How to Make the World Better

At the risk of offending a zero audience, my three things that would ease strife around the world. No, I'm not being flippant. Number one: Everyone has a garden. Number Two: Everyone gets a nap of at least 45 minutes every day. No matter what. Number Three: Women stop verbalizing every, goddamn, thing. That's it. Those three things right there and we would be on the way to world peace.

New Stuff

The CBOE (Chicago Board Options Exchange, henceforth to be known as the CBOE) has initiated weekly options contracts on a very small, select group of stocks. GOOG, AMZN, AAPL, BIDU are a few of the names. These contracts are issued on a Thursday and expire the following Saturday. They are issued every week EXCEPT for the week of normal options expiration the third Friday of the month. Covered call writing as a way to generate additional income from a core position that is being held will be one of the uses. Selling puts at a strike for a position that you want to own is another idea that will work with these. The shorter time to expiration makes the ability to generate income over shorter time frames attractive. They have had these contracts for index options since 2005 but the individual stocks are new. The CBOE extended the expiration by a day on contracts beginning July 1st. Anyway, another arrow in the quiver. Not sure how much trading of these I will do, depends on the premium for the strikes but if I was a fund manager with traditional core buy and hold positions I would be looking to these contracts to increase my return via covered writing and by selling puts to reduce my basis for acquisitions. There are only 14 stocks that these contracts are available for currently but as time goes on and interest takes hold I think they will expand with additional stocks.

Long AAPL, SIVB, IBM calls, AMZN calls, CME calls, covered call write on AAPL.

Bread and Butter

Most of my trading profits come from a handful of companies. I trade a lot (2600 trades last year) and it is too difficult for me to focus on more than 8 -10 companies. I've tried in the past and I just end up losing money. GOOG accounts for much of my trading success. I watch it continually and have a pretty good handle on how it moves and it's chart. Here is an example of the type of trade that I try to do on a daily basis if the trade presents itself. This is a base hit in my world. Nothing flashy, just steady income.

GOOG is down to start the day, the market is decent, volume is mediocre, it has recently closed above both the 20 and 50 day moving averages, I just didn't feel, based on my history with this stock, that this selloff was going to stick. I bought calls. Not super deep in the money because we are far enough away from expiration, but with enough premium that if the stock elevated I might get a point. My vision for this trade was intra-day with perhaps holding overnight given the action. I was able to gain the point by the end of the trading day and so I closed the trade. Not complicated, I felt I bought close to what the low of the day was going to be and I think I closed given my parameters of the trade at the right time.

GOOGLE
07/26/2010	O	STC	GOOG Aug10 480 Call	10	$16.80	$9.00	$16,790.61
07/26/2010	O	BTO	GOOG Aug10 480 Call	10	$15.80	$9.00	($15,809.11)	981.50
Total Realized Gain/Loss for GOOG					$981.50

Gold

I wanted to make a few comments about gold because it's been on a bit of a tear and there are a lot of questions about whether or not to own some gold, trade it, etc. I'm not a big fan of gold as an investment, it pays no interest or dividends and can be expensive to store (physical gold, not an etf.) I do not trade gold but I do own some. The reason I own gold is the same reason I own fire insurance on my house. It's an insurance policy, that's it. If we somehow end up in some sort of Ayn Rand/Book of Eli armageddon, the wheels have completely come off and folks are pushing wheelbarrows around, that kind of thing, then having some one ounce gold coins around might be worthwhile. So if I pay $1200 an ounce and in three years it's worth $850 I don't care. It's simply a cost of insuring my financial life against a worst case scenario, like fire insurance is a cost of owning my home.

Now I don't subscribe to the whole survivalist, fundamentalist christian, the end is near stuff. I really don't. I think the likelihood we have to take the hills and start speaking Latin is about the same as getting hit by a meteor. Actually, the meteor strike is a higher probability. But, just the same, I will be happy to pass the gold I own on to my daughter when I'm dead.

I also support the idea of taking some money from a portfolio and owning gold as a diversification from other financial instruments. I think many people have the vast majority of their wealth tied up in home equity, retirement accounts and brokerage accounts that are equities and bonds. Why not take a percentage of that and own art, cars, horses, gold, something that you are interested in and has value. Nothing wrong with that at all. It's a lot more fun to buy a painting or a bar of gold then another 100 shares of IBM. IBM is probably the better long term investment but it isn't very fun or interesting.

