Thrill A Minute Thursday: Will The Bernanke Bounce Hold? [View article]
I wouldn't want to make a short-term guess but we're very comfortable with the value down here, especially as we're hedging them down to below $4 so I hope the guys buying at $6 were correct - we only need them to hold $5 to make good money.
Just Another Manic Monday: Value Investing [View article]
By the way, whenever you think a post is missing something, you can just click over to PSW, where any post that is up on SA is available for free viewing on our site as well (but not all of our free posts are on SA, so it's always good to check out our site). SA does not include videos and certain images for reasons I'm not quite sure of.
Just Another Manic Monday: Value Investing [View article]
Thanks Hans but this site edited the last sentence of my post where all I said was: "... so the bull will be flying – even if the markets are not!" I can't imagine why they did that but it's strange things like that which turn this site into the same generic drivel we get everywhere else on the web (except PSW, of course).
One very important rule we teach is that, once you are ahead 50% on a caller, you set a very tight stop on him. With more than 2 weeks to expiration, we generally buy back any caller that is down 50% or more (assuming nothing bad happened to the stock's outlook) and then we wait for a recovery and, failing that, look to sell the next lower strike and use that money to roll down our long position.
Cover - you do realize that this article is Friday the 8th, not the current day's article right?
WMT - at 9:41 yesterday, my comment to members was: "WMT so going the wrong way. What a relief as I thought my $57.50 callers were going to blow me out. This is so great! Let’s pick up 5 Sept $55s at $3 in the $10KX and the $25KP XXX"
So the adjustment to this play was that we had the coverage through earnings and, on the dip, we took out the caller at just .40 and then flipped bullish becuase it was silly for them to go down (see this Thursday's post for my general take on the morning sell-off).
Meanwhile, the March $57.50s were bought for $4.75 and we sold calls for $1 and bought them back for .40 so the net basis on the leaps is $47.15 and they are now worth $6.25, not a bad gain for a week!
Had you not bought back the caller, your basis would be $3.75 on the March $57.50s and you would owe your August caller $1.87, for a net profit of .63, still 17% in one week and not so awful but you can spend just .40 to roll your caller to the Sept $60 calls, now $1.50, which would leave you in the March $57.50s at $6.25 and about 25% covered with the Sept $60s. You can do that month after month so, even without the good timing (and luck) we had, it's a nice little income producer.
Thanks Lobster. If you want to get an idea of what we do in member chat, I did take the time to address BSchecker's "concerns" to the trades he asked about in the next post. I don't claim to be perfect - we have wins and misses but the nature of the hedged strategy we run is that we cash in our wins and usually we can roll our misses and turn them into wins at a later date. With a diversified portfolio, time is on your side and, as I we like to say at PSW, there's always an option...
WM/Calvin - Of course there's a possibility but $2 would very likely be on the way to $0 as the bank is already priced for bankruptcy. Like the stand we took on C in the teens, sometimes you just have to look at a stock and say "Yes, I would buy the whole company at that price." WM tested $3 and bounced sharply back on the 14th and we're hoping that line holds for the rest of the month. On this play, if we have faith that the downside is $3 on our $3.10 net entry and the upside is $4, it's a pretty good risk/reward spread.
Also, you have to look at the fundamentals. Congress is passing a housing bill that Bush said he would sign. The concerns on the banks is primarily based on concerns of the value of their housing portfolios due to high default rates so fixing the housing problem fixes the banks. While it might not make everything all better, it sure might mean that some part of the 85% drop in value for WM may be recovered, giving us a nice win.
BSchecker, Rumplewhatever, Contender - as much as it pleases me that you hang on my every word like you do (it's a powerful thing to take up so much of someone else's life), it seems the curse of the Midianites is upon you and that's a sad thing so I will help anyone who asks for it and you can dream about me this weekend or obsess over me during your waking hours but that's no reason I can't chat with real people on this site.
Lobsterboy - what would you have me respond to? They make things up that aren't true and expect me to spend time defending myself, not worth my time. We have over 1,000 members now and a couple of them must be satisfied and I still post on SA for free because they gave me an early break (well before I had a pay service) and I'm loyal to them and allow them to publish my morning posts. How do you see my providing to SA for free something that other people pay for to be "just using this webside to get more clients"? If anything, it costs me clients as it's a very low cost alternative for people who don't want to pay for membership.
