Philip Davis

Options Trader: Tuesday Outlook

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.


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.

Options Trader: Monday Outlook

LOL Saifl, how can you be so spectacularly wrong while acting so sanctimonious? In Aug 2006 oil had run from $40 to $79 in 2 years and in January it was back at $51. It pretty much went straight south from the point where you are quoting me and yes, you are right, they were using the same BS con job arguements then that they are now.

You can have fun betting this time will have a different outcome but I'll thank you for pointing out that I called it on the money then and I am equally outraged now.

Meanwhile, just so you can keep up, we cashed our XOM longs today and picked up some USO puts at $111.

Options Trader: Monday Outlook

Sorry Saifl but you are dead wrong and also sorry but we had a hugely profitable day because not only were we short on oil at the outset but we jumped all over the BS morning bounce and doubled up our positions.

You'll be very happy to know we bought some XOM calls into the close as we expect you'll be chasing that one tomorrow morning - feel free to rant and rave some more so we can catch the next top, probably tomorrow's inventory report....

It doesn't matter how many contracts are short when there are reported and unreported exchanges - it's a total joke and you treat it as gospel. We just see it differently. As I'm sure you know it's 'open interest" in front-month contracts that drives the price of oil in this country and 50,000 long contracts (20%) were dumped on the NYMEX in the past 2 days:

futures.tradingcharts....

That, by the way, would be a reference to what I am saying that people can verify, as opposed to spewing a bunch of quesitonable figures and then basing my premise on that...

As you mention, there are still, even after the mass dumping of contracts, 282,411,000 (1,000 barrels per contact) barrels of oil scheduled for July delivery at $131 per barrel. Let's follow up every day and see how many of these barrels there is really a demand for and how many are total BS. I'll be putting my bet that 240,000 of those contracts are cancelled over the next 10 days. That's an entire month of US imports that, if we forced delivery, would arrive in Cushing OK during the month of July.

The FACT is that we don't need them at all. There is so much oil in this country and being produced around the world and floating around in tankers that all there is for the traders to do is fiddle around with contracts they have no intention of accepting because no one actually needs the oil they are trading - it's a speculative vehicle and nothing more but, sadly, this is how we set the price for all the crude that is actually delivered.

It's a sick system and you are an excellent example of the kind of people who defend it so thank you for giving me something to point to when I discuss the oil apologists.

Options Trader: Thursday Outlook

ENER - well some guy (maybe you Expert) paid us $2.25 for the $50 call that expires next Friday. So we don't need to buy the stock, or do anything other than take the $2.25, put on a stop at $3 (if it breaks $50 before the value of the contract deteriorates) and, if ENER doesn't break $5 in 5 days we take it all ($225 per contract) as pure profit.

My risk is $75 and my potential profit is $225 - you should really learn to understand the mechanics of a trade before you criticize it as I would have to buy $5,000 worth of ENR and they would have to make 4% by Friday just to make the same $225 while my risk of a gap down is significantly higher than my risk of a gap up on the call I sold as the stock has to go to $52.25 (up 4%) JUST for my caller to get his $225 back.

This is what we teach at Philstockworld, how to use options to DECREASE your risk and make superior returns. I don't think ENER is a bad stock at all, I just don't go chasing 40% moves no matter how much we love a stock.

Ted: I advise rather than spend $22K on a single contract that is a horribly bad idea (for pretty much the same reasons that I just told Expert you don't chase ENER and note the $90 was the insurmountable barrier), you should spend $49 and spend a month papertrading our picks on my web site. This is not a shameless plug - we really do help people just like you every day!

You are, frankly, lucky you still have .56 of value for a call that's more than 10% out of the money with no expected event. There is no cheap way to "save" this play as the premiums for the other months are ridiculous on V.

The correct way to play this (other than cashing out and moving on) would be to roll yourself down to the $80s at $7.65 (+ $7.09) and sell the $85s for $3.75, which brings the total cost of your play to $1.10 + $7.09 - $3,75 = $4.44 and any finish above $84.44 gets you even. The most you can make on that play is .56 because above that you owe the $85 caller money but it has a very good chance of getting your $10,800 back (assuming you have $88K for the new play!).

Another expensive way to "fix" this is to take the low premium ($2.80) June $80s for $10.10, which will lose approximately .60 of premium between now and expiration and sell those same $85s, which have $1.45 of premium, after which you will "roll" that position to the June $85s, now $7.10 for a net collection of perhaps $8.50 against your $11.20 investment meaning you need a June finish above $82.70 to "win."

There is one other thing you can do but it's risky:

Since you already have the 200 $95s you can sell 200 $90s for $1.52 and 200 $85 puts for $1.52 covered with 200 $80 puts for .38. That puts net $53,000 back in your pocket and you are playing for the stock to finish between $80 and $90 on Friday. You would need $5 per contract in margin to make this trade ($100K) and you do risk that loss (less the $53K you collected) if the stock goes all the way up to $95 or down to $80.

There are about 5 other strategies we teach on our site to save a play like this but mainly we teach you never to put yourself in this position in the first place!

Good luck....

Investment Banks Have Too Much Money On Their Hands

Yep, nice work if you can get it!