Sold-to-Close: DIA Call Options Strike 133 @ .20
February 1st, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
How could it possibly go up? Right? With every media source saying we’re in recession and the world is ending, doom, etc… I mean, sure, maybe it is The End.
But, then again, maybe not.
…
I have this thing about being upwind when the media starts a fire. When things look so totally obvious, and the mainstream media is in on it, I just go the other way.
—EMERGENCY: GLOBAL FINANCIAL MARKETS COLLAPSING
Remember those DIA calls that I bought back when the blood was flowing in the streets… I paid .05 for them.
My GTC sell order got taken out at .20 during yesterday’s session. I’m not bragging. I’m worried about those of you out there in Internet land who might be thinking about playing or sticking with DIA long.
I’m going to explain the technical arguments for why this move looks like it might continue, and then the reason why I pulled the plug.
Truth be known: I would have tried to let it ride (after all, this is the options lotto), but my PBW calls (strike 29) aren’t doing so hot. I paid .05 for those and that’s pretty much where they sit. Expiration is still a couple of weeks out, though. I figured I’d take profit on the DIA calls in case the PBW calls don’t work. Bird in the hand… Pigs get slaughtered. Nobody ever went broke taking profit. Etc.
Now, if you were insane/smart/reckless/in-the-know enough to buy calls down there, when the panicked herd was selling everything that wasn’t bolted down, letting greed win out over fear right here might be justified. That is a BIG FAT—might.
Obviously, I considered the following argument myself, but took profit anyway. Let’s be clear: I’m completely out. But, I’ll consider buying puts soon if the daily squiggly wigglies go extreme overbought.
Ok, so here are the arguments for sticking with DIA long:
Squeeze
* There is a daily green candle close above the fib fan AND the 50% fib retracement grid line. Did They paint that candle to get the shorts to give up? I have no idea, but shorts probably needed a change of shorts as they watched that thing develop.
* Daily MACD has crossed up and is diverging, indicating increasing momentum.
* Daily stochastics might be going for a full oscillation, and the oscillator isn’t extreme yet (just under 70).
* Same with daily RSI at 48.8.
* OBV has formed a channel with a slightly positive slope. If I was holding out long, I would want to see that OBV slope a bit steeper. (OBV is one of my favorite indicators, by the way. The volume studies are the key ingredient to the special sauce, I’m pretty sure.)
Now, I don’t know if it’s a deal breaker just yet, but I don’t like how those MAs I’ve applied to the volume are coming back together. If I’m in a trade, I want to see increasing volume with a net flow my way. I know, I apply MAs to my volume. I’m weird that way. This chart leaves a bit to be desired, in terms of believing the volume, even with OBV showing a positive slope. Never mind, of course, that this bounce is an absurd, sucker baiting, whipsaw, clock-cleaning-waiting-to-happen farce. But, bet against short squeezes at your peril.
Remember what I said about buying those calls? Actually, I quoted Blade Runner:
“I’ve seen things you people wouldn’t believe.”
It’s because I know the psychology of short squeezes. They lay on short squeezes when almost EVERYONE believes THE END of the world is upon us. Lots of “dumb money,” meaning retail investors (Their term, not mine), are taking in the meme payload of DOOM from media. Then They paint a few red candles by selling the futures… What do the sheep do? They read the idiot financial press and listen to the money honies and they think, “OH MY GOD, IT IS THE END,” and they sell.
At the bottom. Or a near term bottom.
Now, if I made 300% on that bet, sitting here in my underwear, try to imagine what They’ve made off of this racket! Personally, I doubt that They’ll be able to convince the sheep to go “bargain hunting” because the sheep are too busy worrying about very worrying things. My guess is that more upside will be about decapitating speculators who are playing what I think will ultimately turn out to be a dead cat bounce.
I buy during red candles. I sell during green candles. That’s why I cut my position loose right here. Don’t get me wrong, they could squeeze this thing until those 133s I bought are in the money, but I won’t regret getting out when I did. Here’s why: the reversals off of short squeezes are usually brutal, whip saw moves. They come on suddenly and there’s really no way to see them coming (that I’ve been able to find). That’s why I’m not waiting for stochastics and RSI to go extreme, because the wizards behind the curtain know that lots of slobs who are long still think this move has legs and that the slobs are thinking, a little more, a little more…
Thanks, Jack. I’ll take my .20, my cigarette butts and my bottle caps, but I’m splittin’.
Research Credit: Brad
Brad recommended ThinkorSwim for charts. Indeed, I can create some pretty weird charts with that thing, and get up to some of the antics I used to get up to on the professional platforms. I pull the trigger using TradeKing, because their prices are right, but their chart package blows (and that is kind understatement). Thanks, Brad! Anyway, I created the chart above with the ThinkOrSwim client.
What MarketWatch was calling, in its bulletin (no longer visible), a “JAW-DROPPING $117 BILLION QUARTERLY REVENUE” shrunklink.com/aizl
Remember, that’s QUARTERLY. That’s a shitload of money. Shell reported similar “good tidings” recently. Add in the year-after-year bumper crops of opium in Afghanistan, and that’s a REALLY BIG shitload of money. And they all have Bush/Cheney to thank for it. Think they — the profiteers AND Bush/Cheney — don’t know that? That’s one big fat juicy favor to call in. There’s the official plunge protection team that even the Wall Street Journal will mention, then there’s the old boy/neocon network, awash in ill-gotten gains.
We won’t see the real crash until W and Dick are long gone; just like we won’t see 9/11 II till they’re long gone. They aren’t stupid. They’re determined to be exonerated — and then some — by history. So how do you make these thieves and bunglers look good? Make the next administration look like a nightmare. Count on it.
TOS has a more complicated fee structure than TK, but I found that my trades are cheaper there. Trades up to 333 shares for $5, options $2.95 per contract (or other fee structures), 3 free mutual fund trades a month. Also, they provide free live quotes to everyone with a brokerage account. They have a affiliate program, too. I’m in the process of switching right now…
I think this fraud caused the rally yesterday: MBIA seeks to reassure investors; S&P puts on review
MBIA shares closed up 11 percent at $15.50, and Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) jumped 9.2 percent at $11.72, both on the New York Stock Exchange. MBIA stock has tumbled about 50 percent this year, while Ambac has plummeted almost 70 percent.
…
The insurers have guaranteed municipal and consumer debt worth about $2.4 trillion, of which about $900 million is “structured finance” debt, including mortgage bonds held in collateralized debt obligations (CDOs).
…
Just after midnight EST on Thursday, MBIA reported a loss of $2.3 billion, or $18.61 a share, versus a profit of $181 million, or $1.32 a share, a year earlier.
Hmm… $-18.61 EPS on a $15.50 stock? Sounds AAA to me!
Chief Financial Officer C. Edward Chaplin said on the call the bond insurer would continue to work with Moody’s to keep its credit rating at triple-A and believes the outcome of a Moody’s review will be “affirmative.”