If these boys want to attempt to turn this site into the YHOO message board, that's not my problem and even their obsession with me isn't my problem, clearly it's theirs. There are people I don't like and I just don't read them, much less hang on their every word. Stalkers go with the territory, most of the popular writers I talk to have their obsessed anti-fans. I'm harsh on Cramer, Bush and Whitney myself so I guess it all goes with the territory but I don't see them interrupting their lives to address my concerns.
What bothers me is I used to enjoy having conversations with readers here as there are lots of really smart people who read SA but, as you point out, my disinterest in rising to their bait is taken by someone like you to be an admission of guilt of some kind so I'm saying this once here and that's it. I am very amused by the fact that I, Phil Davis, occupy the thoughts of these people to this extent while if I don't happen to click over here for a day, they don't even exist to me at all. Just think of the disproportionate impact I'm having!
So I've decided to simply respond to the people who have real questions (why should they suffer) but, overall, it sure is nice to be ranked as one of SA's most commented authors!
CROX/Likestock - What a disaster! I have to give props to Ahmit, who totally called this one while I trusted the management. I still can't figure out what they did with all the money as sales were "only" off 2% for the Quarter, down $4M from last year, yet the company managed to not make the $48M they made last Q2. Our bullish case was based on the 80% increase in international sales that were reported in Q1 and had increased to over 1/2 of total sales. Now that's drying up too but it's the MASSIVE missed guidance by management that makes me want to give up on them.
Our position, which had been rolled and doubled several times from our original play (but we sold many calls against them along the way so, until today, we were in decent shape) was the Sept $6 calls with a $2.85 basis against which we'd last sold the $9s for $1.15.
It's rare but there's really nothing to save in this trade, all we could do was sell the current $5s for .70 and use that money to roll back to the Dec $5s and hope we find some way to make back the $1.70.
Usually, if you get blown out of a hedged position (and almost all of our positons are hedged) the best course of action is to sell another option with good premium that pays for you to roll yourself back in time and closer to the money but you never want your caller to have position advantage over you, in case there is a sharp bounce.
I would say that this is the type of strategy we teach but Lobsterboy would think I was soliciting so I'll just say that there are many fine web sites that teach using stock options as a hedging tool and those strategies can get you through many tough times but there's really nothing that's going to save you from a 50% drop pre-market and that's why position management MUST be a part of any good portfolio strategy (many fine sites teach that as well).
Murphy - this is all your fault as your link caught my attention and I decided to respond to you but first I had to do a little housekeeping! First point is XLF is financial so I'm not sure we're talking apples to apples subsituting a health-ETF basket but I think you were thinkining about the XLV.
We use the XLF because the risk of owning any single bank is pretty insane. We took gambles on C and BAC pre earnings as well as LEH and JPM as they were ones we were pretty sure were going to beat. We also took the XLF and had a variety of covers and naked positions among the 5.
You can pursue a similar strategy targeting health care but one interesting use of an ETF, if you are playing a major component of it, is to go long on the single stock and short on the ETF ahead of earning. Bad earnings from a major player in a sector can bring down the whole ETF but good earnings from one stand-out don't always translate into a sector break-out.
All portfolio management is about balance and it's not the sort of thing you can learn without practice but, as Mr. Miyagi says "Once you find balance, you can accomplish anything."
By the way Al and C, last year we ran a "Free Picks" portfolio where every single trade was published in the main post before the markets even opened. That portfolio gained 350% and you can go over each and every one of those trades (there's even a review when we closed it) and verify those without even being a member.
Wow such anger from contender and Al... I'm not going to sit here and defend myself and every single trade we make in the member portfolios ($10KP, $25KP, DTP) is printed in chat BEFORE the trade is made. That has been our system for over a year. Nobody claims to make 300% a month so if you are going to attempt to disparage someone elses work perhaps you should "get real" - whatever your problem is with me, you can resolve it simply by just not reading what I write. If it's not helpful to you, why waste your time - surely you don't have that much of it???
I'd personally rather spend mine answering legitimate questions like Blue Dogs.
