40 Point Friday – Up 2.8% Since Last Expiration Day!

Last Options Expiration Day was August 17th and the S&P was at 1,420 and a month later we're testing 1,460 – 2.8% higher after Bernanke pledges to spend at least $600Bn and, of course, the ECB pitched in their own $600Bn and China dropped $400Bn and the BOJ added $200Bn of their own.  All that for 40 points.  

So what's the problem?  Of course there was front-running, QE2 had front-running as well, with the S&P running up from 1,040 to 1,250 (20%) ahead of the actual announcement.  That didn't stop us from heading up to 1,361 the next year – up another 9% before collapsing all the way back to 1,100 last fall (down 20%) into Operation Twist, which took us all the way to 1,422 (29%) before falling back to 1,266 this June (down 11%) when the Fed announced Twist would be extended and rumors of QE3 did the rest, running us all the way to 1,440 just ahead of the announcement (up 14%) and, as I mentioned, up to 1,460 now (up 1.4%). 

As John Lennon would say, we need to give QEs a chance but clearly this is a little disappointing so far – especially with such massive, coordinated central bank action AND, did I forget to mention, the new IPhone is here!  That's right, today is new IPhone day and, in the Appleconomy, what could possibly be more important than that?  

Lines like the one on the left are in front of almost every AAPL store on the planet as getting a new phone on the first day it's shipped is really, Really, REALLY important to some people.  We discussed the potential for upside in AAPL (we're already long) in yesterday's Member Chat and there seems little likelihood that AAPL will be holding back the Nasdaq NEXT Quarter, but this Quarter (AAPL's 4th) ends on the 29th and it remains to be seen how and when AAPL chooses to recognize these early revenues.  

Earnings are on Oct 15th so we'll see what they have to say but, of course, we'd see any dip as another buying opportunity there.  We took the dip in gasoline (/RB) to $2.80 as a buying opportunity as well and buying gas futures into the weekend is often a good bet and, at $420 per penny, per contract – an exciting one as well.  Longer-term, gold and silver are getting interesting as we're having a very bullish breakout on GLD at $172.50.  

I'm not a big fan of gold (and we have some GLL short plays on it here) but, long-term, if it runs, it can be lucrative and, rather than buying 10 ounces of gold for $17,750, you can buy 10 GLD June $145/170 bull call spread for $16.70 ($16,700) and all GLD has to do is hold $170 (now $171.50) and you make $8,300 or about 50%.  Buying physical gold, it would have to move to $2,600 an ounce for you to get the same bang for your bullion bucks.  Break-even on that trade is $161.70 so it has built-in protection as well.  

AGQ is an ultra-ETF that tracks silver and is currently at $58.91.  That one can be used as an inflation hedge by picking up the March $58/75 bull call spread for $5 and they just released 2015 options on ABX, which can be used as a bullish offset to AGQ or the above GLD play by selling the 2015 $33 puts for $5.05 which turns the AGQ spread into a .05 credit with a $17 potential upside (34,100% on cash) and the worst case is owning ABX at net $32.95, which is 22% below the current price of $42.46.

As I keep saying, there are lots of ways to make money in a bull market – so far, this week, we seem to be in one.  Notice I'm not talking about fundamentals, as they still suck, but the Central Banksters seem very intent on buying us a rally and who are we to stand in their way.  Earnings season is upon us and we have lots of fun with those bets as well so tune in next week, once we get past today's quad witching moves for lots of ways to make some quick money on those as well.

Have a nice weekend,

- Phil