New Trade XLK: AAPL 17% of this ETF, If iPad3 “Evolutionary” Next Week Watch Out Below

by Dan February 28, 2012 1:30 pm • Commentary

NEW TRADE: XLK ($29.05) is up ~13.5% ytd and if it closes above $29 it will be making new highs not seen since April 2001.  Make no mistake about it, this would be a monster break-out…….but I sit here and wonder how sustainable this will be before we get a pullback and then a consolidation….I mean really, who the hell else on the planet has yet to buy AAPL????

12 YR XLK Chart from Bloomberg LP


The etf has been on a runaway break-out since popping through $27 which had been a huge resistance level, and trading more than 11% above it’s 200 day moving average, I would expect a re-tracement fairly soon.

1 Yr XLK chart Bloomberg


AAPL, MSFT and IBM make up almost 33% of the index, and with AAPL and IBM at near all time highs and MSFT at multi year highs, I think it is safe to say that this etf may be a bit ahead of itself.

Next week AAPL will introduce the iPad3, and I know I sound like a broken record, but if this product is evolutionary then I think AAPL holders better watch out below.  AAPL makes up 17% of the XLK.

NEW TRADE:   XLK ($29.05) Bought the Apr 28/27/26 Put Tree for .03

-Bought 1 XLK Apr 28 put for .42

-Sold 1 XLK Apr 27 Put at .24

-Sold 1 XLK Apr 26 Put at .15

Break-Even On Apr Exp:

Profits of up to .97 btwn 27.97 and 25.03….btwn 27.97 and 27 I make up to .97, btwn 27 and 26 I make full .97 and btwn 26 and 25.03 the profit trails off….

Losses of up to .03 btwn 27.97 and 28 and btwn 25.03 and 25 with max loss of .03 above 28.00


Update Feb 15th, 2012 at 9:40am:  AAPL obviously on a vicious tear here defying gravity…….this one is really starting to hurt those (ME) who tried to pick a top starting last week….I fully expect the stock to have a massive intra-day reversal soon, but the real question is from where….I am going to move out of my Feb Puts that don’t have a great chance of being in the money by Friday’s expiration and I just bought some March Puts in the XLK etf which AAPL makes up 17% of..   Listen people, this trade has been a bit of a train wreck, and while I can occasionally be dumb and stubborn, I am persistent. I can’t totally pull the plug now.

TRADE: XLK $28.36  Bought the March 28 Puts for .46

-Will look to leg into a Put Spread as the market comes in….



Post From Feb10th 2012:

Here is a quick preview of what I will be discussing tonight on Options Action on CNBC at 5pm:

I have been active trying to short AAPL this week through the purchase of short dated puts…..This has been an expensive and futile proposition….I want to now look out to March which will have a fairly significant event which will likely be the launch of the iPad 3.  This will be Tim Cook’s first new product launch since Steve Jobs’ death.   If the product is unexciting from an innovation standpoint the stock should pull back to the launching point post earnings of about $460 to where it was trading just last Friday!

I want to look for a low premium defined risk way to isolate that $460 level……

TRADE: AAPL $493 Bought the March 480/460/440 Put Fly for 3.00

-Bought 1 March 480 Put for 11.50

-Sold 2 March 460 Puts for a total of 10.80 (5.40 each)

-Bought 1 Match 440 Put for 2.30

Break-Even on March Expiration:

Profits btwn 477.00 and 460 make up to 17.00, payout trails off from 460 to 443

Losses of up to 3.00 btwn 477 and 480 and btwn 463 and 460

Max Loss of 3.00 above 480 and below 460

I am still long Half of my position in the Feb 480 Puts and actually bought some Feb 490s too…..



TRADE UPDATE Feb 9th, 2012 at 11;13am:  Well this turned out to be a disaster….I can honestly say I have never seen anything like it, or at least not since 1999/2000.  The stock is clearly going to 500 today. I am going to cut my losses and sell half the Feb 480 puts I just bought at 4.00, my avg was 4.40.   I suck in this name this week, but it will break soon enough……

Trade Update Feb 9th, 2012 at 10;06am:   I was early in the AAPL Feb purchase (obviously)….since Tuesday the stock is up 20 points, or 4%.   I sold half my position in the Feb 460 Puts, (avg of 2.50) at 1.50 yest and the second half this am at .90 with stock $486.

But as many of you know I can be stubborn, which sometimes equates to stupid….but I think we are very close to the fever breaking in AAPL.

[private]  With stock $486, I just bought the Feb $480 Puts for 4.60….will look to turn into a put spread when/if the stock starts going my way…..


Update: 3:40, Feb 8th.

Well clearly I was early on this one. AAPL continues to scream higher. Currently at 476, I’m going to lick my wounds and dump half this trade at 1.50. Will try to get a better fell for the stock and either re-enter or bail entirely. Stay tuned.


Original Post

With AAPL now up 15% ytd and seemingly making new all time highs every day, As a trader I have been dying to short the stock….that said I was also dying to do so prior to their fiscal Q1 report, but abstained, luckily.

The chart below shows a an uptrend that has been intact since last spring, but now touching the upper end, this seems as good as time as any to get in an attempt to short (with defined risk) a name that everyone loves.  Also helping me to this decision is that I feel the market is a bit overbought at current levels and we are due for a pullback.

[caption id="attachment_8646" align="aligncenter" width="300" caption="1 YR AAPL chart from Bloomberg LP"][/caption]


TRADE: AAPL ($466.30) Bought the Feb18th 460 Puts for 2.73

-Looking to leg into a put spread when the stock starts to go my way.

Break-Even On Feb18th Expiration:

Profits below $457.27

Losses of up to 2.73 btw 457.27 and 460 with max loss of 2.73 460 or higher (less than 1% of the underlying).