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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Monday, January 12, 2009

Apple Looking Pretty Tasty

Today the most traded contract was the AAPL JAN 90 CALL. After hours the current bid for Apple is $88.80 which means it is trading up about 14¢. This indicates that traders are expecting to see Apple above 90+ premium (today's low for the contract was $1.27 and close was $1.57) by Friday. That is a pretty risky bet, but considering it is only a 3% move up it is very feasible. I would assume we end the week strong, maybe not as high as we closed Friday 1/7 but I assume we close this Friday higher than we finished today. I really like Apple and I have several bets on their longer term options that they will go higher. Rumor has it that they could be reveiling something new at the Super Bowl this year, but that is just a rumor. The Steve Jobs news rumors/news is keeping this company down. The company won't stop if and when he has to leave! If something severe happens and Apple takes a severe beating over it, I am definitely going to be putting limit orders for AAPL that day. If news struck that Apple was working with Verizon, Sprint etc... I think we could see an easy 20% rally in the stock, the question is if and when that news will come out. I honestly hope they don't resign with AT&T for exclusivity rights. If you want exposure to Apple but think it is still too risky check out QQQQ they have a large position in Apple.

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Sunday, January 11, 2009

Stocks I'll Be Keeping My Eye on for the Week Ahead

I usually don't post on the weekends, but since this week will be chaotic for school/work I decided to post tonight. I have been keeping my eye on TNA which is from the same ETF company who puts out the BGZ stock I trade. TNA is an ETF that invests in small cap stocks and seeks a return of 300% of the entire basket. This means when the basket of small caps goes up/down 1% the ETF will move with it 3% (not an inverse fund). This stock is around $30 and I might try to sell puts (25 strike) if I can't get my order filled, otherwise I may put orders in for the $26-$29 range. Small caps outperform mid and large caps over the long term (reason being they have a lot of room to grow) which is why I like this name, not to mention I need some exposure to some small caps. Remember this fund is almost double of its 52 week low, and it could reach that level again which is why I will put orders in to fill on the way down. This stock is extremely volatile which makes it even better (greater premiums) for writing covered calls on. The first day I am more than 5% unrealized gain on this stock I will look to write some covered calls out of the money.

Another name I wil be watching is Citi. I think if this stock gets beat down over bad news it could be a good chance to pick some up. If this stock gets to the $5-$6 range and then some decent news comes out about them, a 20% move could be as easy as 1 day! I really don't need any exposure to financials therefore I would strictly be buying light blocks of this stock with intention to trade within 72 hours.

Another ETF I like is the inverse of SDS or the pro S&P double up fund SSO. If the S&P is down 90 points or more (or close to 10%) anytime during the week, I will be trying to purchase some shares os SSO (a close to 20% decrease in the value of SSO). This stock moves with the S&P 2 to 1 so if the S&P goes up 1% this ETF goes up 2%, if the S&P goes down 2% this ETF will go down 4% etc...

These are some name I will be watching for the week of January 12.

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