Weekend Review – 9/8/2013

I realize I could cut and paste this sentence from about twenty weekend review blogs over the past couple of years, but here goes anyway –

Options Action –

The Options Action guys started out talking about Apple (AAPL – 498.22) as there is a big event coming up on Tuesday with the new iPhone announcement plus anything else Tim Cook has up his sleeve.  Personally I’m not expecting any big surprises because if something was brewing Carl Icahn probably would have already tweeted it.  The option market is pricing in a short term move of 4% in shares of AAPL.   There is a lot of debate around AAPL stock next week with the result being a bullish short term trade.

The AAPL trade is a call butterfly with a bullish outlook and includes two events – this week’s announcement and earnings in November.  Based on Friday prices on AAPL Nov 500 Call is purchased at 25.00, two AAPL Nov 550 Calls are sold at 9.00 each (18.00 total), and finally a AAPL Nov 600 Call is purchased for 3.00.  The net cost here is 10.00 with a net profit potential of 40.00 if the needle is threaded and AAPL closes right at 550.00 at November expiration.  The trade makes a partial profit if AAPL is between 510.00 and 590.00 on the third Friday in November.  The maximum loss is 10.00 outside of 500.00 on the downside and 600.00 on the upside.

AAPL PO

The next trade was based on a macro reference of today’s Internet stocks behaving like they did in 1999.  I was around in 1999, this isn’t anything like that.  Trust me.  Based on many Internet stocks taking off over the last twelve months, but LinkedIn (LNKD – 253.22) has lagged the group only climbing 43% since last September.  The expectation is that LNKD will catch up to the group.  The trade idea is a conservatively bullish trade in the form of a bull put spread.  A LNKD Nov 250 Put is sold at 19.00 and then a LNKD Nov 240 Put is bought for 14.50 and a net credit of 4.50.  The expectation is that LNKD will be over 250.00 at November expiration which can occur even if the stock drops a little.

LNKD PO

The final trade suggestion is on the bond market.  One of the best methods of playing the bond market in an equity structure is the iShares Barlclays 20+ Year Treasury Bond ETF (TLT – 103.05).  The bond market has been under pressure and TLT is down over 10% for 2013.  The feeling is the downside move is close to an end so there is a bullish outlook for TLT.  TLT is a low volatility instrument so directional plays using options are usually cheap and that is the case here.  The trade idea is to buy 1 TLT Dec 104 Call at 2.90.

TLT PO

Barron’s –

The Striking Price column has no mention of VIX.  I think this is a first in a few weeks and I guess I will deal with it.  What it does have is an interesting list of long stock ideas that have what is referred to as cheap options available.  The list of stocks comes from Goldman Sachs and is a group of stocks that might double due to strong fundamentals.