The Apple Rots: I’m A Buyer
This is the third time it has happened since I’ve been recommending this stock. It was victimized by a severe sell off relative to the market- not the company. Two out of the three times (August and November), I stepped up and jumped into the stock by investing in some very high priced calls.
In August I took a long term position, which even if I sold on Monday after a 20 point drop, has worked out fantastic. In November, when the stock swooned from $190 to $155 in three trading days. On that trade, I turned $16,500 into $24,500 in one day.
I hope to do it again. I love these irrational, emotionally driven sell offs. I hope I’m right again.
I bought 10 $185 Feb Calls today at $14.25 ($14,250 investment). Let’s hope it’s deja vu all over again.
In the interest of time I’m not going to put up a chart. Next week I’m hoping for some post holiday stats or some FED intervention next week to send the market higher. The stock could easily rebound 10 points.
Also, next week is the Consumer Electronics Show in Las Vegas, followed by the MacWorld report one week from Monday. Lots of reasons for the stock to rebound without the FED intervening.
If it drops again on Monday, I’m pretty sure I will add to the position.
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down 12% today. Anyone who is in for the volaltility has it now.
Editor: Getting really interesting at this point in time.
Comment by Ruth — 1/23/2008 @ 8:33 am
better than waiting until today. would you hedge by doing a straddle next time?
Editor: I believe my next move with this stock will be to actually buy the stock, and write covered calls. I suspect there is going to be a time of sideways trading before stocks start up again, and the options trade at huge premiums. However, the direct answer to your question- yes- I would try to be on both sides and just capture the volatility.
Comment by Ruth — 1/16/2008 @ 11:31 am
did you sell your calls on the bounce up yesterday?
Editor: Sold all my positions at about $172- terrible trade. Basically, in the last month, I turned $60k in profits into $20k in profits but trying to stretch. That’s the nature of being on the wrong side of option trading. Now, I love the stock tanking, because I am out, and looking for a bottom and a huge 2nd half of ‘08.
Comment by Ruth — 1/16/2008 @ 5:59 am