Daily Stock Market Equity and Options Trading Commentary

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Thursday, January 15, 2009

Update to Apple, TNA & More

Okay, so I couldn't have called that Apple news any better. Two days before it happened! So as I said I would be putting limit orders in today, well I now have 300 shares at a cost basis of $79.55 which I will write out tomorrow if Apple breaks above 85 a share. I will most likely sell 3 contracts for the Feb 95 CALL. These premiums will be huge considering how volatile this stock has become, and the entire market as well. I assume to lower my cost basis by about $2-$3 per share. Honestly Apple has awesome products already in the pipeline so it's not like they'll just stop! I hope the best for Mr. Jobs and the faster he recovers the better.

As for the TNA, today the shares dipped below my $26 target (as low as $23.50) and I sold PUTS for the FEB 25 when the stock was below $24 for $490 a contract or $4.90 a share! This means if I do get the stock at $25 come February expiration, my cost will be $20.10. I assume I won't get the stock, but I really won't mind if I do. (After hours bid for TNA is at $27.80- up 43¢ from close)

I also sold some PUTS for the JAN $17.50 American Express (AXP) for $105 per contract or $1.05 per share. Bid for AXP is currently at $17.45 after hours so I would be golden if American Express closed above $17.50 tomorrow. If I do end up getting the stock I haven't decided if I want to flip it or write it out for the FEB contract ($25 region). I have a feeling we could see a very strong open on Wall Street tomorrow (1/16), depending on earnings before the bell.

BAC has moved their earnings before the bell, this could have a major impact on all financials. Low estimate for BAC is loss of 25¢ per share (-25¢/share), and high estimate is profit of 49¢ per share (+49¢/share), and I would have to assume they come in with positive numbers (remember this is for Q4 2008) but not better than 49¢ per share. However if BAC beat high estimate this stock would probably get to $10 or more by close of session. I think the most important thing is if BAC comes positive, as JPM did this morning, we could see financials strong tomorrow. Week guidance and a dividend cut (almost guaranteed!) may cancel out good earnings, or even throw everything negative for the day. I have a feeling they will slash dividend by 50% or more- they may even decide to eliminate the dividend altogether (really bad for the stock I would assume). However my assumptions are rational and this is an irrational market. Other news that may come out tomorrow is if the government gives BAC more money for swallowing up Merrill Lynch, this could have a significant positive or negative effect on all sectors (I assume any money given or the backing of their assets would be positive).

Check out the Goldman Sachs Leap 10 or 11 CALLS if you think GS will be in better shape by then. I am looking to add to my GS 100 Leap 11 CALLS if the market gets hammered again tomorrow.

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