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October 8, 2012 / redman59

Thought on Today and New Trades in AAPL and NFLX

Watching the market today I was in the perspective of “this is good action”.  I take a no news or objective future opinion as this market has proven retarded and that it can move on any news whether good or bad.  At this point any economic data has to be ignored and just watch the market reaction, don’t try to over-think it.  I must say that I liked today’s action.  It seemed like the bears had every opportunity to bring the market lower and they weren’t able to.  With a holiday-like day with the bond markets closed I expected the low volume follow through to the downside, but the market held steady.  Intraday I was watching the 5-minute $TICK chart and it did not have me worried at all as it made higher lows into the afternoon and hitting better highs than lows.

With that I swing traded $AAPL by buying the 645 call on weakness then later selling the 655 call on strength, my net debit/risk is $270 with full profit of $730.00 if AAPL closes above 655 on Friday.  This stock is definitely in the news, especially with its consecutive close below the 50-day SMA, but I am looking for it to make a push to the 50-SMA and then maybe seeing more selling.  I recently wrote a post titled “Similarities in Apple ($AAPL) Before It Last Corrected” on 10/01 about how AAPL was seeing similar price action bearishness to a previous time period, so far it is playing out.  But I am short-term bullish and have no intention to take a long-term position before earnings, I may miss out on a big gap up but I am willing to accept it.

Also today I took a delta-neutral options position in $NFLX.  Another stock that was in the news today.  I have to say from a consumer standpoint that if it was moving on this news, that is not a reason to buy.  I am a Netflix and Amazon Prime customer and I must say that Amazon is far more superior.  I really see them taking away share from Netflix as I am more of a purchaser of convenience rather than minuscule dollars.   I see today’s news more as an euphoria and I am hoping that previous longs took some profits as I see maybe a run to high 70’s then further selling.

My position today in NFLX involved me selling volatility via selling the Nov 55/85 Strangle for a 3.80 ($380) credit per spread.  I saw this as a good opportunity as previous moves have shown stalling afterward so I am looking to capitalize from time decay and volatility stall/drop.  The morning didn’t work out as the stock saw further upside movement so for right now I am down approximately -7.5% on the original margin requirement.  I am looking to stay in the trade and buying a put on further upside movement.  The risk graph can be found below with red lines representing -10% move, live, +10% move and light blue representing a 1 StDev by Nov expiration:

Right now most of my positions are bullish bias and really I have no reason from a chart perspective to be bearish.  The $SPX is still trading above its 10/20 EMA’s and under the radar the price action of a market of stocks is still working.

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