Moin from Germany,

today could be key day....

Bear Stearns admits that the subprime assets in their hedge funds are gone

"Leveraged fund worth nothing; larger fund reportedly loses 91% of its value"

LBO´have trouble in financing their deals because spreads are soaring

" ......bankers marketed a $10 billion loan for Chrysler's auto business at 3.75 percentage points above the London Interbank Offered Rate, compared to the 3.25 percentage points discussed when the road show kicked off about three weeks ago, Standard & Poor's said.

And another $2 billion in financing for the auto company is now being marketed at seven percentage points above the London interbank offered rate, compared to the original six percentage points. The banks are also offering to sell those loans at less than 100 cents on the dollar in a bid to further entice investors to the deal...."

plus from Russ Winter

A leveraged loan that was sold in May to pay for part of Sam Zell’s Tribune Co. acquisition originally traded at 99 cents on the dollar. On Monday morning, the deal was trading at 95.25, according to two investors who didn’t want to be identified. The poor performance has been driven partly by a bigger-than-expected drop in sales, the investors explained. In May, Tribune’s publishing ad revenues were down almost 12% on continuing weakness in classifieds and a nearly 18% decline in national ads. Meanwhile, circulation revenue fell 6.2% and broadcasting revenue slumped 11%.

etc......

Today's mantra:

There is only one cockroach...
there is only one cockroach

RPS

Thanks Bill for your great work. Do not neglect the great surroundings you have there! Well, anyway for me it's too hot there. I'd move to Canada instead... :)

European Central Banks: sale of gold
Here it is the updated list of transactions (that is the result of +purchase -sale of gold) in millions of Euro and in tons. The dates in the list are in dd/mm/yy format. The source of the data is official: http://www.ecb.int/press/pr/wfs/2007/html/index.en.html. The Central banks included in ECB are: Austria, Belgium, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia, Spain.
13/07/2007 transaction -88 / 5.49 t
06/07/2007 transaction -44 / 2.75 t
29/06/2007 transaction -631 / 40.87 t
22/06/2007 transaction -45 / 2.8 t
15/06/2007 transaction -25 / 1.56 t
08/06/2007 transaction -59 / 3.68 t
01/06/2007 transaction -29 / 2 t
25/05/2007 transaction -191 / 11.92 t
18/05/2007 transaction -280 / 17.2 t
11/05/2007 transaction -22 / 1.4 t
04/05/2007 transaction -186 / 11.60 t
27/04/2007 transaction -195 / 12.17 t
20/04/2007 transaction -281 / 17 t
13/04/2007 transaction -31 / 1.91 t
06/04/2007 transaction -189 / 11.8 t
30/03/2007 transaction -273 / 17.04 t
23/03/2007 transaction -189 / 12.17 t
16/03/2007 transaction -256 / 16 t
09/03/2007 transaction -9 / 0.58 t
02/03/2007 transaction -34 / 2.19 t
23/02/2007 transaction -37 / 2.38 t
16/02/2007 transaction -90 / 5.8 t
09/02/2007 transaction -70 / 4.51 t
02/02/2007 transaction -39 / 2.51 t
26/01/2007 transaction -36 / 2.32 t
19/01/2007 transaction -37 / 2.38 t
12/01/2007 transaction -28 / 1.86 t
05/01/2007 transaction -25 / 1.61 t
29/12/2006 transaction +36 / +1.5 t
22/12/2006 transaction -41 / 1.24 t
15/12/2006 transaction -410
08/12/2006 transaction -71
01/12/2006 transaction -120
24/11/2006 transaction -106
17/11/2006 transaction -97
10/11/2006 transaction -180
03/11/2006 transaction -101
27/10/2006 transaction -65
20/10/2006 transaction -112
13/10/2006 transaction -15
06/10/2006 transaction -40
29/09/2006 transaction -37
Jim Sinclair's Commentary: "It is so important to understand fully that selling by central banks never ever touches the open gold market. Instead, it goes to singular large buyers directly which is more often than not central banks. Announcing sales by central banks has only one functional purpose and that is an attempt to hold down the gold price. Holding down gold has only two purposes: to camouflage real inflation and to protect the dollar from the currency competition from gold.
Many times during this generational bull market you will hear about central bank selling of gold. Such news may give an opportunity to COT, the paper traders in gold, for a very small period of time, to attempt to manipulate the price. Announcing central bank selling intentions has always failed to keep the price of gold down and in some cases actually helped it up. It will now certainly fail because of paragraph number one above."

..i don't think i would open any positions right now, it's hard to go long, but even harder to bet against the dip-buyers..

http://tinyurl.com/27w87z
P/E around the world. US and Japan are quite expensive (and China, too)!

lelik-i don't disagree...but to paraphrase a trading rule: things can stay out of whack longer than one can stay solvent...

