Options Action Recap: Getting Bullish on Apple and Bank of America
Time to get bullish? The "Options Action" traders sure seemed to think so. After all, on Friday’s show, they explained why they expect two very different stocks to go higher — Apple and Bank of America.
Let’s start with the bullish call on Apple ahead of the release of the iPhone 5.
Although, to be more specific, RiskReversal.com’s Dan Nathan did not present a full-throated case for why the stock will go higher. In fact, Nathan thinks that Apple’s much anticipated announcement on Wednesday will disappoint. However, he is still enthusiastic about the long-term prospects for the stock and the potential release of the iPad mini. (Read More: Is This What the iPad Mini Will Look Like?)
So to capture his thesis that Apple will see weakness in the near-term, but will perform well in the longer-term, Nathan suggested buying a calendar call spread.
Specifically, Nathan suggested buying the October/September 700-strike calendar call spread for $10.50. His trade and breakdown are below.
DAN’S APPLE TRADE
• SELL SEPT. 700-STRIKE CALL FOR $6.10
• BUY OCT 700-STRIKE CALL FOR $16.60
HOW DAN’S APPLE TRADE MAKES MONEY
• PROFITS ABOVE $710.50 ON OCTOBER EXPIRATION
• LOSSES BELOW $710.50 ON OCTOBER EXPIRATION
On to Bank of America . BofA has seen massive call buying in the past week. And although CRT Capital’s Mike Khouw is cautious on the name, he did recommend a bullish trade that defined his risk. Khouw suggested buying the October 9/10 call spread for a quarter. His trade and breakdown:
MIKE’S BANK OF AMERICA TRADE
• BUY THE OCT-9 STRIKE CALL FOR $0.30
• SELL THE OCT 10-STRIKE CALL FOR $0.05
HOW MIKE’S BANK OF AMERICA TRADE MAKES MONEY
• PROFITS CAPPED AT $10.00
• PROFITS BETWEEN $9.25 - $10.00
• LOSSES BELOW $9.25
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