Monday, October 18, 2010

Playing $AAPL

I've been asked by a few subscribers how to play Apple and its 5pm ET earnings release today. Let's get this straight: no one knows for sure what shall happen; it's all a big guess - even for those highly paid Wall Street analysts and the hottest of stock and options traders. So take my opinion for what's it worth - about the same as everyone else's.

Long the stock and ridden the wave of the last few months? I'd just hold and ride it higher for even higher prices this spring. This is going to be volatile once earnings are out but no sense in knee jerk selling. How low could it go to make you lose money? Only you know your loss tolerance. Worried about some sort of big pit in the Apple results? Hedge by buying some near term puts.

Option holder? Take some profits off the table if your position has rewarded you with big gains in recent days. Remember, once the 4 pm bell sounds, you are trapped until 9:30 the next morning. Don't be piggish. Also consider rolling into longer term calls (eg spring strikes) if say a November expiring position is up better than 100% for you.. I know some options traders who do not hold through any earnings. They wait for the numbers to see whether their justification for being long or short is validated by the numbers and then go back in.

New option holder as of today or Friday. heh. good luck. You might as well be shooting dice.No advice, but be prepared to lose it all if you're wrong about direction, or the stock stands still. There is such a thing as evaporating volatility after an event which can put you behind the eight-ball. I will note that the options players are going nuts over the calls today with volume in most strikes exceeding open interest. Better hope it's not a contrary indicator. The buys in Apple November options go all the way to the 470 strike.

By the way, going into GooG earnings many were unsure. In Apple's case, many see an upside explosion coming. Sentiment in the two company's vastly different ahead of earnings.

All of this is not official FA type of advice, just some rambling thoughts.

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