What is the ticker symbol for the FEDERAL RESERVE?

as markm would put it: ppt

:-)!

An interesting reading with some data about the big numbers of China reserves and trading, and why the problems will start (or are starting now!) with the US banks. No big news, but many data to hold this opinion: tinyurl.com/29tdgl

Does the Rat Catcher have any comments on this Bear Stearns meltdown?

I thought they were the #1 on Wallstreet for MBS? Don't they know what they're doing......

Gold up 7$ at 672$....

$ testing the multi decade support at 80.....

Ben B talking now
http://tinyurl.com/cvkkd

EGO, hourly rsi crossed aboved 50 with positive divergence to price. IF the news lacks substance then to me looks like coming off the bottom. Still huge IF. Serious ecological accusations with the potential huge lawsuits. All of that out of my imagination. To average down or not? I'll just hold and be glad if this thing recovers.

TORONTO, July 18 (Reuters) - A private equity consortium led by Brookfield Asset Management Inc. (BAM) is preparing a bid for Canadian Pacific Railway Ltd. that could prove one of Canada's largest leveraged buyouts, the Globe and Mail newspaper said on Wednesday.

This news is behind the rr's that I have, bni and gwr. Any implications for canada's equity mkt?

There's not enuff cats to catch all the rats, that swarm in the sewers of lower manhat.

Liking GSS and NXG somewhere today.

jasper-i think your 45% allocation in metals/materials is going to finally put you over the benchmark today...

What's going on with the R&Rs today?

agaunv,

it might be related to the CP buyout:

http://tinyurl.com/2hh63d

Excuse me ..one of the congressman questioning Bernanke referred to China as the U.S.'s largest trading partner. And noone corrected him that Canada is by far the largest trading partner of the U.S. Shouldn't everyone at a discussion at this level know this?

IBKR: I keep adding more and it keeps going down!
Anyone has any idea where the bottom might be for this one.
GRS: Not moving much?

I am fairly new to this site and absolutely love it! Being disabled and bedridden due to a car accident(I'm 36) I've decided to take up trading as a way to help my wife improve our financial future. This site has been a wealth of help and information. Thank you Bill! Now for my question: Does anyone know if there is any truth to the fact that Alan Greenspan was arrested over the Wantagate scandal? I hate to ask such a seemingly crazy question, but if it's true, I think it could have a huge impact on the dollar and the markets.

Gold has a nice spike, but...

A 1/10 eagle says that if NY doesn't get it under control today, then at 2:30 it gets body slammed in the access market.

Until we get a sustained peak that doesn't get capped and walked back down to 666, I remain skeptical.

Same thing on pops less than the 'allowed' $8 of movement. A 10 dollar plus day that actually sticks and holds is when I'll acknowledge that the grip of CBs/GS/etc. is slipping. A little.

Mike
NYC

What the heck is the wantagate scandal?

Green arrow,
The 'wanta' stuff is garbage. There is a single source who keeps pushing the issue in various forums under different names. If you look back over the years, there is always some new disaster about to happen arising from this 'scandal' that never quite happens. The stories aways mutate to include the news-based buzz-word du jour, but nothing ever happens, or will. Ignore it. Wanta is a con man, the story is junk.

IMHO.

Mike
NYC

I'm currently listening to the Bernanke. This is my first time doing so. Two things stand out to me. First, the congressman have no interest in hearing what he has to say. In fact they typically ask long-winded questions and don't allow him to answer, interrupting everytime he gets a few words out. They are extremely rude and unproductive. Second, many of the questions are political statements related to social equity. For example, "the unemployment rate is 4% but, the unemployment rate for african americans is over 8% and the poverty rate is 10% but, the poverty rate for african americans is over 20%...what are you doing to address that inequity?"

ALOHA !!

Geologix - GIX/GXEXF is up 11% today meeting some resistance at the $2.00C level ... I added to my position a couple weeks ago at the dip. Waiting for more drill results. Good call Aussieontop!

Ron Paul had some interesting things to say to Bernake. "If we keep printing money why do we ever have to go to work"....something pretty close to that. Am I just becoming a better listener or is the fed's control of money supply becoming more openly discussed?

2nd ave. Good memory. Today, port is mildly in red to flat. Not getting the rides up as high when the dow and tech spikes, but doing better, relatively speaking on a bad equity day. Is it not an unusual day that gold miners have a negative correlation with the broader equity mkt? A trend..at least as long as the ten yr stays down?

