AppleOption: Apple (AAPL) Stock Options Trading Newsletter

AppleInsider published a private communication from Steve Jobs to Apple employees. He acknowledged the beating Apple shares have experienced lately, $200 down to $130, but was confident that investors would inevitably recoup their loss and then some!

“Wow… what a remarkable last few days,”

“Our stock is being buffeted around by factors a lot larger than ourselves.”

“As you can see, we have outperformed many other blue-chip tech companies, including Google,”

“I continue to believe that our fundamentals - our remarkable people, our clear and focused strategy, our new product pipeline, our 200+ retail stores, our $18 billion of cash in the bank with no debt, etc., will serve us well in the coming months and years.”

“I believe that investors who stay with us will be rewarded as the market’s confidence is restored over time,”

“Hang in there.”

Access Apple’s Investor Relations Page

Earning Reports due this week:
Tuesday (unannounced): Yahoo (YHOO)
Wednesday (after the close): Starbucks (SBUX)
Thursday (after the close): Google (GOOG)

For an entire list of company earning reports, check out Yahoo Earning’s Calendar

If you are interested in “playing” the earning’s report… here are some suggested trades.

YAHOO! - Wide Straddle - currently $20.78
Buy to Open the Feb 17.5 PUT for $0.30
Buy to Open the Feb 22.5 CALL for $0.80
Total Debit = $1.10 or less
Breakeven points are $16.39 and $23.61
Exit plan: After earnings we expect ~5-10% stock price change, sell into the excitement which ever option has profited from the earnings. If the stock falls 10% the PUT should become ~$1 or more, where as a 10% gain would cause the CALL too increase to ~$1.80 or more. Selling at this point will create a likely breakeven or better trade, while leaving the other leg open. We then have the remaining 18 days till expiration for the stock to revert to the mean or swing the other way for additional “free” profit.
Technical Analysis: The Yahoo Chart has a strong bearish outlook for the stock. The first level of support is at $19. Last November they traded as high as $34.

UPDATE 1/29/08 : Order should have filled for $1.10 or less. In after hours trading Yahoo fell 10% to $18.72. This will make our 17.5 Puts ~ $1 or more at market open. Sell the put for $1.10 or better!
UPDATE 1/30/08 : $17.50 ranged from 1.50-2 today. Should have been no problem taking the gain! This results in a total trade profit of AT LEAST $0.48 or 43% if you sold at $1.58 and as high as $0.90 for 81.8%.
The trade now has an open 22.50 Call which has 17 days to potential make your more on this trade! But either way it will stay a winner!
UPDATE 2/1/08 :Anyone see the current value of YAHOO? The Call 22.5 which we bought for 0.80 is has traded today from $5-7! You should exit the trade now if you haven’t done so already at $5.35. This results in a return on the call alone of 568% !!!
TRADE CLOSED:The put side cost $0.30 and sold for $0.48 which is 43% return, while the call cost $0.80 and sold for $5.35 which is a 568% return. This total trade cost $1.10 and was sold for $5.83 for a net return of $4.73 or 530% profit.

Starbucks - Straddle - currently $19.66
Buy to Open the Feb 20 PUT for $0.30
Buy to Open the Feb 20 CALL for $0.80
Total Debit = $1.80 or less
Breakeven points are $18.20 (7.6% down) and $21.80 (11.1% up)
Exit plan: Similar to Yahoo, we are playing the earnings momentum change after reporting. Last time SBUX fell from ~$24 to $21.75, while two weeks later return to a high of $23.75. This similar swing should produce a nicely profitable trade. After earnings, sell into the excitement for profit! Then hold onto the remaining leg until it recovers.
Technical Analysis: The Starbucks Chart has a bearish outlook however major support levels sit at $18. Novembers high was $26.50.

UPDATE: 1/30/08 Over the corse of the day Starbucks lost 3.76% and in after hours is down ~2% to $18.80. Your 20 Put was worth $1.50 at the close and should open tomorrow ~$2. Sell for $2 or more. Resulting in a $0.20 profit or 10%, then hold the 20 Call until we rebound in the next 17 days before expiration for additional profit!
UPDATE: 2/1/08 We have made 10% on this trade, in three days. Not bad… have to watch SBUX until expiration.

Google’s Trade recommendation will be posted Wednesday evening. We are watching BIDU extremely closely, they have turned positive and google will likely follow.
- No trade was safely identified.

There are hundreds of online brokerage firms these days… TD Ameritrade, E-Trade, Scottrade, Fidelity, OptionXpress, OptionHouse, TradeKing, ThinkorSwim, Zecco, etc.

Learn who is stealing your money and who is helping their clients!

Every trade you place has an associated commission and fee that the brokerage firm charges.

So how should one decide which brokerage firm to give their money and perform trading?

