Wednesday, January 23, 2013

$AAPL $300? No Mr. & Mrs Maven

Can't put this in a 140 character post on twitter so here it is:
My simplified AAPL overview:

* MY BEEF: I keep hearing mavens saying 'if it weren't apple then no one would be surprised it's down that much.' Even one genius called it a broken company, etc.

* MY STATEMENT:  My answer to the aforementioned mavens: "but it IS Apple Mr. or Mrs. maven. You can't just make believe it's not. It's still that same company that sells EVERY widget it makes and at a premium! It still has more cash that most countries. AND it still has most of the modern world as devout fans. AND it still owns the way we ALL buy music, etc."

* MY TAKE: Apple dooms-dayers now littering the media with forecast of 300/share for apple. Keep it simple: take a 2 year trend and add my trusty YELLOW MARKER trend line, you can draw a line (best fit to 2yrs ago performance-not the crazy run up it had) that gets you to about where it's trading after hours. So what? let's use the mavens words and say: 'take out the name Apple from this chart and you get just the normal medium growth company plugging along just fine!' This means that the $300 price forecasts for Apple are just as crazy as the infamous 1,111 call!

Disclosure: I have a small long Feb position (Credit puts spread) that is still way out-of-the money even at 480 AND I am long weekly puts that I will cash in tomorrow. So I am not biased based on any hurt long position.

Tuesday, January 22, 2013

Rare $ISRG earnings trade

 If you already follow me then you know that I like to sell option spreads. You also already know that I don't like to take positions into earnings because I can't foretell HOW the markets will react to the reports. All the homework in the world can't give me ANY insight on that reaction; I can have certainty in say the size of the move but as for the direction it's no better than a coin toss.

Here comes the shocker: Just before today's close, I tweeted that I initiated a long $ISRG position going into earnings.

Why break my rule? I felt that the recent drop in ISRG gave us a sneak peak at its LOW levels. On my chart, I marked those areas with the horizontal lines and hand-drawn rectangle (sorry too much coffee and hand jittery). I felt like the 'world had ended' for ISRG with a few really doomy headlines and dropped and popped around the hashed zone for a few days. So, if the world ended AND YET it held the 480's then it must be a really strong support going forward.

THE TRADE: Long ISRG via Credit put spread.

NOW WHAT? 1) if ISRG opens around 560ish (as I write this article it's at 566ish) then I will look to add an upper leg and turn this credit put spread into an Iron Condor. I will carefully look for a good level to take a credit call spread. or 2) if the premiums disappear on the CPS I already sold today then I may close it and cash in the ISRG play. or 3) same as #2 (close the CPS if cheap enough) and start looking for a cap on it. Whatever I do, I will make sure not to ruin a perfectly good trade.

NOTES: looking at the chart I see an earnings pop/gap that fizzled and proved to be a top (oval). This pop will guide me in finding upper levels (should I decide to cap it). The red x on the chart shows where it's trading after hours which coincides with recent resistance. Usually, when I try to cap the run of a fast runner I go much higher than price; likely about 600+ for ISRG as it's proven over and again that this sucker can run circles around Usain Bolt!