As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Further Update to: Trade Alert -(AAPL)
Buy the Apple (AAPL) February, 2014 $460-$490 bull call spread at $26.85 or best
Opening Trade
1-28-2014
expiration date: 2-21-2014
Portfolio weighting: 10%
Number of Contracts = 4 contracts
Let me tell you my thinking here.
More than 51 million iPhones sold is good enough for me, 3.2 million more than they moved a year ago, and they are more expensive devices. iPads leapt from 22.9 million to 26 million, including the five high end ones I bought.
The earnings announcement wasn?t that bad, with record quarterly YOY revenues of $57.6 billion reported. Earnings per share jumped a middling 5%, from $13.81 to $14.50, partially in response to the company?s own massive buyback program.
Gross margins came in at 37.9%, which would be gigantic if Apple were in any other industry but technology.
The dividend was nailed at $3.05 per share, setting the yield today at 2.43% annualized, a mere 30 basis points below ten-year Treasury bonds.
However, I think that traders have become so conditioned to selling on the news that the stock wasn?t going to take a dump no matter what the company said. This is why I went into the release flat on Apple this time. It?s too early in the year to lick wounds. At today?s low of $502, we were down $73 from the recent high, or 12.7%.
If you look back at the collapse after the September, 2012 $706 peak, it took two months for the shares to fall $100. For us to lose money on the Apple February, 2014 $460-$490 bull call spread, it would have to fall twice as fast as back then, and it has to do it in only 17 trading days. Sounds like a good bet to me.
We are also getting huge valuation support down here, with an ex cash multiple of 9, versus a market multiple of 16. Investors are going to hold a gun to the head of their portfolio managers to get them to average up in this neighborhood.
You also have corporate raider, green mailer, and former Manhattan neighbor of mine (activist, to be polite) Carl Icahn Twittering away about how cheap the stock is, and buying another $500 million worth of shares today to cash in on the plunge. You can see him coming in every time the stock takes a run at $507. Carl was not a factor in the last melt down.
For your edification, I have included a proprietary chart from my colleague, Mad Day Trader Jim Parker, showing huge technical support at the $470-$480 level. It is days like this that Jim is worth his weight in gold. Too bad he isn?t heavier.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don?t execute the legs individually or you will end up losing much of your profit.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months further out.
Here are the specific trades you need to execute this position:
Buy 4 February, 2014 (AAPL) $460 calls at????.$50.65
Sell short 4 February, 2014 (AAPL) $490 calls a?$23.80
Net Cost:????????????....??..?.?......$26.85
Profit: $30 - $26.85 = $3.15
($3.15 X 100 X 4) = $1,260 ? 1.26% for the notional $100,000 model portfolio.
