rovo's Market Journal -- 2011

[rovo]

I'm in FAS, 2,000 at $30.80, so now it is just wait and see what happens.

[mtntigger]

Woo-hoo! I have some FAS too; cheaper than yours, although a tad (just a tad ) lower volume than your order.
Yes, I know buyer beware and don't play with money that I actually need. But look! I made $0.66... no $0.82... no $1.46... no $1.62 already today after fees. I'm rich!
ETA: Well, it ended up being $0.66 for the day. I guess I'll try to keep my day job for a while.

[rovo]

The market was a little rough today but the port ended a tad higher. Percentage wise I'm up 6.55% YTD compared to +6.42% at Friday's close. Big losers today where HI and WHX. There were no outstanding winners today but just a bunch of OK upward moves to more than offset the losses.

The FAS trade entered into this morning is slightly positive. Buy at 30.81 with current at 31.16. I expect to make $2 to $4 per share by Friday.

[lovetobike]

I learned something new today - if a company makes an announcement, then TD Ameritrade cancels a trailing stop order. I got a message from TDA saying they canceled my trailing stop b/c POT announced it would be announcing earnings soon. Anyhoo, here is my daily AG update:

DE: +1.21%
AGU: +1.53%
MOS: +2.53%
POT: 1.07%

I've got too much cash but everything seems so overbought right now. I'm too busy at work to make short term plays and so here I sit. Ugh!

[clarkrl2]

I cancelled my Sept covered call order for F for a debit of 16/share and replaced it with a Sept 16/12 credit put spread for .77/share. After commissions this is about 22% return if F is above 16 at Sept exp. If F is between 12 and 16 I'll be put the shares at a net cost of $15.23/share. If it falls below $12 I will have my losses cut at -3.23/share. A 22% return at todays closing price would be $22.81. The table shows the profit loss breakdown for 100 shares vs. 1 contract.

Sept. Close	stock	16/12 put spread
10	-870	-323
12	-670	-323
14	-470	-123
16	-270	77
18	-70	77
20	130	77
22	330	77
24	530	77

The stock has $1870 at risk vs. $323 at risk for the spread.

[rovo]

lovetobike, Another great day of gains in your Ag. holdings. Those puppies are really flying. I had no idea about them canceling the trailing stops on news. Thanks for alerting us as I use TD also.


So, the trade in FAS could get dicey. C reported this morning and did not meet expectations but this was accounted for in the low buy price after they announced. Tomorrow is the critical day in this trade as GS and WFC reports. BAC reports on Friday.

GS reports 1/19 at 8AM and estimate is $3.76 per share.
WFC reports 1/19 at 9:30AM and estimate is $0.61 per share.
BAC reports 1/21 at 8AM and estimate is $0.15 per share.

I'm looking for $4.15 to 4.25 on GS and $0.65 to $0.66 on WFC. Meeting expectations is not an option for this trade to work. The 1st two have to beat estimates. BAC is not as critical because I'll be out of the trade by then if the first two beat as expected.

My sell order is on the books: Sell 2K FAS at $36.00. Price is probably too high but it can always be adjusted downward.

[clarkrl2]

Using the above example I note that as long as the price stays between $15 and $21 a three contract spread compares favorably to 100 shares. If F is above $21 in Sept the 100 shares outperform. Also between 14 and 9 the 100 shares outperform but lower than 9 the spread outperforms because the losses were capped at -969.

[rovo]

clarkrl2, I'm completely lost on the spread you listed above. If you get a chance could you spell out what you did in a little more detail. Did you buy the contracts or sell the contracts? I must have a mental block on these more complex option stuff.

[clarkrl2]

I'll try to give an explaination of what I try to do but keep in mind that danshirley is much more experienced in options. Also, a lot of what I picked up about options I learned on Supermodels and later Strategy lab forums on threads started by gshell on trading covered calls. Later I followed danshirley's conservative option threads on Strategy Lab, then Market Talk and Start Investing. At first I was confused by these strategies but as I read more I noticed that options were a very good way to manage risk. The tradeoff is that you will usually give up some upside potential for lower risk. There are four ways to put on a simple two leg spread using the same expiration.