Bill, thanks for posting and thus allowing the comment section to ramble on. I for one was having those withdrawal pains from not having a huge list of comments to ponder and investigate. Even if you just post 1 pix a day you would be letting us see where you're at and also allowing us to comment and educate each other.
By the way...."you look marvelous"
On another note, whenever I undertake a task and get repeated but different obstacles as you feel is happening, I assume the Great Spirits would rather have me do something else. If I recognize that, I usually take a careful look around. First for whatever danger I may be overlooking and then second just to take a look around at the beauty that surrounds me. So Bill...get some trunks on!
To the Cara Community, thanks for your posts. Things out there must be getting scary to those who recognize it. If I see it as dangerous, it is becoming obvious to the masses of which I are one. I have taken a small position in SRS. I am looking for reasons to get out of some other positions I have taken, e.g. airlines, drug cos. I want to get into water suppliers and ag chemicals but will (grudgingly) wait for them to come to me / dip.
Question #1 to the group:
What happens when our government workers realize their investment in their homes in the DC area might loose 50% of the value? I’m of the opinion that those who have the ear of our lawmakers get the most service. Who has more contact than all the people who work in the same building with our elected royalty do?
Question #2 to the group:
If the Bear Stearns hedge fund fiasco/scandal/theft (call it what you will) is important in a canary in the coal mine sort of way….which HBB is next? Where is the most danger?
Question #3
Will our govt. use xenophobia (of Chinese poison/the yellow peril) be the next reason to tighten our borders and quietly divest us of our individual freedoms?
This is my longest post to date. Thank you for any insight you care to share.
From the north Puget sound
Peace
Gray

I think gold is gaining a more firm foothold. Action in the miners over the past few weeks has been positively bullish, and a lot of large buying has taken place. I got in KGC at 11.39 and GFI at 15.59 and have enjoyed a nice run in both recently. I have 8% stops in but I really would like to have them as low as 10%... In any case I think we will see a test of 680 soon, followed by a break of that resistance level by the fall (i think thats basically plagiarising Bill, sorry Bill!)

It looks like there is a lot of confidence in the gold equities and with GLD (gold etf) and GDX (gold miners etf) recently giving bullish signals. I am hoping for blue skies ahead but I am still unsure how much of that is wishful thinking on my part.

Ron Paul has a clue...and Bernanke relies on ignorance "the Federal Reserve is committed to price stability" for his job.

I'm such a wuss to hedge my MDY puts into a spread...but better to run and live I guess

JogyP,

Looks like capitulation day for IBKR. I was allocated a few shares in the IPO on which I am now down 23%. Admittedly, this is my worst investment in the past five years.

However, there seems to be little point in selling now. Instead of buying more shares, I wrote Dec 20 puts today for 85 cents (yes, I would be comfortable owning IBKR for $19.15). If the share price goes above $25, I will write Dec 30 calls. Between these two premiums, I hope to get out with little or no loss by the end of the year.

Good luck to you.

Mike, Thanks for your comments, I am skeptical of the article that mentioned it, but last night while watching 'Fast Money' on cnbc it looked like the host Ratigan almost had a heart attack when it appeared that a guest was going to mention Greenspan and the scandal, but at the last moment took the question in a different direction. I really trust the views here, that is why I asked. Thank you for your input. For those who wonder what the heck I was talking about : http://www.worldreports.org/news/56_worst_financial_corr

ALOHA !!

jasper ... Ron Paul is the only politician in DC that has challenged both Greenspan and now Bernanke. The rest are just posturing idiots and spinmeisters with no real agenda other than self adulation and profit!

Photogray ... Q#1-Add in that most politicians at the highest levels own DC property. They can't print a private buyer but they can print a "bailout" perk!
Q#2-JP Morgan Chase has by far the largest derivatives position at some $74trilUSD. Most all of HB&B are heavily exposed to derivatives in the $trillion USD range. Time bombs to be sure ... Insolvency would also effect retail accounts like CDs, etc. I would not have any accounts at any of the BIG HB&Bs and I don't. I'll stick with Bank Of Hawaii. GO SMALL!! I would include ETFs in that mix especially GLD and SLV.
Q#3-There are a multitude of reasons to divest us of our freedoms ... pick one! Keep voting the same two party power elite into office and you keep voting away your future and your kids future.

chas ... I still believe there is a surprise upside to the USDX ... We are at 30 year support levels. If the USD rallies then POG will fall and so will miners. In any event I have not sold any of my PM shares or bullion and in fact have added on dips but I still have some large cash. If the USDX drops below 80 I will "uncash"!

Kaimu,

Ben just declared inflation dead, how will the USDX lift from here? Why do you feel it will go up? Thanks.

Dear Green Arrow,

I looked at your link but it's long, and really hyperbolic. Can you tell me in two sentences what this thing is?