On BAC - We already had the 2010 $35s back on 4/14 and we've been scaling into it over time following the gameplan from this article: www.philstockworld.com.../
We thought the financials were cheap then and we really think they are cheap now but it is key to take a long position, sell calls against it and roll the position to a lower strike as it falls, selling more calls along the way. This helps mitigate some, but not all of the losses and BAC is currently down 50% on us despite the scaling in but we are now in the 2010 $25 calls for a net of about $6.
The banks have been a real disaster and the financials make up close to 20% of our Long-Term Portfolio, which got killed the past two days.
As Al points out, these are just my trades and I'm not a financial advisor and you should ALWAYS consult a financial advisor before making any trade.
If I were still sitting on the BAC 2010 $35s at $1.20 I would be looking just to get even and I would roll the calls to the Jan '09 $22.50s at $3.10 (+$1.90) and sell 1/2 covers of the current $22.50s for $1.15 with a plan on rolling those to a full cover of the Aug $25s, which now sell for $1.08 so my expectation is to get $1.15 premium on 1/2 of my calls (.77) plus hopefully another $1 for the $25s so that's $1.77 of my $1.90 roll paid for.
My game plan going forward would be to get at least $1 of premium per month selling calls and if I do that for Sept, Oct, Nov and Dec that's $4 per contract made up plus whatever residual value I have left in the Jan position. Realistically, I'd probably double up the position on the roll as that way I only need to sell $2.50 worth of calls and retain my $3 value to get even, which is a much more obtainable goal.
Thanks junk! How about protecting the environment, universal health care, equitable distrubution of wealth and living wages? No one is "immune" to oil lobbying because the system is built around it BUT you will find that about 80% of the money goes to Republicans and one would have to assume they go where they are getting the most bang for their buck which on could deduce means that it's 4x harder to get a Democrat to drop their principles simply because you write them a check but that's just a supposition of course...
Thanks Morgan - looks like that writer is right already! My target is a little more ambitious at $85. Tell your folks I said hi, even though that makes me feel really old!
Contender - You confuse checking the facts with bending over and accepting whatever BS Goldman hands out as gospel. Whoever made that clue doesn't know jack about the airline ordering process and I said as much the day it came out. I predict not only will orders not be cancelled but that there will be a market for trading slots. How soon would you like to start saving 20% of your fuel cost which is over 40% of your entire operating cost as a comany that drops (using CAL as an example) just 5% to the bottom line in a good year? It's not even a choice to switch, airlines cannot compete without upgrading their fleet.
As to our gains. They are simply the results of the tracked member portfolios with every single entry and exit publically traded with 1,000 members on-line trading every day on my site. We have a 98% monthly retention rate vs. an industry average of just over 70% and half the people who we did lose last year cited politics as their reason for leaving, not trading. I made a decision a long time ago that if conservatives can't take a little sermon with their economic salvation then they can damn well go pray for a winner somewhere else. Not surprisingly my board is still 50% Republicans as they don't really care what your politics are as long as your money is green!
I don't know of a proper Dow study. The S&P routinely changes components too and the Russell just rebalanced but with the Dow just having 30 components, you really can't just go pretending it doesn't matter when you trade 2 in, especially with their whacked out weighting system - that in itself could have used an extensive study to figure out what the hell they did.
I would understand the lack of action by the government if the situation was insoluble, but it isn't. It just takes firm action and some vision. Unfortunately, those are things we are very short of in our government.
Thrill A Minute Thursday: Will The Bernanke Bounce Hold? [View article]
Wednesday Worries: Yentervention, Euro Style [View article]
Wednesday Worries: Yentervention, Euro Style [View article]
Wednesday Worries: Yentervention, Euro Style [View article]
Just Another Manic Monday: Value Investing [View article]
Just Another Manic Monday: Value Investing [View article]
Just Another Manic Monday: Value Investing [View article]
Options Trader: Friday Outlook [View article]
Options Trader: Friday Outlook [View article]
WMT - at 9:41 yesterday, my comment to members was: "WMT so going the wrong way. What a relief as I thought my $57.50 callers were going to blow me out. This is so great! Let’s pick up 5 Sept $55s at $3 in the $10KX and the $25KP XXX"
So the adjustment to this play was that we had the coverage through earnings and, on the dip, we took out the caller at just .40 and then flipped bullish becuase it was silly for them to go down (see this Thursday's post for my general take on the morning sell-off).
