Dear Momentum Options Subscriber,
Futures were showing a huge gap-up this morning following Monday’s carnage, but there were concerns about whether or not the gains would hold. The first 30 minutes of trading were important, as the bulls showed strength and some follow-through. Although it’s still early in the day and there is another half of trading to go, the action looks bullish so far.
I mentioned in this morning’s Pre-Market Update that I was looking at a possible trade on Apple (AAPL, $109.05, up $5.93) following its close just above $103 yesterday. I was hoping that shares would open below $105, but they were pushing $109 into the opening bell.
I was targeting the AAPL September 110 calls (AAPL150918C00110000, $4.10, up $0.95) with a Limit Order at $4 following their close on Monday at $3.15. If we were filled, I was hoping to be able to exit the trade at $6 or better.
I should have known the market wasn’t going to oblige my wishes and, to my chagrin, the calls opened at $4.50. They have traded to a high of $5.40, with the low checking in at $3.85. Over 18,000 contracts have traded thus far.
The AAPL September 110 calls traded to a low of $0.30 and a high of $4.30 on Monday. Volume was ridiculous, as nearly 19,000 contracts traded hands. They opened at $1.97.
The AAPL October 110 calls (AAPL151016C00110000, $6.00, up $1.20) traded nearly 10,000 contracts on Monday, with a price range of $0.20 to $6.06. These options closed at $4.80 on Monday and have traded in a range of $5.65-$9.20 today.
I wanted to show you the tremendous price swings these options experienced yesterday and today because it could continue to happen for the remainder of this week and into September.
I usually don’t recommend options over $1.50, but I was hoping to place a bet this morning on the market’s strongest stock to lead any recovery. However, I don’t want to chase stocks to the upside, or the downside, given the market’s volatility.
The Dow is currently up 372 points to 16,243, while the S&P 500 is gaining 45 points to 1,938. The Nasdaq is higher by 145 points to 4,671, and the Russell 2000 is adding 16 points to 1,128. The VIX is below 30 and is trading down by 11.22 at 29.52.
The current environment is just like a Vegas poker table with fresh fish. Although I want to put a little money to work, the sharks are still in the water, and it doesn’t make sense to chase. We still have the flop, the river and the turn to take a stab at the pot. We just need to look at a few more cards and keep our poker faces on.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 82-28-2 (73%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 12:00 p.m. EST.
I hereby disclose that I will be participating in the following trade(s). Every Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the portfolio.
Krispy Kreme Doughnuts (KKD, $17.02, up $0.31)
KKD November 17 puts (KKD151120P00017000, $1.40, down $0.30)
Entry Price: $0.95 (8/19/2015)
Exit Target: $2.50 (Limit Order on first half)
Stop Target: $1.25 (Stop Limit)
Action: Resistance is at $17-$17.25. Support is at $16.75-$16.50.
The company is scheduled to report earnings on Sept. 9, after the close.
Trades on Hold — other 2015 Portfolio Open positions (4): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.
Rigel Pharmaceuticals (RIGL) September 5 calls (from 6/4/15) — Continue to hold.
Bank of America (BAC) September 18 calls (from 8/17/15) — Continue to hold.
JPMorgan Chase (JPM) September 70 calls (from 8/10/2015) — Continue to hold.
iShares Russell 2000 (IWM) September 123 calls (from 8/19/2015) — Continue to hold.
Editor and Chief Options Strategist