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Thursday, December 1, 2022

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Toppy Tuesday – Don’t Sit Under the AAPL Tree!

SPY 5 MINUTEWe're just waiting on Apple's earnings this evening.  

While we are long-term bullish on the stock, we have pulled our short-term bullish positions – in case they miss and spike lower – at which point we will be BUYBUYBUYing while the rest of the suckers are selling.  This is AAPL's weakest quarter during a weak product cycle – it's madness to expect great numbers and, LONG-TERM, we're comfortable playing for a $400 floor but, short-term – anything can happen

As you can see from Dave Fry's SPY chart, volume was miserably low yesterday, rendering the day's action meaningless.  AAPL's earings will have a huge impact on both the Nasdaq and the S&P, with AAPL accounting for almost 5% of the S&P 500's total earnings.  

Overall, barely 50% of the companies are beating their revenue targets and those revenue targets are not very exclting:  MO missed this morning with revenues down 1.2%, BEAV had 15.3% lower revenues than last year and lowered guidance, CIT dropped 14.1%, DD down 0.7%, IRWD down 33.6%, LXK – 3.1%, LMT -4.3%, MTG -17.8% (and housing is supposed to be coming back!), RSH – 0.5% with a massive miss on earnings too (-0.53 per $3 share) and even Dow component TRV was 0.7% lighter on the revenue side than last year while blowing away earnings estimates ($2.13 vs $1.60 expected).  

Earlier this year, I stuck my neck out on AAPL and went on TV January 15th and made it one of my top picks for 2014, along with TSLA ($33.85 at the time) and CIM ($2.84).  TSLA, did so well ($122) we are now short on them and CIM ($3.06) is chugging along and, most importantly – paying it's 12% dividend!  DESPITE the fact that AAPL was at $486.31 that day and is now $426, the spread has proven surprisingly resiliant as the $400/500 bull call spread is still $35 but the 2015 $350 puts are now just $28.50 for net $6.50, down just net $7.50 despite the fact that the stock itself has dropped $60 (12%).  Isn't that a lot better than if you had just bought the stock? 

Of course, we have since rolled and adjusted our positions – taking full advantage of the dip to $400 that we pretty much expected would happen over the course of this year.  In fact, even today, those Jan $400 calls are still $42, more than we paid for the total spread.  If you have not toched the position since January, the adjustment I'd make at the moment (with earnings looming) is to roll the Jan 2014 $400 calls ($42) to the Jan 2015 $370 calls ($80) for net $38 and roll the Jan 2014 $500 calls ($6.65) to the Jan 2015 $465 calls ($38.80) to get a $32.15 credit back so the net of the entire roll is $5.85.

That then leaves you with the 2015 $370/465 bull call spread at net $14 (original) + $5.85, the cost of the roll for a total of $19.85 on the $95 spread that's already $56 in the money.  Not a terrible outcome for a stock that's moved 12% against you, right?  This is how we use options – both to hedge and leverage at the same time!  That's what I mean when I say we're not worried about our LONG-TERM position on AAPL.  Short-term is anybody's guess and we cashed in our short-term winners last week.  

Speaking of gravity:  Oil did exactly what we wanted it to yesterday and is now falling below the $106 line for a $2,500 PER CONTRACT gain from yesterday's post.  That is what we, at Philstockworld, refer to as "WHEEEEEEE!"  

If you want to learn to trade Futures contracts like these – make sure to sign up for our seminar in Las Vegas – November 10th and 11th this Fall.

We also had ordinary short positions on USO (Aug $39 puts at $1.25) and SCO (Aug $26 calls at $3.20) in our Short-Term Portfolio and we're still hoping for a fall all the way down to $102.50 or lower but, in the Futures contracts (/CL), you can't afford to be that greedy – we try to only play when there's a REALLY good line to short off of.  $105 will be the next one but now we're ealy in the new contract cycle and it's more likely to be a bounce line (back to $106) – we may even take a quick, bullish poke there if the stars are aligned, and then re-short at $106.  

Another fun short we had was NFLX and they too are giving us a big Wheeee! this morning as the stock falls 4% despite the fact that they beat earnings (0.49 vs 0.40 expected) and were in-line with revenues ($1.069Bn).  As I said to our Members in Chat yesterday afternoon regarding my earnings expectations (12:34):  

NFLX/StJ – As noted in news above, not all their acquisitions are going to be hits and, as I said last week, their upfront costs on this acquisition spree is very likely to exceed returns in Q2 and best-case scenarios are already priced in so I can only see a bearish case from $265.

