The bears returned on Monday and caused a little stir at the open but the bulls battled back to nearly even as the market ended lower by the slimmest of margins. We weren’t expecting a run to new highs yesterday because we have warned of the bears recent domination on Monday’s but support held and Tech looked strong.
The Dow dipped 4 points, or 0.03%, to finish at 13,271. The blue-chips made a brief appearance into positive territory (by a point) shortly after our midday update but couldn’t hold the line into the close. The low for the session was 13,230 which was comfortably ahead of support at 13,200.
The S&P 500 slipped 0.03 of a point and remained at 1,418. The index tested a low of 1,412.12 about an hour into the session and may have sniffed green had there been another 5 minutes. Short-term support remains at 1,400 while the bulls continue to eye new highs north of 1,422.
The Nasdaq gave back 0.38 of a point, or 0.01%, and stayed at 3,076. Tech also failed to break into positive territory after touching a low of 3,059 but there were some standouts. Apple (AAPL, $665.15, up $17.04) gained another 3% and is up nearly 10% since the beginning of the month.
Even better, the WEEKLY Apple August 675 calls (AAPL120824C00675000, $4.50, up $3.40) were up a cool 300%. The call option pits have been going insane over the past few weeks as traders place their bets on a new iPhone announcement by playing options on Apple which is a lot cheaper than paying nearly $700 for 1 share.
A 10 contract trade using the aforementioned calls would have only cost you $1.10 at yesterday’s open, or $1,100. The options allow you to control 1,000 shares of Apple at a fraction of the cost as each option contract controls 100 shares. The beauty of options and why we trade them is the leverage and the returns they provide. To trade 1,000 shares of Apple it would have cost you $650,000 on yesterday’s open as the stock was at $650.01.
Yes, you could have made a sweet $17,000, or 3%, by the closing bell but that is a lot of jack to put up just to trade or own Apple. The options cost considerably less and the return was 100 times greater. Now you know why we wake up every morning loving our job…
We haven’t traded Apple in a couple of years due to the high premiums on the regular options but the WEEKLY options could be an alternative. However, they are super risky because you have to be right on a stock’s movement in a shorter amount of time, usually 2 weeks or less.
We have been clamoring for companies like Apple to split its stock 10-for-1 to get shares back under $100 which is our comfort level playing options on stocks. We know the pros will tell you share price doesn’t matter when you want to invest in a company for the long-term but price does matter when you trade options for living.
There are about 50 stocks that trade weekly options and we have played some in the past but again, they are risky so be careful.
Some of our current trades got some nice pin action yesterday despite the flat action so let’s go see where we are at. Subscribers, check the Members Area for the updates and stay locked-and-loaded. We may send out a New Trade or Profit Alert if we take or need to take action.
As we head to press, futures look like this: Dow (+40), S&P 500 (+5); Nasdaq (+12).