UPDATE APR 21, 2011 at 1:25pm:
Stock acts fairly well considering it bounced off of 320 on Monday, up 9% in 4 days from the lows…..Keep an eye on Levels where you would get long as the Nasdaq Re-balance approaches. As we get closer I will look to sell the May 320 Put and buy an Upside call near the previous High of approximately 365 in February.
AS AN EXAMPLE OF WHAT I INTEND TO DO LATE NEXT WEEK, If there is weakness closer to the May 2, 2011 RE-Balance.
TRADE EXAMPLE: (Stock Ref ~352) BUY MAY 325 / 370 Risk Reversal for ~60
SELL THE MAY 325 Put at 1.65 and
BUY the MAY 370 Call for 2.25
Break-Evens on May Expiration:
Upside: stock 370.40 or higher make money
Downside: stock 325.40 or lower you money BUT WORST CASE you are Put the stock at 325 down 7%…bwtn 325 and 370 you lose the .40 premium that you paid.
TRADE RATIONALE: If there is any weakness into the re-balance, I would look to take advantage for a short term pop in the stock possibly back to the previous all time highs…..
ORIGINAL POST FROM THIS MORNING:
AAPL reported blow out EPS for their fiscal Q2 and a a decent revenue beat in a qtr that saw the release of the iPhone at VZ and the iPad2 in multiple channels including VZ and At&T. Company guided fiscal Q3 conservatively, as they often do, and the Street generally disregards and takes their numbers up well above such guidance.
-Stock is trading up almost 4.25% in the pre-market.
– As many readers of this site, and viewers of Options Action know, I have had a near-term bearish stance on AAPL, not because I thought they were going to miss expectations, but because I think this is the most one sided story the U.S. equity markets have seen in a very long time and at some point something has to give……I like to be CONTRARIAN….which generally doesn’t pay in a story like this. That is why when I make bearish bets in the stock I look to do in low premium ways through the options market and DEFINE MY RISK.
-The stock rarely sells off outside of broad market corrections and in a lot of ways as the company continues to execute the stock only gets cheaper on a valuation basis, thus making it more difficult to short using valuation to as an input……
MY VIEW: iPhone obviously continues to drive the story and launch with VZ in North America and penetration into markets like China only offer further visibility into the untapped potential for AAPL to continue to gain market-share in the smart-phone space.
-While iPad continues to be a big success I find it interesting that the company did not break out unit sales for the device for their opening weekend as they have in almost every other large product launch, other than saying that they “sold every iPad they could make”…..well without component shortages and other supply disruptions that they said they did not see post the Japan disaster, then would would ask why didn’t they make more?
-Stock trading at 357 in the pre-market up about 4.25%, the previous all time closing high was on February 16th, 2011 at ~363. I would look for the stock to break that today, but I would guess since the stock bounced off 320 on Monday that the stock would likely have to consolidate there for a little before it can make a concerted move above the all time highs……
IF STOCK CANT HOLD THE MORNING GAINS THEN I WOULD EXPECT THE STOCK TO CONSOLIDATE IN FRONT OF THE EARLY MAY NASDAQ RE-BALANCE, WHICH COULD BE A GOOD BUYING OPPORTUNITY.
TRADE UPDATES: As for the short term Bearish bets they APR21 weekly Put Spread will be worthless on the opening (if long try to get what you can for them on the opening), while the Bullish stock replacement strategies that I suggested on April 4th should perform very well as the stock is approaching the call strikes that you are long.
Check back after the Opening I will give a new Trade Structure.