By the way, the market didn't like what Uncle Ben has to say, and neither, it seems, does gold.

We are headed for a big, historic and scandelous debacle in U.S. residential housing before this thing's over, which may be awhile.

WFMI: Interesting news for the Whole Foods Fans

Designer bag hysteria at Whole Foods
http://money.cnn.com/2007/07/18/news/companies/whole_foods/index.htm?postversion=2007071810

Shark_attack, I accidentally posted the wrong link. The correct link was from the home page news archives link to July 5th on Bank on England from that site. I don't want to waste anymore time here posting it or discussing it here as I am new and have a great deal of respect for this site. If it is incorrect I apologize for junking up this message board. It appeared from the link that Greenspan was arrested along with some other bankers. I follow Russian news sites and articles on Putin to get an international view of our markets. In trying to determine what was discussed on Putin's trip to Bush's home at Kennebunkport, I came across an odd site and was trying to determine its validity, that is all.

Kinross (KGC) flying today - seems recently its been a few days behind GFI before it follows the lead, any thoughts on why that might be the case, or just cooincidence?

I will add that today, GFI is up about the same amount (.70)

ALOHA !!

SiO2 ... I have been betting against the US Dollar for six years now by buying gold/silver and PM shares.

Historically look how many times the USDX has bounced off 80 ... seven times since 1968. It hovered in the 80 range for two years from 1978 to 1980. With the high margin and heavy debt loads of most corps and the public nobody could last two years much less two months!

USDX link: http://www.nowandfutures.com/download/usdx1968on.png

When everyone believes the USDX is doomed is when it rallies ... Call it a hat trick or whatever you want. I want "confirmation" that a 30 year support level is broken so therefore I am waiting for sub 80! Ask Warren Buffet all about that trap ... he lost billions.

I must emphasize that I believe any dollar rally would be "short term" a month or so, but enough to dampen enthusiasm. All long term indicators are forcasting a US Dollar collapse.

I love how Ben says he plans to keep rates stable yet they go up, so is the FED really in control of anything other than money printing and spin? I believe the FED is as useless as FEMA! The FED needs to be eliminated. Its only purpoase is to serve elite banking families like Goldman Suchs.

Just call me "extra cautious" when it somes to the USDX ...

I leave you with an infamous 300 year old quote from the founder of the Rothschilds banking empire ...

“Give me control of a nation's money and I care not who makes it's laws."
- Mayer Amschel Bauer Rothschild

Shark, the guy's name is Leo Wanta, so if you Google that you'll find a zillion pages going back quite a few years. There's also a debunker page where someone actually tried to follow up some of the claims about him.

Good luck!

Mike
NYC

Green Arrow:

Absolutely none of my business, but unless you are a real veteran, I suggest you phase in your trading over time. Use a small percentage of your funds.

Keep a huge portfolio funded with make-believe play money, if you like, to keep track of how adept you can be. Yes, you'll kick yourself if that portfolio goes through the roof, since it's make believe, but if it should decline (even a lot) you are safe.

Lots of opportunities today, but that will be true tomorrow & next day, year, years, etc. Pace yourself to get a handle on it. It's tricky.

Okay, okay, maybe you're a real pro with much experience. It's hard for me to tell. But if that's the case, then I direct my comments to other newbies. There is a learning curve.

Hope it works out for you.

Some huge roboust pm winners, started out as nothing but a hedge, now I can see a little shine at the bottom line. No selling. Holding some decent gains in asia etfs and cara india banks and russian tele. Moderate trailing loss stops in place. One shoulder says protect profits; other shoulder says let my saftey nets go to work. Loss of relative strength is another trigger to take me to safety.

