The bulls are pushing resistance and the top of the current trading range ahead of Apple’s (AAPL, $405.36, up $6.69) earnings report tonight. We had a feeling another push was coming following Monday’s gains and it remains to be seen if Apple will propel the market to new highs or if the news will be worse-than-expected and shares lead the market lower on Wednesday.
It will be an exciting time in after-hours trading but most investors have to place their bets ahead of today’s close because they don’t trade in these types of markets due to the capital needed and the restrictions. This means investors can go long or short the stock or they can use options to play a possible move higher or lower if they don’t trade in after-hours.
We talked about the “mini” options that trade on Apple and there are currently only 5 stocks that trade mini options. We profiled both call and put options this morning for a possible Apple trade but we would need shares to move 10% or more for them to make a double because they expire on Friday. The regular May options on Apple carry and even heftier premium so a move of 7% or less could crush the premiums.
Of course, if Apple zooms $50 instead of $40 then these options could made several hundred percent. Take Netflix (NFLX, $219.16, up $44.79) for instance.
We profiled several Netflix options after the company reported earnings in January and we were sick to our stomach we didn’t recommend call options as an official play. Shares had momentum going into the announcement and we loved the Walt Disney (DIS, $62.27, up $0.26) deal from December 2012. Needless to say, Netflix smashed expectations and shares zoomed from $103 to $146. They added another $13 the following session to close at $169. The options made several thousand percent.
Well, we are down with the sickness as we totally blew another chance to play Netflix’s strong push past $200 but the options were super rich and had premiums north of $4. The WEEKLY Netflix April 200 calls (NFLX130426C00200000, $16.70, up $12.65) are up 312% while the May 200 calls (NFLX130518C00200000, $20.30, up $14.10) are up 228%.
A cheaper trade, or lottery play, would have been the May 250 calls (NFLX130518C00250000, $1.75, up $1.08) that closed at 66 cents yesterday and have traded to a high of $2.78. That is over a 300% return.
As you can see, the opportunities to trade Apple are there but it is just hard to say if shares are going to move 10%.
As far as the indexes, the Dow is up 145 points to 14,712 while the S&P 500 is higher by 15 points to 1,578. The Nasdaq is advancing 38 points to 3,271.
We have updated our current trades and our call options are getting some nice pin action with today’s market pop. We may also have a Weekly Wrap Trade Alert later today so be on the lookout for it if we take action on those trades.
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