Meanwhile, the March $57.50s were bought for $4.75 and we sold calls for $1 and bought them back for .40 so the net basis on the leaps is $47.15 and they are now worth $6.25, not a bad gain for a week!
Had you not bought back the caller, your basis would be $3.75 on the March $57.50s and you would owe your August caller $1.87, for a net profit of .63, still 17% in one week and not so awful but you can spend just .40 to roll your caller to the Sept $60 calls, now $1.50, which would leave you in the March $57.50s at $6.25 and about 25% covered with the Sept $60s. You can do that month after month so, even without the good timing (and luck) we had, it's a nice little income producer.
Options Trader: Friday Outlook [View article]
WM/Calvin - Of course there's a possibility but $2 would very likely be on the way to $0 as the bank is already priced for bankruptcy. Like the stand we took on C in the teens, sometimes you just have to look at a stock and say "Yes, I would buy the whole company at that price." WM tested $3 and bounced sharply back on the 14th and we're hoping that line holds for the rest of the month. On this play, if we have faith that the downside is $3 on our $3.10 net entry and the upside is $4, it's a pretty good risk/reward spread.
Also, you have to look at the fundamentals. Congress is passing a housing bill that Bush said he would sign. The concerns on the banks is primarily based on concerns of the value of their housing portfolios due to high default rates so fixing the housing problem fixes the banks. While it might not make everything all better, it sure might mean that some part of the 85% drop in value for WM may be recovered, giving us a nice win.
Options Trader: Friday Outlook [View article]
Lobsterboy - what would you have me respond to? They make things up that aren't true and expect me to spend time defending myself, not worth my time. We have over 1,000 members now and a couple of them must be satisfied and I still post on SA for free because they gave me an early break (well before I had a pay service) and I'm loyal to them and allow them to publish my morning posts. How do you see my providing to SA for free something that other people pay for to be "just using this webside to get more clients"? If anything, it costs me clients as it's a very low cost alternative for people who don't want to pay for membership.
If these boys want to attempt to turn this site into the YHOO message board, that's not my problem and even their obsession with me isn't my problem, clearly it's theirs. There are people I don't like and I just don't read them, much less hang on their every word. Stalkers go with the territory, most of the popular writers I talk to have their obsessed anti-fans. I'm harsh on Cramer, Bush and Whitney myself so I guess it all goes with the territory but I don't see them interrupting their lives to address my concerns.
What bothers me is I used to enjoy having conversations with readers here as there are lots of really smart people who read SA but, as you point out, my disinterest in rising to their bait is taken by someone like you to be an admission of guilt of some kind so I'm saying this once here and that's it. I am very amused by the fact that I, Phil Davis, occupy the thoughts of these people to this extent while if I don't happen to click over here for a day, they don't even exist to me at all. Just think of the disproportionate impact I'm having!
So I've decided to simply respond to the people who have real questions (why should they suffer) but, overall, it sure is nice to be ranked as one of SA's most commented authors!
CROX/Likestock - What a disaster! I have to give props to Ahmit, who totally called this one while I trusted the management. I still can't figure out what they did with all the money as sales were "only" off 2% for the Quarter, down $4M from last year, yet the company managed to not make the $48M they made last Q2. Our bullish case was based on the 80% increase in international sales that were reported in Q1 and had increased to over 1/2 of total sales. Now that's drying up too but it's the MASSIVE missed guidance by management that makes me want to give up on them.
Our position, which had been rolled and doubled several times from our original play (but we sold many calls against them along the way so, until today, we were in decent shape) was the Sept $6 calls with a $2.85 basis against which we'd last sold the $9s for $1.15.
It's rare but there's really nothing to save in this trade, all we could do was sell the current $5s for .70 and use that money to roll back to the Dec $5s and hope we find some way to make back the $1.70.
Usually, if you get blown out of a hedged position (and almost all of our positons are hedged) the best course of action is to sell another option with good premium that pays for you to roll yourself back in time and closer to the money but you never want your caller to have position advantage over you, in case there is a sharp bounce.