Just a few random thoughts, ideas, and observations. Back in the middle of December I wrote that the VIX was abnormaly low and long gamma postions should be considered, or at the very least, protective puts for long postions. The SPX closed at 1425, the Dow at 12,416, while the VIX closed at 9.97. Today the SPX is 1540 (up 8.7%), the Dow is 13,870 (up 11.7%), and the VIX is 16.65 (up 67.7%). This is almost unprecendented. The only time I can remember the VIX and broad averages going higher together was from late 1999 til the March 2000 top. This is significant. Risk is being repriced and moving back to at least historical norms after being artificially supressed by the tidal wave of liquidity sloshing around the financial system. Look for the VIX to eventually revert to it's former range of 15 on the lower end to 35 at peaks. A crash could push the higher limit to 65 or higher (1987 saw vols over 100 in the OEX).
Last year I noted the the braoder averages should see a 4 year cycle low sometime between Oct. 2006 to March 2007. Obviously this did not occur (Bill has felt Bernanke and Paulson had a hand in postponing the inevitable slide). The last time the cycle missed was 1986. No need to comment on what happened in 1987. Compare the stock market of 1987 to 2007.
In Febuary we all wondered when Sandisk was going to bottom. I had two possible entry points, 33 and 36, and noted on the 28th it was a good time to consider long dated calls. The Jan 2008 at the monies have rallied from 7.1 and 4.95 (the 35 and 40 strikes) to 23 and 18.5 at yesterday's close. The point is not to break a hand patting myself on my back. As a full time trader I'm wrong probably 50 times a day. You learn to live with your losses. The point is this market is vulnerable and SNDK probably will have a hard time motoring much past 60. Therefore I would consider either; taking profits now, or selling the Jan 08 55 at 8 or the Jan 08 60 calls at 5.6 against the original purchase, or if you still want to participate on the upside with modest downside exposure, buying the Jan 08 50 put and also selling the Jan 08 65 call and collecting .40 cents. This protects you under 50 and lets you participate on a further rise to 65 and actually collect money from your insurance policy.
Lastly a few option strategies to play the upside in the miners. On June 7 I took a 50 percent position in AEM, GG, and RGLD and said I would add on weakness. Unfortunately I was too timid and never added to the original stakes. No brass ones. I think gold is poised to accelerate as long as the late June low is not violated. Thus I would begin adding to trading positions on pullbacks, using the June 27 low as my stop out zone, while leaving core postions alone. My time frame is different than most people so my advice is not for everyone. The one thing about goldminers is greed is a stronger emotion than fear-the exact opposite for all other equities. Thus volatility peaks with the stock, as opposed to the normal situation where vol peaks at panic lows in other individual stocks. I look at skews-the difference in implied volatility between the put and call options. Again the differences between goldminer vols and other stocks is striking. Puts almost always have a higher vol than calls in a nornmal stock (not counting the internet craze of 1999-2000), but subtle differences appear in 2 goldmining stocks-NEM and AEM. At their price peaks in May 2006 the calls traded 7 vol points over the puts. Right now in AEM and NEM the puts are 1.5 over the call. That is a potential swing of 8.5 vol points if these stocks take off. I know some of you are shaking your head but this gives you a historical edge if we are right about the stocks soaring. Not knowing your risk tolerance, level of sophistication, transaction costs, or how closely you monitor your postions reccommending a multi leg spread is probably out of the question. But I would consider purchasing long dated AEM and NEM call options on pullbacks to the 50 or 89 day moving averages and financing some of the cost by selling out of the money put spreads. Alternatively one might consider selling at the money Jan option and buying 2 or 3 out of the money calls. In NEM strikes are 2.5 points from one another so you do not need as big of move to profit from the position. This is just one of many possible plays and in the future I hope to give real time examples rather than hypthetical ones. As always just my humble opinions.

Thanks optionoracle. I'm going to go over all the trades you mentioned slowly until everything you said makes sense. Especially the volatility skews. It's more a lesson for me than trades I'll actually make, because I don't 'get' that stuff right now.

I'm in a butterfly spread on Oct natgas, as I mentioned before, long the 9 and 11, sold two 10s. I also have a silver spread, Dec 08, sold the 20, long the 19. But neither of these are anything I plan to trade in and out of very quickly, as the option pros do. You guys are the rocket scientists of traders, as far as I'm concerned. "Math is hard!" to quote Barbie.

I think I've seen your screen name around: Do you have a "home forum" where options are discussed and focused on? Maybe I can watch and learn. Kinda like my love life. ;-)

Thanks,

Mike
NYC

Thanks a lot OO, always a pleasure to see you around and read your posts.

I like trading in KGC ATM Calls for the current month. Bought Jul 12.50's at 0.15, sold 1/4 at 0.60 to cover the initial purchase, and the rest between .70 1.15 when I was stopped out ealier this week. Currently they are 1.60! This pattern has repeated itself many times with KGC.

Green Arrow, this is what this 'newby chicken investor' did to phase in to trading: First I bought a huge Financial Times volume on how to invest. Second, deciding to try a newsletter, I subscribed to Hulbert Newsletters which have researched newsletters for 30 years, compiled the results and you can find one newsletter that might suit you and see how well it did over time. Third I subscribed to a good newsletter NoLoadX and used it as the basis of investment. I used it very aggressively and made good money. Trading can be very expensive....and I think this more systematic approach is better (FT book $75, Hulbert $100-150/year, and NoLoadX $150/year) which sounds expensive but will be much less than your trading losses at first....by using a newsletter you will learn more how to approach and think about the markets and also reading all the good information on Internet. (My local pub library has this stuff) Good Luck.

