Trade Alert – Tale of two techs: One hyped buy and one hyped trim

Good morning and good week, as it were. Monday morning and we’ve already got a lot of movers and a few trades I want to make here early.

First, Apple. The WSJ joined the chorus of “iPhone 5 sales suck”, with the same verses as everybody else has told us. I’ve been worried more about the weak-handed longs than the fundamentals this quarter but now I think there’s some real worst-case-scenario baked into the stock here at $500 this morning. I’m going to buy a tranche of common stock of AAPL and bid for some more AAPL calls dated out into June with strikes around $580-600. Remember that any options trade is extremely risky and buying such calls as this, with out of the money strikes (meaning the call’s strike price is higher than the stock quote) is even more risky.

Facebook’s continuing to ramp into this mysterious press event tomorrow and at this point, I don’t think there’s much chance that whatever they announce is going to live up to the hype. I’m going to sell a tranche of Facebook calls, leaving me with common and mostly longer-dated call options with strikes about $30 or so that I bought when the stock was in the teens. Yes, in the teens. Here at $32 heading into tomorrow’s call, I want to continue to lock in some of those big gains because it’s always possible that FB sees the teens again of course. Not likely, IMHO, but certainly possible. More likely, I’d expect to see it trade in the high $20s and on up towards $40 before the year is over.

And our having Flipped It and having bought FIO on the downgrade last week in sympathy with EMC that I didn’t think made much sense is rewarded this morning with a big upgrade and price target bump at JPM. JPM’s analyst notes they sent out to clients this morning included a downgrade of EMC along with that FIO upgrade, which I do think makes much more sense. I’m not trimming any of the FIO common or calls yet.

More to come in a bit. I’m gonna get a second cup o’ joe.

 

Comments

  1. Mark Handley says:

    Cody, not sure I follow your reasoning on APPL this morning. You say “…but now I think there’s some real worst-case-scenario baked into the stock here at $500 this morning”… yet you are buying common stock and calls here (bullish).

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