Trade Summary: March 16, 2015
March 16, 2015
Trade Rationale
Although there’s been plenty of economic and geopolitical news to follow in the month of March, one of the most watched events so far has been the launch of the Apple Watch. Apple (AAPL) made a splash with a worldwide broadcast of its watch-launching conference.
Of course, there are many naysayers who feel the Apple Watch is going to be a bust. It’s too expensive (it is pretty expensive). It doesn’t have enough battery life. It does the same thing as your iPhone. And, just about every other reason out there why it’s going to fail.
One thing I’ve learned over the years is to not doubt Apple. The marketing machine that is AAPL can pretty much guarantee the success of any product. Keep in mind, plenty of people doubted the iPod, iPhone, and iPad as well.
Contrary to popular opinion, I think the watch will do quite well. It won’t just be a hit for consumers, but Apple’s suppliers as well… and even some competitors.
First off, we’ll go with calls on Micron Technology (MU). Micron has been one of the leading memory chip suppliers to AAPL for some time now. It stands to reason the company will also make chips for the Apple Watch. MU is also one of the few suppliers trading under its 200-day moving average.
Another supplier I like is InvenSense (INVN). Most people aren’t aware INVN even exists, much less supplies AAPL. But, that’s good news for us. The company produces the gyroscopes which enable motion tracking in iPhones. Presumably, they’ll be making similar components for the Apple Watch.
Finally, we’re going to go long on Tiffany (TIF). Why TIF? This one is based on the “high tide lifts all boats” theory. I believe the Apple Watch will stoke demand for high-end watches. If people start wearing watches again, it will benefit all different kinds of watch sellers, especially high-end retailers like TIF.
Trade Details
#1) Buy Micron Technologies (MU) July 18th 30 Calls up to $2.00
For this trade, we’re looking for an upward move in MU. Our first profit point for conservative traders is at $33. For aggressive traders, you can hold up to $36. For risk control, the conservative exit level is $26. $24 is the final exit level for aggressive traders.
#2) Buy InvenSense (INVN) June 20th 17 Calls up to $2.00
With this trade, we’re also looking for an upward move. Our first exit point for conservative traders is at $19.50. For aggressive traders, you can hold to $22. For risk control, the conservative exit level is $14. And, $13 is the final exit level for aggressive traders.
#3) Buy Tiffany (TIF) May 16th 90 Calls up to $2.30
Finally, we’re looking for a higher move in TIF. Our first profit-taking exit point for conservative traders is at $93. For aggressive traders, you can hold to $97. For risk control, the conservative exit level is $82.50. $80 is the final exit point for aggressive traders.
Category: AOA Trade Summary