YC Mike-I do not have a home forum, but am happy to provide answers to questions any readers have. I do have a historical database of option pricing which I research to come up with trade ideas. I know I threw a lot of jargon out there and it may not have been clear since I was trying to trade at the time. Feel free to ask questions or make rebuttal comments. It was written to generate reader input and ideas. Good luck in trading-and in your love life. LOL.

It could have been next week after expiration, but it wasn’t. Had 20 July calls on ABX @32.50 which have been under water most of the time. With today’s positive move, I was going to exercise them all, but realized the addition of 2000 more PM shares would increase the portfolios total PM exposure beyond my target. So I took the 110% profit on the options instead. Thank you Bill for the heads-up on ABX potential a couple of months ago.

In the AG area: Nice move by SFD (Long) past few days. As much as I like TRA you don’t fall in love with a stock, so took @ 27% profit after 4-5 weeks. May be opportunities to re-enter if and when it dips, as I like the fundamentals.

Good to see you well and communicating from the Bahamas Bill.

Found a great page with links to articles and facts about the Plunge Protection Team... quick and easy reference for those interested in how the Government is engineering equity prices... or trying to

http://www.fallstreet.com/plungeprotection.html

Only the pdf links work but those have the good stuff anyway

Interesting piece on the TIC data @ Macro Man with comments by Brad Setser which may account for the recent strength in the market:

" Moreover, despite the ongoing concerns over US growth and credit, the inflow into US corporate securities was MASSIVE. There was a net $72 billion invested into corporate bonds, and a further $42 billion invested into US equities. Both were records, with the equity inflow being 50% higher than the previous monthly record."

http://macro-man.blogspot.com/2007/07/well-well-well.html

BMD: in the interests of full disclosure, another insider sold 5000 shares at $3.80CDN on july 9 (reported july 17): http://tinyurl.com/22pbr7 This was a late filing, and occurred before the 25,000 share purchase @ $3.76USD July 11, and the 10,000 share sale @ $3.80CDN July 12. How significant are the two sales-they don't set off any alarms for me.

Re long-term holds: I was holding 1000 shares of PTR in the low 20s in 2003 after learning Warren Buffett had a position. Now PTR trades in the 150s. How much did I make? Let's see, I left about 125K on the table...

typo...in the INTEREST of full disclosure....

Mike,
You should consider buying the January 60 Crude Oil puts. They closed today at 860.00 usd/option. That is good until Dec. 13,2007. I just don't think oil can sustain the current prices into the end of the year. It could be a 3500-4000 gain on each option if oil drops back to 60. I do not own any yet but I will trying to get in tomorrow at .80/option. Open interest in that strike is over 17K. stk

KRY for tomorrow:
200day EMA at 3.73, -3.5 BB at 3.73. I will try tomorrow to aquire 2K @ 3.75. stk

Optionoracle

Your post was a bit of an 'information overload' for me, which is great because it encourages self-education. There is always more to learn...
I am familiar with the basic concepts of options, however could you give a brief explanation of the VIX, and how you interpret this indicator.

For other newbies, here's a link that explains the concept of 'gamma' and other measures of risk associated with options, known as 'Greeks'

http://www.thinkorswim.com/tos/displayPage.tos?webpage=lessonGreeks

Re: stktrader

Anyone who plan on buying January 60 crude oil puts raise their hands...

looks like a lot of big resistance to the market in general historically at this level, GE testing its 40 level, the USD's historic weakness that Kaimu posted about earlier, all on top of a big bullish rally in the US markets (even today was close to being back to even and it was a "bad" day).
I bet the dow will punch through 14000 tomorrow barring some really bad news now that everyone has taken a breather. The question is, can I short the ultrashort QQQ tomorrow? Looks like things could be fought around this Dow 14000, S&P at historic highs level for a while in the mid-term though.

Here's to gold dipping again! I don't have enough. Though after Bernake basically said he doesn't care about inflation, I think it will be hard to scare people back to the dollar!

Hallvardo,
Sometimes life is a simple thing. I tend to have an edge on the economy ahead of the Wall Street economist. My business is highly discretionary. Kind of like boat builders. My business has been very busy since the first of the year but I have noticed that I am no longer taking orders as I once was. I have work out until mid August at this point. Today I was at two of my suppliers and they stated that things were getting slow for many of the other businesses like mine and have been all year. I guess I am lucky.
My point is this. Last year I bought several Crude Oil puts for December 06 when oil was at 68 and I made good money by going against the crowd. Oil tends to be seasonally weak into the last quarter. Considering that, I see highly discretionary spending slowing that portends consumer spending slowing and consumers watching their other spending as well. Buying the puts outright is aggressive and I believe the current future outlook into the end of the year looks bullish for Crude Oil puts. stk

I don't like to bet strong trends will reverse. So no oil 60 strike puts for me. Which sounds odd given that my NG spread counts on NG going to 9 for full profitability - against the trend, though NG is up nicely today. I hear it's going to be high 90's-100 degrees in the east coast next week, so that will be nice for NG.