I would say that this is the type of strategy we teach but Lobsterboy would think I was soliciting so I'll just say that there are many fine web sites that teach using stock options as a hedging tool and those strategies can get you through many tough times but there's really nothing that's going to save you from a 50% drop pre-market and that's why position management MUST be a part of any good portfolio strategy (many fine sites teach that as well).
Murphy - this is all your fault as your link caught my attention and I decided to respond to you but first I had to do a little housekeeping! First point is XLF is financial so I'm not sure we're talking apples to apples subsituting a health-ETF basket but I think you were thinkining about the XLV.
We use the XLF because the risk of owning any single bank is pretty insane. We took gambles on C and BAC pre earnings as well as LEH and JPM as they were ones we were pretty sure were going to beat. We also took the XLF and had a variety of covers and naked positions among the 5.
You can pursue a similar strategy targeting health care but one interesting use of an ETF, if you are playing a major component of it, is to go long on the single stock and short on the ETF ahead of earning. Bad earnings from a major player in a sector can bring down the whole ETF but good earnings from one stand-out don't always translate into a sector break-out.
All portfolio management is about balance and it's not the sort of thing you can learn without practice but, as Mr. Miyagi says "Once you find balance, you can accomplish anything."
Have a good weekend all,
- Phil
Options Trader: Wednesday Outlook [View article]
Options Trader: Wednesday Outlook [View article]
I'd personally rather spend mine answering legitimate questions like Blue Dogs.
On BAC - We already had the 2010 $35s back on 4/14 and we've been scaling into it over time following the gameplan from this article: www.philstockworld.com.../
We thought the financials were cheap then and we really think they are cheap now but it is key to take a long position, sell calls against it and roll the position to a lower strike as it falls, selling more calls along the way. This helps mitigate some, but not all of the losses and BAC is currently down 50% on us despite the scaling in but we are now in the 2010 $25 calls for a net of about $6.
The banks have been a real disaster and the financials make up close to 20% of our Long-Term Portfolio, which got killed the past two days.
As Al points out, these are just my trades and I'm not a financial advisor and you should ALWAYS consult a financial advisor before making any trade.
If I were still sitting on the BAC 2010 $35s at $1.20 I would be looking just to get even and I would roll the calls to the Jan '09 $22.50s at $3.10 (+$1.90) and sell 1/2 covers of the current $22.50s for $1.15 with a plan on rolling those to a full cover of the Aug $25s, which now sell for $1.08 so my expectation is to get $1.15 premium on 1/2 of my calls (.77) plus hopefully another $1 for the $25s so that's $1.77 of my $1.90 roll paid for.
My game plan going forward would be to get at least $1 of premium per month selling calls and if I do that for Sept, Oct, Nov and Dec that's $4 per contract made up plus whatever residual value I have left in the Jan position. Realistically, I'd probably double up the position on the roll as that way I only need to sell $2.50 worth of calls and retain my $3 value to get even, which is a much more obtainable goal.
Options Trader: Wednesday Outlook [View article]
Thanks Morgan - looks like that writer is right already! My target is a little more ambitious at $85. Tell your folks I said hi, even though that makes me feel really old!
Contender - You confuse checking the facts with bending over and accepting whatever BS Goldman hands out as gospel. Whoever made that clue doesn't know jack about the airline ordering process and I said as much the day it came out. I predict not only will orders not be cancelled but that there will be a market for trading slots. How soon would you like to start saving 20% of your fuel cost which is over 40% of your entire operating cost as a comany that drops (using CAL as an example) just 5% to the bottom line in a good year? It's not even a choice to switch, airlines cannot compete without upgrading their fleet.
As to our gains. They are simply the results of the tracked member portfolios with every single entry and exit publically traded with 1,000 members on-line trading every day on my site. We have a 98% monthly retention rate vs. an industry average of just over 70% and half the people who we did lose last year cited politics as their reason for leaving, not trading. I made a decision a long time ago that if conservatives can't take a little sermon with their economic salvation then they can damn well go pray for a winner somewhere else. Not surprisingly my board is still 50% Republicans as they don't really care what your politics are as long as your money is green!
Thanks Phin!
Options Trader: Tuesday Outlook [View article]
SC Boeing: www.bloomberg.com/apps...
I would understand the lack of action by the government if the situation was insoluble, but it isn't. It just takes firm action and some vision. Unfortunately, those are things we are very short of in our government.