Kudrna's Stock Market Talk

Update

AAPL is breaking/resting on key near-term support at 336.  A close below would be a bearish sign and I'd reccommend closing out the trade for a loss.

However, if you are still bullish for upcoming earnings, I would reccommend covering all the sold positions but keeping your longs.

So for example if we have a 340 calls we bought for 4.5 and a 345 call we sold for 3.25, i would buy back the 345 call, i think its around .9 right now.  This allows you for unlimited profit if apple were to make a key reversal next week.  It should be noted that if you buy back the call at .9, you are adding 90 more dollars of loss to the trade if aapl does not rebound. 

Personally, I've covered my sold positions and am holding for a rebound as I hate fighting this inflationary environment, I also have many hedge positions for a down market so a loss on this trade would be met equally with a gain on my shorts.  As always do your homework to see if you agree.

I've been following AAPL and GOOG closely in the last 2 months and after running some charts Friday I decided to create a position in AAPL for the upcoming earnings run.  This play will focus on Bull Call spreads and is designed to be closed before earnings announcements.  The only drawback to this trade is that earnings will be announced two days after the April options expiry. 

I'm a big user of fibbonaci fans and retracement levels.  Looking below I've ran two charts one on a 6-month interval and one on a 5 week interval.

We can see from the 6-month chart that AAPL has retraced down to the 22.3% level resting almost directly on the line, this represents a minor retracement and in this market rally I feel AAPL has pulled back about as much as it is going to before earnings.  Now lets look at the 5-week finonnaci fans.

From here we can see almost a complete 66.8% retracement in the last 5 weeks.  This is a strong signal to buy as well, coupled with earnings announcements we are greatley stacking the odds in our favor.

Friday I opened the following spreads on AAPL.

Bought to open 355 April 15 call.  Sell to open 360 April call.

Bought to open 360 April 15 Call.  Sell to open April 365 call.

Looking at the chart below we see a Max possible loss of $355 with a max possible gain of $1165.  I like opening multiple strike spreads on stocks because it allows you to play movements in the stock without cashing in too early.  We see a break-even here at $356.35.  If the stock moves relatively quickly I'd most likely close out the   355/360 leg of this spread for a 100% return and allow the 360/365 end of this spread to run.  A strong point for this spread is if AAPL does indeed run up till earnings we can allow the spread to run till expiry and collect the maximum possible profit because we do not have to worry about the fear of an earnings annoucement dropping the stock while we hold the options.

*Disclaimer- Teemoney is long AAPL at the time of this writing.  Positions may change at any time. Not responsible for personal loss.