The news I was referring to was specifically the box office failure of the Dreamworks movie Turbo, which matters to NetFlix as they have already paid a boatload of money to DWA for an "exclusive" children's series based on the movie.  In this frenzy for NFLX, AMZN, HULU, TWX, etc. to secure "unique" content – there are bound to be missteps – NFLX simply isn't priced for them.  

Also not priced for a misstep is TSLA, who don't announce earnings until August 7th but we cannot wait for that one and we've pressed our short positions already.   They are not just priced to perfection but perfection in a perfect world where everyone is rich enough to afford their cars and the Government will subsidize them ($7,500 per unit) forever and ever – Hallelujah!  

Bespoke has an excellent chart of Sector Relative Strength taking Market Cap into account.  I've been warning our Members not to take the early rise in XLF (Financials) too seriously as it's the large caps that report first and they are having indictably good earning (Senate Hearings today on their commodity market manipulating activities).  Regional banks and local banks, however, are struggling.  All the Materials, Utilities, Telcom and Energy Stocks are pretty weak and it's small cap Tech that's leading the charge on the Nasdaq and Russell but, as you can clearly see – this just doesn't seem like a chart group from a market that's at record highs, does it?  

So, despite all the excitement on the indexes and despite my promise to get more bullish after AAPL earnings if the market doesn't collapse – I still think it's cash that's king although Winston had a great list of stocks we can still play with on Saturday and, if we're still up at these lofty levels tomorrow – I do promise to make a list of additional bullish plays we can make (and see last Monday's 500% Bullish Trade Ideas).

Let's be careful out there.  

 

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AAPL: 

 i would think they come in a low end of estimates…maybe even lower…but i wouldn't think stock would fall back below 400 for very long until we see how global economy develops and new products are received

NFLX: its odd how forgiving the market is to almost every other company but aapl…i guess still way too overowned.
AAPL: i would normally say to buy the after-hours weakness if it falls materially, but the entire market is so extended and acting a bit toppy given the big gains in asia overnight…so it may play out over a few days/weeks…any aapl weakness

stj,

have you thought about the aug 65-60 strangle on qcom………..or do you like something else……..

hey guys –// heres somethin I do when I'm not losing money ; >

randers – I know it well.  Feel free to contact me off the board if he ever needs a leg up.

Quite a turnaround on HLF.  Ackman happy, Icahn not so much.  What a circus.

QCOM / Mill – Not a bad play. We have seen support around 59 and change and resistance around 66 so you would be covered. I guess a small bet…

That's another frustrating stock – still long the 2015 50 calls and I had sold the July 65 which obviously worked well on the short calls but the longs are a pain now.

Phil/CMG

I'm still in CMG old Income Portfolio position of Jan 2014 $235/$315 bull call spread. Do you recommend selling or holding this position. Thank You.

phil // puppets
thanks – just a hobby really – I collect them when i can find them. its a shame, all the old masters are dying and theres no one to pick up the trade in most families – i merely just care for them. I think i have around 50.

Wombat: some of the faces could make great imagery for sale.  Skate decks, shirts, tea lables….

Gold so close to 1350, looking / waiting to recover ABX Jan15 $13 calls with something for a few bucks…

APPL Earnings hedge – how about the QQQ $74 puts for .21?

Phil / NFLX – re. your comment "there's no proper support for NFLX now", well there is one form of support — Icahn telling his developers "keep the bots spinning upwards until I've sold my shares"…

QQQ – Thanks Phil, decided to grab a few puts just to get a little more short-term bearish.  

weiner confirms recent online sexually tinged exchanges with unnamed woman….hahahahah
 he should be banned from running just for the dumb factor…wow

that isn't picking on me Phil 😉

I have been waiting impatiently for you to break out of …

ABX at 18 is much better than 13 (unless we are buying, of course).

doubling down and loving stocks is something I prefer not to do.

FU is a coping mechanism.

I try not to ever use curse words.

FU means freaking unbelievable..

I told you I wanted an I told you so post.

Hopefully, it will continue into earnings and there will be no big butts..

Way to pound the table!

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