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Author: Mike Celeste Editor: Tony Ponzo March Circulation: 7153

Stat Sheet Week Ending March 20th 2010

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+117.0+1.1%+314.0+3.0%
S&P+9.0+0.8%+44.0+3.9%
NAS+6.0+0.3%+105.0+4.6%

Highlight of this past week: We have two highlights of the week. First our Basic Strategy stock split pick NETL, was sold this week with over a $5 profit. Second, SPWRA was an overnight straddle that made a terrific profit. Read more about it in the newsletter.

In this Issue---
Options---
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This week we saw another expiration opportunity. Why? Because there is more volatility during expiration week as the time value dwindles down and finally disappears. You can get stung pretty quickly, too, but if you watch out, there are opportunities. One of those can be on the writing side, or selling an option to open. On Friday, there were a number of stocks that still had time value early in the day. POT was one of them. The March 120 Put ranged from a high of 80 cents before closing at zero. A Put written anywhere in between those prices would have been profitable. Granted, it was a little nerve-racking at times when the stock dropped to a low of 119.80, meaning there was true value of 20 cents, but it didn't stay long at all before bouncing back to around 121. There were many others that fit that situation, and it was there for the taking. Remember that this is for experienced traders that are approved to writing/selling options.

Another opportunity came up as it applied to an earnings play, and this involved holding overnight. See below in the Momentum Section for more on this exciting strategy.

Momentum Plays---
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We had a good week of wins. There were only two plays but both were not only wins but had very nice profits. See Results One of the wins was a straddle that was different from our usual straddles. It was an overnight straddle and it made a .60 profit shortly after the open and went on to produce well over $1 profit not long after that for those who hung on. The following is an explanation of why the play was different and why it was a great opportunity.

We entered a straddle on SPWRA just before the close on Thursday with the idea of holding it overnight. The straddle was the Mar 22 Call and 22 Put. We entered this trade because SPWRA was reporting its earnings right after the close on Thursday. This stock has a history of gapping the next day at least $2 up or down after its earnings. It was almost at $22 when it closed and it happened to have 22 strike options which is a real benefit but here is the great opportunity. Both the Call and Put were trading for only about .80. Think about what that means. If the stock has a history of gapping over $2 and the stock is at $22, it means that either the Call or Put is going to be worth at least 2.00 (all intrinsic value) on Friday morning. And if it gaps more or has any time value in it at all, it will be worth more than $2.00. If you bought the straddle for about 1.60 (.80 Call and .80 Put) and one of the options is going to be worth at least $2.00 you have a .40 profit. In other words this is a situation in which you are almost guaranteed a profit. The only way you would not make a profit is if the stock gapped less than 1.60 and didn't trade beyond that during the day. But like we said, it has a history of always gapping $2 or more - sometimes as high as $5 after earnings. As it turned out, the stock did indeed gap down over $2 and the Put quickly became worth 2.25 and that is where we sold it. We did not even have to sell the Call as it was worth nothing. This brings up one more possible benefit. If for some reason the stock later retracted up, the Call could be worth something and you could sell it later for more profit. It never did but it is a free shot for more profit. Opportunity like this only comes during the week of expiration because most of the time premium in options have dwindled making the options much cheaper creating the opportunity. Also we have to find stocks that are close to strike to make it work. This week is near the end of earnings season so there were not a lot of earnings plays to choose from. But next month at expiration week there should be more to choose from as the new earnings season will be under way at the time. We'll certainly be looking.

Indicators---
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We laid off plays this week, as before, and missed the strong upward momentum move--until Friday. It finally broke the other way, and while we missed it by the end, the early morning move was indecisive on Friday, so we didn't get in. It later broke down and there would have been a nice play. At least the signal proved correct. Now we can move on and hope to see more normal markets, depending on the signal.

