Of all the craziness of the last week the moves in the large cap Nasdaq stocks have been some of the most breathtaking considering the market cap changes involved. AAPL is currently around 113 after briefly being in the low to mid 90’s on Monday. Good luck if you tried to actually buy it but it definetly traded just below 100 for long enough for 98 or so to be considered the real recent lows. So using 98 as the legitimate lows where lots of stock traded it’s rally to 113 is still amazing. There are a lot of other charts like that this week, but since it’s the largest stock in the world, that one sticks out to us. So that brings us to the QQQ. Its chart this week looks like AAPL but with 99 other stocks in it, which makes it even crazier:
GOOGL is unchanged on the day with the QQQ up over 2% and that could be one of the first signs of exhaustion in this bounce. GOOGL was spared some of the panic selling that other stocks like AAPL saw on Monday morning (it still got clobbered but nothing close to what other big caps saw) and this is suggestive of some of the other moves relying a lot of short covering for their continued moves higher today. (people got really off sides in stocks like AAPL and may be chasing here)
We took off our QQQ short on the first leg of that selling for a nice profit:
Update – Sold to close the QQQ ($103) Sept 110/102 put spread at 4.85 for a 2.85 profit on original put
We want to re-enter a bearish QQQ position here. The damage done the other day is unlikely to turn on a dime with everything going back to normal. This is also a good trade for those that had the daylights scared out of them the other morning and are looking for some portfolio protection. So here it is:
Trade: Bought to open the QQQ (105) October 105/92 put spread for 3.00
- bought to open 1 Oct 105 put for 4.00
- sold to open 1 Oct 92 put at 1.00
Breakevens on October Expiration: Losses up to 3 above 102 with total loss above 105. Gains of up to 12 below 105 with max gain at or below 92.
Rationale – Vol is high and if the major indices merely pull back slowly from this bounce we could look to turn this into an in the money fly. If the markets continue higher we’ll look to protect against losses more than 50% on the premium paid.