Follow Up to Trade Alert - (AAPL) May 6, 2015
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. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.
Follow Up to Trade Alert - (SPY) - Update
Sell the Apple (AAPL) June, 2015 $115-$120 deep in-the-money vertical call spread at $3.70 or best
Closing Trade
5-6-2015
expiration date: June 19, 2015
Portfolio weighting: 10%
Number of Contracts = 24 contracts
This morning we learned that Apple (AAPL) had issued $6.5 billion worth of bonds so they could buy back more of their stock.
Borrowing at 1.25% to retire shares yielding 2% makes all the sense on the world. The company has also locked in a longer term source of funding virtually for free, which will be highly useful in any future recession or stock or bond market crash.
This will reduce the float for the shares, making fewer available for future buyers, and is hugely price positive.
What did the stock do? It promptly fell 1.5%. It is an old trading nostrum that when you throw good news on a stock and it fails to rally, it is time to get out. Not just from the stock in question, but from the market in general.
In fact, the entire technology and biotech sectors have recently lost their upside momentum. Energy and financials have taken over the market leadership. So these once red hot sectors look far more appealing from the sidelines.
Fortunately, I was able to cover this small Apple loss with my double short position in the S&P 500. Remember ?Sell in May, and go away? So, net, net, we will make money on the combined trading book.
This year, my tolerance for taking losses is low, to the point of becoming subterranean. Making money is hard, but recovering losses is far worse. I can always make the money back with the next five or ten trades. It?s better to be up 20% in a flat market, than breaking even in a falling one.
On to the next trade! Andiamo!
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Sell 24 June, 2015 (AAPL) $115 calls at?????$10.35
Buy to cover short 24 June, 2025 (AAPL) $120 calls at..??.$6.65
Net Proceeds:??????????????????.....$3.70
Loss: $4.15 - $3.70 = -$0.45
(24 X 100 X -$0.45) = -$1,080 or -1.08% loss for the notional $100,000 portfolio.