I have no problem believing that there will come a day, not to far away, when oil stays permanently in the high 70s and above. I don't know if that day is now, but it will come soon. I don't care how big that African oil field they just found is, or how much will be exposed when the ice packs melt, etc. The ratio of barrels per person use chinese/american is too strong an indicator. That ratio will rise dramatically, and it won't be because the denominator (our use, that is) goes down.

Hallvardo, Google VIX and you'll find a ton of information about it. It's commonly seen as a measure of uncertainty about the market. It usually trades high when the broads decline. So to see it trade high while the market rises means the general level of discomfort is high, even as share prices increase. A strange and somewhat scary thought.

Mike
NYC

STKTRADER:

This is no guarantee, but if I were a BETTING MAN (hehehe)
based on the price action today I would bet that KRY will actually rally toward the 20 day and will come nowhere near 3.75 tomorrow. But don't buy this train wreck on my account.

Shark,
I am always on the prowl for those stop out days that the MM like to play. Usually they hit the -3.5 BB. That is why I place my orders a few cents above that level just so that I am sure to get my fill. stk

Mike,
What I have found out about the futures is that everything moves in a much faster time frame vs. the stock market. Things unwind quickly due to the large transactions. Fear and greed are also heightened, which make for violent price swings. When the mood changes, EVERYONE heads for the same double doors. Oil will retrace and five months is plenty of time. stk

G'Day Kaimu,

Re: Geologix

I did my due diligence a long time ago on GIX.V I highlighted them on this blog a while ago just after they ran up to $1.50. I was lucky enough to get in and buy a big chunk just before this when they were below $1.00 dollar. They then ran up to a high of $3.20 and came back to $1.50 on the back of some released results. These were interpreted as poor by some but I did not see them that way. You also posted that you thought they had been misinterpreted and bought on the weakness. Well I think the market is starting to take notice again.

My 12 month target is $4-$5 and my 2-3 year target is $17 + or - $5.00.

In summary they have great management. They have a great project in Mexico. They have great potential upside.

A friend sent me the following info. Apparently the Kaiser report is very positive and supports my views on this property, company and management. His $10 - $20 target is similar to mine.

From Peter Grandich
Below is commentary from www.stockwatch.co m regarding newsletter writer John Kaiser’s commentary on Geologix Explorations (GIX-TSX-V $1.80). Without a doubt, John is one of the foremost experts in the junior resource stock business – period! He’s also one of the least promotional and has a long history of attacking “hype” in the business. That’s why as a very large shareholder of Geologix and a compensated consultant, I was extremely pleased to see him note GIX could be a “$10-$20 homerun”. To the best of my recollection, John rarely offers such upside potential for his average stock pick.

Kaiser says hold Geologix for the management he likes

Geologix Explorations Inc (C:GIX)
Shares Issued 36,848,633
Last Close 7/16/2007 $1.75
Tuesday July 17 2007 - In the News

John Kaiser, writing in a June 28, 2007, Tracker, revisits Geologix Explorations Inc. ($1.71), officially and still a "Spec Cycle Hold 100%." The baron of bottom fishing said buy Geologix on April 29, 2005, at 35 cents. An investment of $1,000 is worth a handsome $4,738. Mr. Kaiser sees much more upside, such as a $10 to $20 home run. His report follows a visit to the gold-silver San Agustin project in Mexico in late May, 2007. He contends that an earlier failed rally -- the stock touched $3.20 on April 16 -- was due to confusion about the nature of the San Agustin play and its underlying acquisition agreement. The new story which caught the attention of institutional investors was the reinterpretation of San Agustin as a polymetallic gold-silver-zinc-lead system in the Penasquito mould. Retail investors, who tend to like precious metals, headed to the sidelines. In the end, Mr. Kaiser figures it is not so much San Agustin that is the biggest attraction. It is Geologix's "well-rounded management team and a system to generate both early stage and advanced projects." The management he admires includes old guards Robert Willis and Mike Mallard, and new-guard operations people Dunham Craig and Siegfried Weidner.

stktrader, I agree totally. And volatility is our friend with options. Also, as we both know, those puts won't even need to go ITM to become profitable. I have no doubt you'll make money on them, unless some sort of 'event' occurs (war with Iran, Al Queda finally succeeds in blowing up a piece of major Saudi oil infrastructure, or even an oil tanker or two.)

Personally, I'm gunshy on making bets on prices coming down on anything since I got burned with puts on the broads and puts on RE made too early.

