The bulls got off to a good start this morning after stellar earnings from Apple (AAPL, $387.51, up $10.66) had Wall Street in a buying mood. The company reported another ridiculous 3 months as they blew by estimates for the 13th straight quarter on strong iPad and iPhone sales. And strong computer sales. And strong download sales of its applications. Well, you get the picture.
There is no need to go over their numbers because it seems like monopoly money but we have counted 7 analyst upgrades this morning with many of the knuckleheads raising their price targets above $500.
Our question is where were you yesterday?
If these so called “analysts” believed in Apple and are hiking their price targets by 25%-50%, why didn’t they say so before their earnings announcements?
Anyway, we don’t trade Apple because it’s a high triple-digit stock which usually carries high premiums. We could have looked at the Weekly options yesterday with the stock at $376 but we didn’t like thesetups. With many analysts actually negative on the stock going into the quarter, there was a chance for a 10% move either way which we figured would have put the stock at $410 or $340.
If you were bullish on Apple before the close on Tuesday, you could have bought the Apple WEEKLY July 400 calls (AAPL110722C00400000, $0.95, down $1.15) for under $2 yesterday and sold them into strength this morning when they hit a high of $2.65.
If you were bearish on Apple going into the quarter you could have purchased the Apple WEEKLY July 350 puts (AAPL110722P00350000, $0.05, down $1.45) at $1.50 but you would be down 96% today. Ouch.
As a strangle option trade, you could have bought the July 400 calls and the July 350 puts but you would still be feeling pain.
As you can see, even the WEEKLY options on Apple are super-priced and inflated which makes trading Apple a tough task unless you are SELLING options. We don’t ever recommend selling an option because it leaves you “naked” but we wanted to show you why we usually don’t trade options on stocks over $100.
Apple ended the quarter with $75 billion in cash and now sports a market cap of $360 billion. By comparison, Exxon Mobil (XOM, $83.64, up $0.01), the world’s largest company by MC, has a market cap of $412 billion but Apple is closing the gap.
Despite the bullish news, investors have been selling Apple near $400 as shares have reached a high of $398. However, if we owned the stock, which is a lot different than owning options, then we would just hold on to it.
As we head into the second half of trading, the market is trading slightly lower as it retests prior resistance levels which are now trying to form support. The Dow is down 15 points to 12,573 while the S&P 500 is lower by a point to 1,326. The Nasdaq is off by 13 points to 2,813.
As usual, we have a ton of information to cover with our ongoing trades so let’s get to it. Subscribers, check the Members Area for the updates.