We mentioned coming into the week Apple (AAPL, $438.69, up $8.57) and a few other Tech names needed to show some strength and after a brief dip below $400, shares have surged 10% since last Wednesday.
It is always hard to call a bottom (or top) in a stock or the market in general but the chart work we did for Apple over the weekend was showing a good risk/ reward opportunity coming into the week. However, we all know Apple is an expensive stock and 100 shares would have cost about $42,000 on Monday’s open.
The options are also expensive making it hard to play directional moves in Apple as the near-term in-the-money options are also expensive to trade. However, we have talked about the “mini” options that are now available to trade on Apple and we have been following them since Monday’s open.
We will do a feature article on the setup in the Weekly Wrap for a covered call trade using mini options and we will also talk about using these types of options to play the up and down moves in the stock. The Apple mini call options we will profile DOUBLED yesterday and are zooming again today. The covered call trade is on track to make 5% in 3 weeks if Apple is over $440 by mid-May. Again, this wasn’t an official trade because we have never traded mini options so we wanted to make sure the liquidity was there and that they made sense trading.
There are only 5 stocks you can trade mini options on but there is a good chance another 5 or 10 stocks get added over the next few months as these options gain in popularity. Instead of the options being based on 100 shares of stock, the mini options are based on 10 shares of stock and trade on stocks in the triple-digits.
As far as the market, the bears made some noise at the open but the Dow got a lift after IBM (IBM, $200.51) announced a dividend hike. Shares have cleared the $200 level following the company’s earnings miss and drop under $190 a few weeks ago . A close above the $200 mark would be bullish for the blue-chips.
Currently, the Dow is down 5 points to 14,813 while the S&P 500 is flat at 1.593. The Nasdaq is showing some green and is up 9 points to 3,316.
We have a lot more to cover with our current trades so let’s get on it. Subscribers, hit the Members Area for the updates and we will be back in the morning with a full report.