Professional Cycling

I used to race bicycles in the 80's, a sport I was spectacularly unsuited for, as an amateur. I grew to love the sport even though I had little success. I was a very good swimmer when I was young but that sport was cut short by parents that didn't understand athletics nor did they try to understand me and my talent for it. I regret that I never got to realize my potential for swimming and resented my parents deeply for their ignorance, indifference and stupidity. Because of that mindset I tried desperately to achieve some measure of success in cycling. I understood the use of drugs in the sport and rationalized that use because of the extreme physical toll the sport takes on its participants. I never took drugs because of my Polycystic Kidney Disease and I was not a professional. But I understood why the sport was rife with supplements.

With all that being said, I cannot believe that Lance Armstrong is clean. I have never met Lance. I have followed his career from inception, the death of Fabio, his 7 tour wins etc. He has never failed a drug test. He has denied illicit use for his entire career. So why doesn't this go away? The problem that Lance has is that there are a lot of people that dislike him. Intensely. He has a way of speaking that is more than just a little bit off. It's more than cockiness or arrogance. In fact, I wouldn't use either of those adjectives to describe him. He speaks in a way that is different from the way that most people communicate and it offends people and is extremely oft putting. Lance then makes you aware that he doesn't care that you are offended. I hope that Floyd Landis is wrong and that nothing comes out of this latest indictment. Lance has had a fabulous career even though he was not a classics rider and didn't do much in any of the other grand tours, the Giro or the Vuelta. He still is the Tour champion 7 times in a row a feat that will likely not be duplicated in the foreseeable future. Even though I doubt he is innocent, I hope that he is vindicated.

Closed my MA put short. Did a quick intra day GOOG call short that worked today. Closed my long AMZN call position in one account for a nice win but left the same position open in another account. Guh. Well, I think it is overdone and will wait for the selling pressure to subside before exiting. Still long IBM calls, backwards a little bit, and long SIVB stock.

Goldman Sachs

I am not a fan of Goldman and have not been for a long time. This feeling is based upon the fact that they have unfair access to the federal government. Too many ex-Goldman employees work in positions of influence in government and in particular positions that relate to Goldmans business. The $550 million fine indicates that the folks that thought Goldman was not completely terrific were in some way validated. Whats interesting to note is that many Goldman apologists have been silent with respect to this agreement. Goldman was, is, and will continue to be, in my mind, dirty. I short them at every opportunity when I feel it is prudent.

Hell's Kitchen

This so infuriates me that it deserves it's own post: Ben, who makes it known he is better than everyone else, occasionally says "Oui" Chef. Actually, not occasionally, he does it all the time. What a pompous, self-affected prick. He should get kicked in the balls every time he says that. Very telling last night when Gordon told him he could cook but that he couldn't lead. He isn't going to win. I think both women have a strong shot.

Apple

Wow. All I can say is wow. What a quarter. I mean I thought they would crush but One Large more in revenue? And $.50 more per share in net income? PhenomenaI execution. Not just great products but the ability to manufacture, market and distribute. I am long calls and the stock and I am going to hold both. I think tomorrow will be a big day and I don't see any reason for this stock to slow down before $300. Volume has been good and it is now through both the 20 day and 50 day moving averages. The recent closing high of $270 I think will be broached summarily and I will look to take some of my positions off the table past $300.

I am going to long AMZN before their report later this week. I think they are going to blow the doors off this quarter as well. They have dropped a couple of hints I think in terms of the number of books they have sold on the Kindle and a couple other tidbits. AMZN is tight lipped about Kindle sales and this is an interesting bit of information they have released. I may increase my normal position buy of ten contracts to 20 or 30 as I think it may be that good.

GOOG and MA also are attractive and I may be active with them as well as CME. CME has been coming back a bit and I may enter a long position with them tomorrow. Support sure looks good at $265 so instead I may generate a little cash and short puts at that strike and deploy the cash generated for the longs I am interested in.

Pop Culture

I'm a little late to the game. Let me blame that on the fact that I have a 7 year old. But I am getting around to catching up on the prior episodes of Mad Men. Roger has to be one of the best characters on television. Hilarious. What a cad. And so funny. I'm up to speed on Breaking Bad and Nurse Jackie. After Mad Men I will feel like I am up to snuff culturally.

Closed my MA put short for a win. Hanging in on my AAPL long and my IBM long. Both of which are south.

