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Apple Calls

Making Money on Wall Street

Written by Christian DeHaemer
Posted April 25, 2013

Yesterday I told my readers in Options Trading Pit to take profits in a call option we bought on Friday...

Here was the note:

Bank 32% Gains in Three Trading Days

On Friday we bought Chicago Bridge and Iron (NYSE:CBI) calls based on the quality of the company and its oversold position on the chart.

The stock has since bounced back and we are close to the standard 33% retracement. No one ever went broke taking a profit.

Exit the CBI July 2013 55.00 call (CBI130720C00055000). These are trading at $2.45.

Sweet, simple, and to the point.

There is nothing I like better than making a quick buck off a Wall Street countermove.

Apple Misses

The most loved and hated stock on Wall Street is flat, despite weak earnings.

I'm talking about Apple (NASDAQ: AAPL).

The company sold 37.4 million iPhones this quarter as apposed to 35.1 million last quarter. The problem was they were iPhone 4s and not iPhone 5s. Margins shrank and the market wants to write them off.

Bloomberg reports:

“Ultimately, we are more worried about secular gross margin pressures — particularly on the iPhone,” wrote Toni Sacconaghi of Bernstein Research, who cut his price target on the stock to $600 from $725 and predicted that “in the near term, Apple’s stock might continue to be choppy.”

Uh, don't know if you notice this, Mr. Sacconaghi... but AAPL is at $405. What was your price target when it was at $700?

We all make mistakes, and he certainly isn't alone. Twenty-one other brokers cut their price targets. According to Blomberg, they now range from $400 to $880.

The fact that none of them were right shows you just how worthless these price targets are.

aapl arpil 24

aapl arpil 24

But I got it right.

On March 6 — right here in Wealth Daily — at a time when Apple was at $520 and the Wall Street bots were saying the bottom was in, I told you it was going down...

I wrote, “Allow me to be Captain Obvious (again) here: AAPL is heading to $420.”


The big news isn't that Apple saw its first quarterly profit decline in a decade and warned on future growth, or that the herd of analysts talked up their book as their trading desk sold the position...

No, the big deal with Apple this week is that they are going to pay higher dividends.

This is logical because the company has $145 billion in cash.

But that's not the big deal, either.

The big deal is that most of the company's money is overseas.

In order to bring this back to the United States without paying huge taxes, the company is taking on new debt in order to pay shareholders dividends. (As we all know, paying taxes is for the middle class.)

Increasing Volatility

The point of all of this is that after a five-year bull run, the entire market — not just Apple — is getting a bit choppy...

Yesterday an errant tweet sent the Dow down 140 points. The Volatility Index has jumped recently from a low of 11.04 on March 14 to a high of 17.56 on April 17.

In this type of market, it's a good idea to start sniping 30% gains by trading options.

You could do worse than putting some speculative money in some AAPL October $80 calls. But for my money, it's a crowded trade...

I prefer to play the short-term silver rebound.

Have a good one,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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