The trade I made I sold the Sept. $16 strike put for $.97 and bought the Sept $12 strike put for $.20. The difference between the strikes is 16 - 14 = 4 and the difference between the prices was .97 - .2 = .77. The $.77 times 100 is credited to your account per contract. So that is the $77 gain you see for any F closing price at Sept exp. above $16. Since you won't be put the shares at over 16 you keep the $77 credited to your account. If the stock falls to 15.23 you are at the break even point 16 - .77 = 15.23, at 15 of course you are down 15 - 15.23 or -.23 times 100 = 23. At F = $14/share you are down 14 - 15.23 = -1.23 times 100 or -$123. and so on with each dollar the stock drops you lose an additional $100 until the price of F reaches the lower strike price of $12. At that point you would put the shares you bought at 15.23 to someone else at 12 so 12 - 15.23 = -3.23 times 100 which means your maximum loss is -$323 per contract.

My broker TradeKing allows you to put in a limit order for the difference between the upper and lower strikes. I chose $.77 because that was the midpoint between the bid and ask at the time of the order for the spread.

This credit put spread is a bullish position (sell the higher strike put and buy the lower strike). An even more bullish position is a call spread where you buy the lower stike call and sell the higher stike call and the difference between the two prices is debited from your account.

The bearish position would be a debit put spread where you buy the higher strike put and sell the lower. Also a less bearish position is a debit call spread where you sell the lower strike and buy the upper strike.

At the advice of Mr. danshirley and other sources where I read about spreads I didn't attempt any spreads until I had paper traded them for quite some time (I think about 2 years). Using bull call spreads and bear put spreads you are using leverage and can potentially loose a lot of money very quickly.

I hope this explaination helps. Good trading.

[clarkrl2]

I forgot to mention one very important thing. In the bull put spread above the difference between the strikes was 4 time 100 or $400 so I need to keep the $77 plus $323 in my account to cover the spread. If I am put I will need the $77 plus $1523 more to cover the $16 strike. Multiply those values of course by the number of contracts.

[rovo]

Gak !! WFC just met expectations and GS beat by $0.03. FAS is trading at $30.30 so this looks like a failed trade. I'll watch the action for a while and I'll probably be able to get out of the trade with a break even.

I altered the sell order to a price of $30.97 for FAS.

[rovo]

clarkrl2, Thank you for the explanation on the options deal. I think I actually understand the what and why of the transaction.

[rovo]

Placed buy order for 500 TQQQ at 169.01. I'm looking for a quick dip in price. Currently at 169.55.

Order filled. With commissions cost is 169.03

[yclept]

Why would a 3X bull ETF go down when two of the components meet or exceed earnings estimates?

[Deleted]

Why would a 3X bull ETF go down when two of the components meet or exceed earnings estimates?

last night i read that AAPL's history is to pop when earnings are released then go down... at this moment it's 10 bucks cheaper than pre-market
stockcharts.com/h-sc/ui?s=TQQQ&p=D&yr=0&mn=3&dy=0&id=p68586403068

[lovetobike]

Holy Crap! MOS took a dive! It has already dropped 6%. I guess I need to read to figure out what is going on.

After doing some quick reading I believe it is based on these 2 things:

1. Cargill is selling its 64% stake in MOS
2. It was trading at a high and so investors are probably taking a profit.

I think MOS may be ripe for a take over in the long term now that Cargill has sold it. I may buy some more.

[livinincali]

They always say bull runs end on good news. You had to figure that since markets like to confuse people that blowout earnings would likely lead to a pullback. The Slope of Hope vs the Wall of Worry. Not much worry to climb up right now but plenty of hope to slide down.

[rovo]

The entire market is funky today. My pie chart on TD Ameritrade is all bright red, indicating loses of at least 2%. Beginning of the long expected correction or just a blip on the radar? New lows in the Qs as I type this. Oh well, might as well go outside and enjoy the balmy 40 degree F weather.

