9:00am (EST)
The bulls got off to a good start for the week following Friday’s flat action and put up some good numbers yesterday. Much of the advance was thanks in part to Apple’s (AAPL, $601.10, up $15.53) dividend announcement but the Financial stocks did well again and continue to set new 52-week highs.
The Dow gained 6 points to end at 13,239 after trading to a high of 13,269 and testing a low of 13,208. The S&P 500 also added a half-dozen points to close at 1,410 after kissing a high of 1,414. The index traded down to 1,402 at the open but held 1,400. The Nasdaq was strong from start to finish as Tech jumped 23 points, or 0.75%, to settle at 3,078. Side Note: The Russell 2000 added over 7 points to finish at 837.77 but more importantly, the index finally broke above resistance which we talked about in our Weekly Wrap and yesterday morning.
American Express (AXP, $57.27, up $0.72) added another 1% and reached a fresh 52-week high of $57.50 on Monday. We said last week shares were headed to $60 when we recommended a call option trade to our subscribers. It is now up 438% in under a week.
Capital One (COF, $55.10, up $0.60) came within spitting distance of breaking its 52-week high of $56.26 set last May after closing at double-nickels and peaking at $56.19. We also have a near-term target of $60 for shares and subscribers are now up over 300% on our Capital One call option trade since last Tuesday.
Bank of America (BAC, $9.53, down $0.27) broke double-digits but didn’t set a new 52-week high. Shares did, however, trade to a high of $10.10 before the talking heads ruined it as they finished the session down 3%. The 52-week high is at $14.05 for BAC but we have been recommending the stock since it was at $5 back in December for our Weekly Wrap.
We were watching Apple’s WEEKLY options yesterday and we wanted to pull the trigger on the March 600 calls (AAPL120323C00600000, $10.75, up $2.60) but they opened at $12.20 and we were looking to send out a Trade Alert to buy them for under $10. The calls traded to a high of $14.40 but the premiums at the open were already built-in after the dividend announcement.
The calls did trade down to $6.95 but we didn’t want to get whipsawed because shares are in uncharted blue-sky territory. It is still an expensive trade and one we don’t often do but we are looking at ways to play Apple because they aren’t splitting the stock anytime soon. However, we won’t be trading 10 or 20 contracts because we would be risking a half or third of the profits we have already banked for the year. A 10 contract trade on an option priced at $10 will set you back $10,000 and 1 contract would cost $1,000.
This is another reason why we don’t typically trade options on stocks over $100 because it is so much easier to take smaller risks than to try and day trade Apple. We would rather buy 30 or 40 contracts on a 40 or 60 cent option or 10 or 20 contracts on options under $2.
Sure, if Apple goes to $650 by Friday, those March 600 Weekly call options will be worth $50 for nearly a 400% gain but if shares retreat and fall back below $600 and you aren’t out of the position, you will lose 100% of your investment. It is also easier to make 400% on a 40 cent option on a stock that moves from $53 to $57 which is what we have done with our American Express (AXP, $57.27, up $0.72) call option trade in just under a week.
This should help answer any questions on why we don’t trade Apple but we have been giving you powerful hints for those of you that want to play at the high-limit tables.
As we head to press, futures are showing a lower open and look like this: Dow (-63); S&P 500 (-8), Nasdaq 100 (-12).
Subscribers, check the Members Area for the updates as we have moved up the Hard Stops to lock-in gains on these two massive trades.
