Sell the ’09 $95s for $18.75
Buy the ’09 $80 puts for $11.80
Sell the ’09 $90 puts for $16.25
You pocket $8.05 and you win between $81.95 and $103.05 and the most you can lose is $1.95, max gain comes between $90 and $95 of course. XXX VOIDED, WRONG MATH
October 22nd, 2007 at 3:05 pm | Permalink edit
FNF – ouch! Painful drop. Rally fizzing out, Dow is just lagging. If you were in Q calls from earlier, this would be a graceful exit point!
AMZN – now I know why I got distracted, not many good spreads on it close up. Here’s a butterfly that might work:
Buy the Nov $110s for $1.44
Sell the Nov $100s for $3.20
Buy the Nov $90 puts for $5.80
Sell the Nov $100 puts for $11.90
That one works between $92.13 and $107.87 and gives you $7.54 with a max risk of $2.46 and our target there is $100 so we’re looking for good, but not great earnings (plus we have the V crush in our favor).
October 22nd, 2007 at 3:10 pm | Permalink edit
Now is a good time to short DRYS! $120 puts at $12.80 as a mo play, sell the $114 puts for $10 if it heads the wrong way on you but XXX as we have a very low risk exit with a high downside reward.
October 22nd, 2007 at 3:22 pm | Permalink edit
BIDU looking weak at $315 – bad news for China if we close red.
October 22nd, 2007 at 3:44 pm | Permalink edit
ERIC hoding up well.
NEM – I love those guys! I think they blow out earnings. We have them naked in the STP with the Nov $47.50s, now .70 (but we have been selling against them).
Wow, LTP shot up to 261%, nice gain for the day! STP up 15% too, must be the VIX because, other than XOM and those DIA puts, there are no major winning trades of note.
SPWR broke $100, CY should break over $33.50 soon! CYs stake in SPWR is worth about 30% more than CY’s entire market cap!
October 22nd, 2007 at 3:55 pm | Permalink edit
AMZN – that calculation is close enough. What’s the most you can lose if it goes all the way up or all the way down? What’s the most you can gain and what’s your sweet spot? Those are the only things you need to worry about. I wish I had the patience for them but not worth all the bother in a hot market.
Now is a good time to flip the DIA calls to puts as the DIA $134s are back to $2 (they were $3 this morning). If Asia follows down tomorrow and/or Apple tanks, we could gap down tomorrow and, if not, we can always roll these up as the basis of a new protector. XXX NO FILL