[livinincali]

If this is a start of a more significant correction there should be a nice rally in the next couple of days to get out. Figure at least 50 and more likely 60% of the move down gets retraced back. Of course many will assume that means the market is going much higher and not use the opportunity to sell. The move back up is going to feel very bullish. The critical thing to do would be to set a stop right below that rally point. Say the S&P trades down to 1250 or whatever and then rallies hard. It should never go back below that level before making a new high unless the trend is shifting.

[lovetobike]

I've gotta post the bad with the good news Here is my daily AG update: - It was slaughtered!

DE: -1.32%
AGU: -3.85%
MOS: -10.49% Ouch! That one hurt!
POT: -3.98%

So, I'm probably a little crazy but I think that MOS is now in a good position to be bought out. BHP was hot on POT tail over the summer, perhaps it will eye MOS now. Or VALE may take an interest. So, today I bought 25 shares at $80 and have another buy order it if it dips to $70. I'm still in the green overall with all of these stocks.

[livinincali]

MOS: -10.49% [image] Ouch! That one hurt!

At least you aren't long CREE or FFIV. Those high flying momentum stocks that miss are taking a beating. It's difficult when you're priced for perfection. I'm thinking at a minimum we'll see people rolling into large cap dividend players in the short term. Those momo plays have obviously been a target for hedge funds and mutual fund managers looking to outperform and when they miss the demand for those stocks instantly vanishes as well as tons of momo players looking to hit the exit at the same time.

[rovo]

The port dropped like a rock today as every holding lost money. Month-to-Date gain dropped from 6.55% to 3.61%. Ouch.

[heavyweightboxer]

My small port took a bloodbath today and didn't even have cash in it to average down.

[yclept]

Yeah, I was down more than I liked today. Strange that we all seem to have been hit proportionately harder than the common indices. I take some consolation that two thirds of my port ended on an uptick. Hope that means something.

[rovo]

I use 15 minute charts for short term trend trading and most of those I just looked are indicating an upswing has started. HI is an exception. This may have been just another scare like the "flash crash". The flash crash however was a precursor to the last big correction. Today's action may be the warning shot across our bow indicating a real dip in a couple of weeks.

Some of the action today just doesn't make any sense to me at all. Ford dropped 4.5%, sitting with a PE of 10, sales up and still increasing, profits up and still increasing. What is the justification for a 4.5% decline? Panic? Fear? A concerted effort to drive the weak hands out of the market at lower prices?

Again, no answers from me. Just concern and a wait and see attitude without panic.

[tyfighter3]

Ford will be alright, I think they sold off right after last Q"s earnings too. As long as they keep doing this they will do fine.
www.nationalpost.com/m/story.html?id=4094784

[ModE98]

Rovo, it may be premature to move this week or early next, but did go ahead and buy some TPI and YONG today. Do not anticipate much lower prices (maybe a few pennies at worst). Now we shall see if the China Fool has lost his marbles completely.

[lovetobike]

I've been considering selling all of my MSFT shares and did it today - ended up with a 23% gain and I'm happy with that. I don't see a whole lot of growth for MSFT and will consider another tech stock to that money into.

I've got an order in for F to jump on the F bandwagon. We'll see if it fills.

MOS is tanking again - I "feel" that it is a good thing to hold onto, it may take time before I see the benefit though. I say "feel" because I'm not too sure how this Cargill thing is going to playout for MOS. In terms of their earnings, debt levels, etc, they seem to be in good shape. But, would this transaction with Cargill affect this? According to the MOS "investor page", no.

It is going to take 2 years before MOS is completely free of Cargill which some analysts are saying will deter the desire for a takeover of MOS.

[rovo]

ModE, Let's not talk about TPI and YONG on this thread. If I buy either of those it will be a stealth play. I hate Chinese stocks.

I'm only joking around with you so don't get bent out of shape.

[rovo]

Lovetobike, As much as I hate to say this ..... if I was trying to establish a position in Ford I would be placing an order at $17.00, which is the 50 day SMA. The 50 SMA will move with the price but I think Ford is trying to go down to touch the 50 SMA and will bounce off of that point.