Trading on Apple Options News

As you know by now, every blog has mentioned the huge GAP down on Apple Computer ,Inc. (Public, NASDAQ:AAPL) on the stock options probe. What I'm concerned with is the strength in this stock. Investors that sold off in the pre-market only got out to make sure they didn't get hit with a huge crash in the regular market hours. When the market opened, there was immediate buying, and to my knowledge it seems as though every investor in the universe could care less about the news, and saw the buying opportunity.

Trader Jamie over at Wall St. Warrior seems to have caught the GAP Fade as well, as posted on Trader Mike's Comments.

I saw the up-trending pattern, and good volume and decided to take a look at how the options were trading. I thought the most practical trade would be to fade the Gap and go for the $80 strike price in January & February.



I tried to enter a limit order and hit the Bid to get in at the best possible price but what I realized is that I was getting over-cut every time and out bid on the price. The "ask" price kept shooting higher and higher and profits were just being blown out of the window.

I enter in a limit order and hit the "ask" price for $3.80 per contract on the $80, JAN '07 Apple Calls. I'm immediately filled and ready to ride the train up. I exited a few hours later for $1.10 profit, and sold for $4.90 per contract. That's a 29% gain.

I also picked up some of the $80 FEB '07 Apple Calls for a longer term perspective on the stocks release of new highly anticipated products, and cheap price at the time, since Apple's price was knocked down so much. My entry price was, $5.40 per contract, and now they're sitting at $6.40. An unrealized paper profit of $1.00 per contract, or 18.5% percent return on your money.

I'm going to have to watch this trade closely as Apple could turn on a dime with bad news currently plaguing the headlines.
-CalTrader

Locked & Loaded

This week we're going to have "21 new IPO's coming to the market next week that will raise $3.2 billion" as per Day Shark's link to Minyanville.com who was recently a part of Wall Strip's interview.

You can check out the interview Here if you'd like to see Todd Harrison's interview sitting down with Lindsey Campbell of WallStrip.com to discuss Minyanville and the markets.


As for those who are wanting to buy a new High Speed Desktop computer......WAIT!! I'm getting antsy about the prices of the Blazing Fast Intel Core 2 Duo CPU Chip coming down, and I'm ready to purchase a Desktop, but after doing some homework and finding out the NEW Intel QUAD CORE Chip is already out and ready to be shipped I'm waiting till around or after christmas, because a recent article from Marketwatch indicated that, "Microsoft has set aside $1 billion for coupons designed to convince holiday-season computer buyers to choose machines from Dell and H-P as they await Microsoft's new Vista operating system, which is due in January."

I've got my call options locked and loaded coming into the week. I'm going to try and see if I can damage as many short sellers accounts as possible.

Call Options List:
Oracle Corporation (Public, NASDAQ:ORCL)
NVIDIA Corporation (Public, NASDAQ:NVDA)
Google Inc. (Public, NASDAQ:GOOG)
Apple Computer, Inc. (Public, NASDAQ:AAPL)
Best Buy Co., Inc. (Public, NYSE:BBY)
Akamai Technologies, Inc. (Public, NASDAQ:AKAM)

After a big week, I plan on relaxing and going to check out the new Movie "Blood Diamond" released by Time Warner starring Leonardo DiCaprio & Djimon Hounsou. You can read a great review from Market Watch.com here

Apple Computer Puts Up 183%

Hedge Fun!

I've been hedging my long term positions, one of which is Apple Computer (AAPL). The idea of buying Put options is to buy the strike price at a higher price in which the stock is currently trading so when the stock goes down, you profit from the fall. You must remember that you still are Long shares of the stock, because one would be long term bullish, short term bearish, and the idea is to protect your initial investment from short term losses. Your Put Options contracts lock in your specified sell price for however many shares you would like to have covered, based on the amount of contracts you bought. Let's review my trade, and chart.

I bought the DEC 2006 Put on APPLE COMPUTER INC at $90.00 for $1.20 a contract.

Apple's Chart:



I think this is just a short term breakdown, Apple has been ridiculously overbought by every mutual fund, and hedge fund manager in the universe to "window dress" their portfolio's for the year end preview of their % figures they've gained. The Stochastic Indicator clearly show's the stock has been Overbought for over a month now, without breaching the 80 level which would signal selling and weakness. I hope this gives insight as to how I trade. I like using techinical terms, and never understood a single one of them until I started reading other blogs and sat down to due my own research and find my style of trading. I'm still on a personal adventure to further my knowledge in the options world, and so far, it's paid off quite nicely. Icing on the cake.

Thank you for reading, and please feel free to post your thoughts in the comments section!

-CalTrader

Go Long!

Well I covered my shorts for further continuing of this bull market has resumed. I found some nice setups today, for some decent profits. I have a feeling with the Bulls taking the lead we're just gonna splurge higher, and breakout from the already monumental highs. I think the bottom buyers have overtaken any type of bearish investor to the core and rattled their bones. I'm sure there were lots of bear traps out there as we had a brief pullback, and continuation higher in most sectors. I'm going to highlight the strength of the market, show you how the volatility is pulling back into it's complacency territory.



Interesting Chart:
Pfizer (PFE)



Today's Trades:

Apple Computer (AAPL)




Best Buy Corp. (BBY)



Volatility Index ($VIX)



As you can see it's heading lower, which means the market is getting more complacent with it's "bullish intent". The sell-off caused a spike in the VIX and shook things up a bit, but it was a false alarm sell off, and the VIX has now gone to rest again.

Breakdowns

I'm going to focus on one of the most easily identifiable patterns found daily throughout the stock universe. The Opening Range Breakdown. Another term I'm going to address is the Secondary Trendline. After confirming a breakdown, you also want to check if there is the break of the secondary trendline as annotated. Generally, when the Secondary, or steeper, trendline is violated, the odds greatly increase that the stock or index will continue to fall to the primary (flatter) trendline.I use my Scottrade Elite Platform to run Trade-Ideas Stock Scanner, and one of them is the opening range breakdown, with other minor requirements such as avg. daily volume 500k shares, price above $10, etc.

Today's Trades:

Advanced Auto Parts (AAP..not ipod)












Apple Computer (AAPL)











Another View of the Apple Trade:

Good Morning

News UpDate
09:00am ET Dow , Nasdaq , S&P : [BRIEFING.COM] S&P futures vs fair value: +4.4. Nasdaq futures vs fair value: +7.0. The stage remains set for the cash market to open on an upbeat note as investors continue to rally around evidence that the economy is not slowing as much as expected. Throw in an analyst upgrade on Dow component Verizon Communications (VZ) and Bear Stearns raising their price target on tech bellwether Apple Computer (AAPL) to $100 from $94 and it appears buyers will pick up where they left off a day earlier recouping more of Monday's sell-off. Nasdaq at... NYSE Adv/Dec 0/0... Nasdaq Adv/Dec 0/0.