Trade Summary: January 5, 2015
January 5, 2015
Trade Rationale
Welcome to 2015! It’s a brand new year with all new opportunities to make money trading options. The market has decided to greet us today with a nice, little selloff. That’s actually good news since our theme for today involves buying three call options. In other words, we’ll get a much better price today/tomorrow morning, than if we made the trades on a big up day.
Lately, we’ve been focused on the plunging price of oil. And for good reason – the price of crude actually dipped below $50 a barrel for the first time since 2009. As I’ve said before, this is ultimately a good thing for the US economy, even if Wall Street doesn’t seem to agree.
Consumers like you and me are going to have more money to spend. In fact, the combination of extra spending money and a slew of new tech products coming out is the basis for this week’s theme. You see, several huge tech companies are releasing new products this year. Moreover, each of these companies is well-positioned for a move higher.
First, we’re going buy calls on none other than Microsoft (MSFT). Yes, MSFT is first a software company (and Windows 10 is due out in the near future). However, the company is underrated as a hardware provider. Don’t forget, MSFT purchased Nokia’s handset business not that long ago. In fact, the company just announced it will be offering a $29 internet-capable phone. That’s easily the cheapest on the market and could create access to a whole new market.
Speaking of big players in tech hardware, we’re also going to grab calls on Intel (INTC). The semiconductor giant hasn’t been an investor favorite in quite a while. However, the company just launched a new flagship chip which is ultra-small. The new chips will allow for super thin laptops, better performance, and longer battery life. I believe INTC’s investment in new semiconductor technology will start to pay off this year.
Finally, we’ll take a bullish position on Facebook (FB). What new tech gadget will the social media giant offer? Remember, FB purchased Oculus, a virtual reality device. A commercial version should launch this year, and could redefine the entire industry. 2015 could be the year when virtual reality technology really goes main stream. And, FB could be leading the way.
Keep reading for the details of each trade.
Trade Details
#1) Buy Microsoft (MSFT) March 20th 46 Calls up to $2.25
This trade profits from a move higher in MSFT. Our first profit point for conservative traders is at $49. For aggressive traders, you can hold up to $51. For risk control, the conservative exit level is $42. $40 is the final exit level for aggressive traders.
#2) Buy Intel (INTC) March 20th 36 Calls up to $1.90
With the INTC trade, we’re also looking for a higher move. Our first exit point for conservative traders is at $38.50. For aggressive traders, you can hold to $40. For risk control, the conservative exit level is $32. And, $30 is the final exit level for aggressive traders.
#3) Buy Facebook (FB) March 20th 82.50 Calls up to $3.00
Finally, we’re looking for a higher move in FB. Because FB options are more expensive, we have to go further out of the money. Our first profit-taking exit point for conservative traders is at $82.50 (but clearly this trade will benefit most from a quick move to this level when time value is still high). For aggressive traders, you can hold up to $85. For risk control, the conservative exit level is $72.50. $70 is the final exit point for aggressive traders.
Category: AOA Trade Summary
