9:00am (EST)
Oh, baby do you know what that’s worth? ($100 billion)
Oh, Heaven is a place on Earth.
They say in Heaven, love comes first
We’ll make Heaven a place on Earth.
Steve Jobs is certainly smiling from up above and it feels as though he never left us. We thought today’s blast from the past was the perfect song to start our morning as we look ahead to the opening bell…
The market made a nice rebound off yesterday’s lows and remained in a tight range for the rest of the day as Wall Street awaited Apple’s (AAPL, $420.41, down $7.00) quarterly results. Despite the nervousness of an Apple letdown, Tech had a strong day compared to other sectors which helped the major averages hold support as the market ended mixed.
The Dow fell 33 points, or 0.3%, to close at 12,675 while the S&P slipped a point to finish at 1,315. The Nasdaq added 2 points to settle at 2,786 but failed to crack 2,800 but this shouldn’t be an issue today.
As far as Apple’s numbers, needless to say, the suit-and-ties were divided heading into the report as half the analysts seemed to be giddy while the other half said there was a chance for an earnings miss – but none of them seemed sure or wanted to bet the ranch. Shares were halted until 4:50pm (EST) in extended trading last night which was a little unusual and goes to show how the much Wall Street weight the company had on its shoulders.
There were over 125 Apple articles within 3 hours after the close on Yahoo’s (YHOO, $15.69, up $0.01) Finance page yesterday talking about Apple’s mind-boggling results.
The company reported a profit of $13 billion, or $13.87 a share, on revenue of $46 billion. The pencil-pushers were looking for earnings of $10 billion on $39 billion in sales. A quick rundown on the record 3 months: 37 million iPhones sold during the quarter, over 15 million iPads, and 5 million Macs. To put things in perspective, the number of iPhones and iPads sold were over 100% increases from the prior quarter. We didn’t even mention the iPods sold for the quarter and the fact its iTunes store is approaching $2 billion sales. By the end of this year, iTunes alone could be a double-digit billion dollar business!
Apple added another $16 billion to its coffers and now has nearly $100 billion in its war chest. Yes, the company ended the quarter with $97.5 billion in cash and marketable securities on its books. Wow.
Once again, we were hoping for a stock-split of 4-for-1 which would have gotten shares down to $100 or so but Apple hasn’t split its stock since 2005 when it did a 2-for-1 deal.
The options on a $400 stock can be expensive and we looked at the Apple February 370 puts (AAPL120218P00370000, $1.80, up $0.35) and the February 470 calls (AAPL120218C00470000, $1.20, down $0.80) yesterday as a possible strangle option trade after our update which represented a $50 move in the stock. We were calculating a 10% swing either way which would get shares to $380 or $460 based on the price at the time. The 10% move wasn’t enough to get the stock past these strike prices which made us nervous because we want shares to move enough to cover the cost of the trade.
Apple shares were up $30 to $450 in after-hours trading last night once they opened and did hit a high of $470 before chilling. This morning they are at $454, up $34. The puts will take a huge hit while the calls should get a nice pop at the open.
As you can see, the option premiums are rich on triple-digit stocks and you need a massive move in the stock to hopefully make a decent return. We would rather play options on stocks on under $100 where a 5% move would double your money or make you 100+% with the right option.
Apple is one of the few triple-digit stocks we wish we could play options on but the risks outweigh the rewards, especially when selling these types of options. No worries. There are hundreds of other stocks we follow under $100 that trade options and we have no problem letting the big boys trade Apple while we focus on Microsoft (MSFT, $29.34, down $0.39), Aflac (AFL, $49.07, up $1.02) and MGM Resorts (MGM, $13.16, up $0.02).
Our subscribers have banked 125% on Microsoft calls, 127% on Aflac call options, and 131% and 114% on 2 MGM call option trades this month alone. Our Seagate Technology (STX, $19.75, up $0.07) also made 100%. That’s 5 triple-digit call option trade winners on stocks that have moved $1-$3 in the last 3 weeks.
With futures up this morning thanks to Apple, we are hoping our other call option trades get some nice pin action.
Futures are mixed as we head to press and look like this: Dow futures are down 35 points to 12,591 while the S&P futures are off by 3 points to 1,308. The Nasdaq futures are showing a 18 point pop and are at 2,445.
Subscribers, check the Members Area for the updates and stay on your toes for possible Trade Alerts. With the Fed speaking at noon, we could be in for a wild ride today as we near the July and April 2011 market highs.