The Economy, The Markets & Commentary---
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CNBC ran a very interesting special, led by David Faber. It is usually repeated, and I advise anyone that didn't see it, to watch for the repeat showing and pay attention. It was about the mortgage crash, when, why and who was involved. Of course, long time readers here know we pointed out that it had to crash, way before it did, but David goes to the financial people that were involved and asks some great questions. He doesn't always get great answers, but he did put people on the spot. When asked if they now feel guilty about what they did, there was not one that I saw that would admit to feeling guilty. One man did almost break down, but he hesitated and finally stated he did not feel guilty. There were some that worked in the industry that lost their jobs, but they acted like they didn't make a lot of money while the fraud lasted. One man--one--saw what was happening and asked himself how he could make money by taking advantage of the collapse that he could foresee coming. He was the head of a hedge fund and he made over $1 BILLION in profit from the program, feeling strongly that it was going to fail. What did he see? He saw that the mortgages were insured and when things went bad, as he was sure was going to happen, he would receive insurance guarantees to cover any loss---by Fannie Mae, Freddy Mac and AIG. And who paid for the insurance losses? Yep, every single one of us, when the government came in and provided the money to save those companies. The trick was that junk paper was classified as Triple A rated, which then got that paper the insurance. All legal---It's incredibly hard to believe it was legal, but it was, and there are so many at fault for that being legal that we citizens should be punished for allowing our representatives to push these programs---and we are being punished. And those people in that industry that lost their jobs---they knew what they were doing was morally wrong and they took the money. We are constantly facing loss of jobs when an industry comes to an end. There are many ghost towns throughout the west where there was plenty of money to be made by mineral mining--until the mine ran out of minerals. Buggies were a big industry until autos came along. Many industries in this country have dried up with the exporting of jobs overseas. My home town in NY State had 2 large employers--IBM with 18,000 and Endicott Johnson Shoe Co, the 2nd largest shoe maker in the world at one time. The shoe company is completely gone and IBM is down to 1,800 workers, one tenth of what it used to be. It happens all the time and all over our country. The trouble is, when jobs are exported, the losers are honest, hard working people that took pride in their work and product, and had it taken away from them by the rise of education in 3rd world countries, where the leaders saw how much profit could be made with cheap, cheap labor. It happens to good people--but I have no sympathy for those that got rich while the times were good, by leading people into mortgages they knew could not be paid. The big boys got out early and they got out very rich. To add to this, it is now coming out that it appears that title insurance, in some cases (and we don't know how many as it is early on) didn't even verify liens that applied to mortgage loan applicants, if the applicant didn't list their full liabilities. Anything to make a deal go through. The plot thickens---and we won't have accountability, you can be sure of that. Remember, catch that TV special on CNBC when it is replayed.

Health Care might receive a final vote this weekend, so pay attention to the news. Of course, we won't know what is in it until after it is passed, but who cares, as long as the politicians carry out their usual method of "representing" us. How can we know if it is what we want, or don't want for that matter, if we don't know before the final vote what the bill finally contains? It is too logical for a final bill vote to be delayed a short time until the people get a chance to see what is in it.

Keep remembering that we still don't have inflation--and we know we don't because we continue to be fed lies telling us that there isn't any inflation and the media is doing very little to contradict that statement. There is just starting to be a rumble about gasoline prices, now that many areas are seeing prices over $3/gallon again. Gee, it is amazing that some out there realize that the higher gas prices go, the less we can spend on other essentials, like food--oh, but food is going up, too. Not to worry, though, because those people that advise us say that we can exclude energy and food because they are too volatile. Yes, don't worry about heating your home, driving to work and feeding your family, ( the cost of which is all going up) because we are told we don't need to worry about those factors. And, I see no mention of increased taxes and fees that are coming at us in droves, now that our states and cities have huge deficits.

Forget unemployment---it’s a hopeless cause, but there is improvement, we are told--yes, about 5,000 less first time claims than the week before--but the total claims number is still huge. When you factor in the long term unemployed, it is clear to us that it will be way more years than the 1 or 2 years before full recovery that we are being fed by those "experts". Thousands of teachers out here in CA received potential layoff notices--where is all the aid money that was promised? A new jobs bill was signed--write to me when you get a decent job as a result of this program. I really hope somebody in our middle class working group can get some of this promised benefit. And the administration claims 2 million jobs have been saved. But they can't say who's jobs have been saved. In other words, they have no concrete backing to prove those jobs have been saved yet they keep telling us they have been. A big radio station out here in L.A. asked people to call in and let them know if their job has been saved due to government action. Not one phone call was received.

There are rays of sunshine coming from an increasing number of companies that are reporting higher earnings. The worry is that it is because of inventory replacement needs instead of increasing sales. One statistic that was quoted said that the large majority of states are reporting lower sales tax revenue compared to earlier times. That just makes me more confused when I see increased retail sales reports coming out--when so many people remain in a financial mess between mortgage requirements, increased inflation in living costs if you factor in ALL living costs, credit card debt (which is decreasing--but decreasing from very high levels) where paying more on that debt means there is less to use for other expenses. Very confusing--and to add to it, we just returned from a few days in Las Vegas, and let me tell you, the crowd was large and gaming was in full force. We play blackjack and had a hard time finding an open spot to play. Buffet and restaurant lines were long, also---You could have fooled me that the economy was bad---Very confusing indeed. We were in downtown Las Vegas, and they told us that out on the Strip, the big hotels are still reeling from losses. They bet on high end spenders, and that market has apparently slowed down a great deal. Downtown caters to the middle class, so maybe that is why there were so many people around us. In construction, many projects have stopped mid-way. Tons of houses are in foreclosure there, and it is discouraging to drive by all of those new developments that are practically empty. All I know is my area of the country is California, and we are still in bad shape out here, too. Maybe the hammer hasn't been hitting as hard as it is going to in the future, but we will try to sort out more as time goes on. Good luck to you people in more stable parts of the country. Keep up the good work.

Stay tuned..............these are especially interesting times.

Today's Thought---
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Things are bad. How bad?---If the bank returns your check marked "insufficient funds," you have to call them and ask if they meant you or them.

Mike

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