So, oil will likely swing down, and even if it only manages to break below 70 sometime soon, those puts will be fat and green. It just seems like swimming against the tide betting on lower prices on anything these days. I know it doesn't sound like it, but I like the trade. It's just not for me.

I do wonder about 70/65 spread, though. I gotta go price that combo and see how much it would cost. I'm a pretty under capitalized guy these days, which is a sad state, indeed, to be in during a major bull, so cost of entry is a big deal to me.

Good luck and keep us posted on the puts. I'll be following it.

Mike
NYC

For those trading novices out there like me, you may find it extremely valuable to go back and paper trade 2007 so far using Bill's methods. I thought I already knew a fair bit about trading but I certainly learnt a whole lot more than I ever imagined doing this exercise.

I used very tight stops. To make it easier I have provided all the Cara 100 stocks that have given entry signals (RSI7 D/W/M <30) this year and date of entry using my system based on Bill's advice.

By using RSI Stochastics and waiting for the trend to show signs of reversal, you can set very close stops on entry followed by trailing stops as the price moves up to create a very attractive risk reward ratio.

I am also playing with the idea of selling a half position at any movement above the purchase price equal to the stop loss so that risk is reduced to Zero (unless there is a gap down or significant slippage).

WFMI Entry Date 29-Jan-07
MU Entry Date 15-Mar-07
HOV Entry Date 16-Apr-07
SNDK Entry Date 2-Mar-07
DELL Entry Date 12-Mar-07
MU Entry Date 11-Apr-07
WFMI Entry Date 22-May-07
WFMI Entry Date 13-Jun-07
SBUX Entry Date 27-Jun-07

SNDK and MU are still in play after very nice moves up, the first WFMI resulted in a + 10% trade while the others are stopped out for very small gains or losses or are still in play.

ALOHA !!

Aussieontop ... G'day back at ya mate! Thanks for the info regarding Kaiser!

I see Pinetree Capital bought some 77,000 shares of GIX on July 12 for $1.50 via the "public market".

Fresh RSI7s

ronsen.blogspot.com/2007/07/casino-open-for-business.html

Aussieontop:

Is there software to play with different strategies appropriate to the cara100 rules with rsi and stochastics?

I have one but it does not include technical indicators. What it does do is use relative strength ranking within a group, in my case the the cara 100, and it uses trailing stop losses. As a general rule, at purchase the trailing stop is tight:3-4% and then, hopefully, as gains increase I looseen up trailing stop loss to 8% always assuring 1-2% of profit. Highest profits are locked in when its rank drops off below a specificed cutoff.

Hallvardo-concerning VIX, go to the CBOE website, click on Daily Market Statistics, scroll down that page and click on "changes to VIX and VXN methodology." This page will give you all the info you need to know about these measures.
These indicators measure complacency and fear in the market place. It is a quick snapshot of what participants are willing to pay for upside exposure or downside protection. Since the VIX is derived from the Standard and Poors 500 index the VIX measures what money managers or large operators are willing to pay for insurance on their portfolios. The VIX traded roughly in traded in a band of 18 to 48 until December of 2003 when it began its downward drift settling into a new range of 10 to 20. Such low levels I believe have been artificially produced by several factors; the Fed's decision to drive down interest rates as a response to the bear market which began in 2000 and the slowdown in the economy due to 9/11; the introduction of funds designed to sell premium as a means to enhance returns during the sluggish markets of this decade; the extreme low interest rate environment caused many to "reach for return", encouraging traders to put on the carry trade, thereby creating excess liquidity in the financial system; decimalization of stock options probably dampened daily volatility (but not weekly) encouraging more participants to sell premium; and the slow upward drift of the market indicies gave investors a sense of security since the Dow ans SPX have not had 10% corrections for many years. As you can see with the subprime and CDO markets, securities supposedly having a 2 billion dollar value can go to 0 in a matter of months (see Bear Stearns). Repricing of risk in the equity market has already begun and will revert at least back to its earlier mean in my opinion. One should protect his or her portfolio before the s*** hits the fan. Do not think the markets will always be fair and orderly, that the quotes you see on the screen will be timely, or your broker will have time to do your transactions (or your electronic platform will function properly). The markets will probably remain firm for a couple of months, but this fall could become unhinged.

optionoracle
Thank you for pointing me to that site, lots of info in there. It might take a while to get it all 'under my belt', but will definitely be spending time on this in the coming weeks.

About oil dropping below 60, I still wouldn't bet on that. Oil is getting increasingly difficult and more expenxive to extract, the global demand is rising, we have a falling dollar and global inflation. On top of that, the long term trend is up, and I never bet against the trend. Sometimes something unexpected might happen, but betting on that is nothing but gambling and has little to do with investing/trading in my book...