As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Buy the Bank of America (BAC) May, 2012 $7 puts at $0.40 cents or best
expiration date: 5-18-2012
Portfolio weighting: 5% when in the money
($5,000/100/$0.40) = 125 Contracts
There is a method to my madness.
It’s all about Apple (AAPL). A disproportionate share of the market volume has been pouring into Apple shares for the past two weeks. The higher it went, the more people wanted to buy. The action in the call options has been absolutely explosive.
The focus of the market distilled down to not just a single sector, but a single stock. When it rolls over, the rest of the market will follow it down. Apple has pulled this off while virtually every other asset class is showing their own topping formations, including most other stocks, the euro, the yen, copper, gold, silver, and even the ags.
The sharp $15 sell off we saw unfold in Apple stock in just a few minutes suggests the short term top is in for the sizzling, innovative company. So am I going to sell short Apple stock? Heavens no! I love Steve Jobs’ creation. I still think it will hit my long term target of $1,000 sooner than later. In fact, I just bought a new solid state MacBook Pro with all the specs maxed out and I am picking up my IPhone 4s on Friday.
Instead, I am going to use Apple as the signal for my cross market timing, and then short a stock I hate, Bank of America (BAC). This is one of the top performing stocks of 2012, soaring some 50%, in six weeks. It is beating Apple by an almost 2:1 ratio, which has jumped only 28%. How insane is that?
When I am in a selling mood, I want to sell the most expensive stock in the market that has had the most blistering recent gains. That describes (BAC) to a tee, which is nowhere near solving its structural problems and still has a declining real estate market to deal with. I picked the May $7 puts to give us plenty of time for the downside to develop. Make it to $7, and the $7 puts double in value. Make it to $6, and they triple.
And while I’m at it, I am going to double up on my position in the leveraged short S&P 500 ETF (SDS) while it is trading at $16.69.
Check Out Bank Of America’s New Logo