Obviously commissions will play a significant factor! If an average order is $1,000 and you are paying $10 in commissions then from the moment the trade is opened/closed, you are down $20 or 2% of your investment. So you must acknowledge that they are going to take your money and realize there more pressure just to break-even. Scanning the chart, you’ll notice several brokers that have stock commission of less than $5.

Option commissions are complex. You have to know your typical trading style! Are you typically ordering 10+ contracts or less than 5 at a time. This analysis will help you decide which commission schedule to select. For example if you are buying 10 contracts, the flat base rate at OptionHouse is appealing, otherwise the next best deal is TradeKing’s $4.95 + $0.65/contract. If you are only buying a few contracts at a time (less than 6), ThinkorSwim offers a $0/trade + $1.50/contract.

Some of you might be drooling over Zecco’s free trading or cheapest commission rate. We placed them on this chart only to prove a point. While they are the cheapest in commissions, how does their user interface work? First, Safari is not supported and Firefox is poorly supported but manageable. The layout of the website makes it extremely difficult to navigate the trade station and to see level II quotes you’ll have to pay a monthly fee. In fact the process of creating an ACH transfer is a little daunting within their framework. So for free or cheap trading, you compromise greatly on the remaining service they provide. Iif you need customer service support, it takes plenty of time for a response if they ever do. We have traded with this company and they have serious issues with their option allocation! Almost every time we wanted to close a trade we ended up on the phone with this company, insisting they fix the option allocation. This issue is VERY concerning in a volatile fast moving market! If you can’t execute your trade timely, you could lose a lot with options! Granted they have only been in business for a little over 1 year, we prefer not to go through the growing pains of this company!

In contrast, ThinkorSwim has been around since 1999 and it’s costumer service is one of the best we have ever seen! During business hours they are available via phone or live chat. Our experience with any costumer service issues have been promptly addressed. By far this is one of the most user friendly online brokers!

ThinkorSwim takes it a step further… they want to keep you happy and will match your previous broker’s commissions. So take a good look at you trading style and find a commission plan that works for you! AppleOption utilizes the TradeKing rates ($4.95/trade + $0.65/contract) for the Index Condor Portfolio and a special rate ($0/trade + $1.50/contract) for both the AppleOption STP & LTP. ThinkorSwim will give you the best rates, while performing the best customer service.

The only remaining factor is the trading interface. TD Ameritrade, E-Trade, Fidelity and Scottrade all tout their “pro” trader interface, usually you have to hold $50,000 account balance or execute 100+ trades per quarter to qualify to utilize this interface. In essence, through higher commissions you are paying to use the platform.

ThinkorSwim has the best trading platform available to everyone!

We encourage you to watch any of the ThinkorSwim Desktop Platform Tutorial Videos.

ThinkorSwim has created a very professional user friendly trading platform which is available to all customers! The platform can be used as a desktop program, as a webbased application, or even on your mobile phone! This company is dedicated to helping you trade.

If you want to test out their trading platform, open up a paperMoney account.

paperMoney is our groundbreaking paper trading application available for thinkDesktop (software), Web-Based Trading (web), or thinkAnywhere (pocket PC.) The trading functionality is exactly the same except that the trades aren’t real and you can start over anytime you like.

With paperMoney every thinkorswim user has access a virtual margin account and a virtual IRA account each funded with $100,000 of “play money”. It doesn’t require a seperate download, special code or even a different username and password. All you need to do is select paperMoney at the thinkDesktop or website login screen (see below.)

In our option, AppleOption believes that ThinkorSwim is the best stock and option online brokerage firm. We have been extremely pleased with their service, appreciate the low commissions, and are impressed with the trading platform. We would encourage anyone looking for a new brokerage to consider if ThinkorSwim is best for you!

AppleOption does not receive financial compensation from ThinkorSwim for this article or customer referrals.

Today was a fantastic day for Apple! The stock fell hard to $126, however at the end of the day rallied strong back to $139. However, this is still down from the pre-earnings price of $155. The stock showed tremendous resistance at this level. Today created a V-bottom to the stock.

The stock moved in a similar way back in August 17th and again on Nov 12th.

The remaining indexes also rebounded nicely today. In previous recessions or bear markets, it has been the financial that lead the run to the next bull market. We saw the Financial Select Sector SPDR (XLF) lead us up from 25.21 to a close of 27.90 or a 10% rally.

So is this the bottom?

Maybe… only time will tell. However this does seem in the short term like we have reached one. Our call over the weekend in the posting Market Train Wreck, stated the predicted bottom would be S&P 500 ~1250 and Dow Jones ~11,200. Well the S&P500 dropped to 1,268.4 before rallying up to a close of 1,348.6 meanwhile the Dow sank to 11,638 before rallying to a close of 12,270. Looks like AppleOption has correctly identified a bottom for it’s members!

How the AppleOption Portfolios will utilize this information!

Please Login or Register to read the rest of this content.