Earnings

Big week for earnings announcements. IBM kicks off this afternoon after the close followed by AAPL tomorrow afternoon.. Many more to come including JNPR, AMZN, SIVB to name but a few. I bought and sold some GOOG calls today because of the very deep sell off on their earnings release and because of the very positive write up in Barrons from Saturday. Nice, quick, intraday trade good for $2500. I sold some MA puts this morning because I think the sell off in Master Card is way over done, support looks to me to be in the $190 to $195 range, and they report on the 3rd of August. Assignment at $190 would not be the worst thing in the world. The puts I shorted are the August 190's by the way. I also bought some IBM August 110 calls as a play on the earnings release. Pure speculation. Over the past 12 quarterly releases for Big Blue, the stock finished above the prior close 7 times. I think it will be a good report and depending on guidance, this may be good for a couple of points.

On to more interesting and pressing matters: True Blood. Last nights episode was a delight. If I may; more Bill, Russell, Russells lover (don't know his name), Lafayette, Franklin, Eric, Pam and Jessica. Less Sookie, Sam, Jason and much, much, much, less Tara.

Espana!

Hats off to Spain. I think they were the best team and they prevailed. The Dutch, realizing they were outclassed, resorted to thuggery and intimidating play. Classless move by the coach to remove his silver medal as soon as he exited the stage. Nice message to send, the ONLY thing that matters is winning. He would be nominated for douchebag of the day but that honor goes to either Mel Gibson for his profanity laced tirade at his wife OR to the cleric anwar al-awlaki for threatening the life of a Seattle cartoonist for making fun of Mohammed. Let me think, let me think. Ok, the superstitious, religious, dickhead that believes in fairies wins hands down in this space every time. Anwar? Please, go kill yourself. But just you, nobody else. Thanks.

Closed my GOOG 460 put short and will look to reenter on a pull back or perhaps a higher strike. This trade was good for two points with enough time before the earnings release on Thursday to perhaps take advantage of some profit taking and reshort. This is the fourth straight day of gains in GOOG so a pull back would not be a surprise.

I'm percolating on buying some shares in TSLA. Not because I think it would be a good investment, I don't, I think it probably would be a terrible investment, but because it's the first American car company to file in IPO in 60 years. I've made dumber investment decisions.

Big Week

This week is a big week for trading. Options expire this coming Saturday with the last day to trade on Friday. INTC and GOOG both release earnings this week and will set the stage for the coming earnings season. I put a toe in the water and sold some GOOG 460 puts and will likely add to that position roll to $470, $480, or buy some calls as the Thursday release date gets closer. GOOG's semi resolution with China saw a continued bounce in its stock price back to it's 20 day moving average on decent volume. This chart looked horrible a couple of days ago and was terribly oversold, primarily, I think, on the uncertainty with respect to it's license in China, and now looks much better. I think they will report a good quarter and there is room to the upside near term perhaps to the $500 -$510 neck of the woods.

Paul the Octopus and variance...

Hats off to Paul the Octopus in Germany for going 6 for 6 in predicting how Germany would fare in each of its world cup matches. He picked the right clam every time. Now if we could just put the symbol for APPL on one box and the symbol for GOOG on the other box.... I'll go out on a limb and predict that Spain will prevail. They beat a very good German team and the outcome was never really in doubt. They had pressure on the Germans from the outset and it was just a matter of time before they scored. I think the same game will unfold against the Dutch. The Dutch absolutely, positively, must score the first goal to have any chance.

I mention variance in the header because it's a term used in poker and the World Series of Poker is going on right now with the preliminary events completed and the main event underway. I played in the last preliminary event, the $2500 No Limit Hold Em event and did not make it to dinner, losing most of my stack with KK against a Canadian internet monkey named Evan Lamprea who thought he was in front with AK when I raised 4X in early position for the first time in two hours. He just shoved it in and prayed with ace high because that is so much easier to do than to have to make a decision on the board, and caught an ace. The vast majority of the time my KK will hold but variance raised her ugly little head and put an ace on the flop.

Variance is also a factor in trading which is the real reason I'm bringing it up. (Ok, aside from kevetching about 23 year old internet idiots.) The big day yesterday was not really a surprise if you had been looking at charts and recognized how much selling pressure had been applied over the previous two weeks. I was short some AAPL 240 puts and long some CME 270 calls. Both July expirations. I have closed the CME calls and rolled the AAPL 240's into the 250's. The market was quite oversold and very much due for a bounce. State Street released a good earnings report and that helped to jump start the day. Yesterday saw a very steady rise on fairly decent volume. Most of the earnings reports for the companies that I trade fall after the July option expiration on the
16th with one exception: GOOG. GOOG reports on Thursday, the 15th after the close. For now I'm content to be short the APPL 250 puts and will add to that short on any pullback. I will very likely go long in some fashion prior to the GOOG earnings release.