Jan 14th Week

SPY continue to look fine and the Accum/Dist is hard to argue with.  We have held the gap very well and we looks set to make a move higher.

QQQ is looking to be in fine shape as well, of course not quite as good as SPY but AAPL has been a major lag on the index, but nothing alarming here.

One small concern would be the extremely low level in the VIX, which can at time, historically, mark temporary tops and vice versa in downtrends extreme highs in the VIX can certainly mark bottoms in the market.

AAPL continues to trade sloppy and has no momentum to be long the stock for more than a day trade.  But there are other ways of playing this name especially when you have OPEX upon us so here is my current plan.

Here is AAPL's options chain and the first thing that jumps out to me is the 500 strike in both puts and calls.  Total open interest combined is sitting at 65,607 contracts, which controls roughly 6.5 million shares of stock.  So there is a potential for a close on Friday at or around $500 for the coming week.  Many believe it is market makers manipulating the market and screwing retail that leads to this.  I do not believe in that theory, but the one i do subscribe to leads to the same results.  Anyways on to my trade:

On Friday before the close I entered a 510-505 put spread for $1.20.  Now it is probable for AAPL to be green Monday and Tuesday as happens often and I could potentially see that happening to the 530-540 range before pulling back in for the rest of the week.  

So if that happens I will look to be short a call spread 515-520, 520-525, 530-535 or 540-545 being the ideal one to be short depending on where AAPL goes and I will be looking to sell this at about 1/4 to 1/3 the size of my put spread.  So if I had 10 put spread contracts I would look to sell 2-4 call spread contracts.  I will be looking to sell them in the $2-2.50 range.

If AAPL collapses on Monday or Tuesday I will look to sell a 495-490, 490-485, 485-480 put spread against my put spread in the range of $1.  At that point it probably would not make sense to sell a call spread, but is going to depend on price.

If AAPL is up Monday & Tuesday and we execute the call spread and our plan pans out with AAPL retracing in the days to follow I will again look to sell those same put spreads against my current ones in the range of .50-.70.

That is the current plan and it can change quickly.

GOOG continues to be strong and any dips are being quickly bought.  RSI did slightly curl downwards on Friday, but overall I like this set up through 745 to be cautious for a run to 760ish or 770ish before pausing.  740-750, 745-755,750-760 call spreads all look to be favorites, while looking to sell 765-775 against those later in the week as one possible play or booking profits or leaving it alone.

PCLN is another beta name looking good through 660ish for a run to 680ish.  Same as GOOG 660-670, 665-675, 670-680 call spreads with the last one being my least favorite.

EARNINGS:

Playing earnings is always tricky and of course is risky and some may even say gambling.  So in Order to play them you need the odds in your favorite so lets take a look at a few notables on the schedule... The banks.

With as strong as the banks have been and their historic moves not being dramatic I do not expect drastic moves in any of these names.  The trend is up, but its also been on a large run and profit taking can come even if they beat, which in all likliehood they will, but how they beat is what will be important.  I am going to post bullish plays for GS, C, JPM, & COF.  I know BAC also reports but an $11 bank stock is not an attractive earnings play for me.

GS I like buying the Jan 19th 140 calls & selling 2 times as many Jan 19th 145's for a net debit around .60.  

Profitable with a closing price in GS between 140.61-149.39.

JPM I like buying the Jan 19th 46.50 calls and selling two times as many 47.50 calls for a net debit of around .10, a more conservative play would be to take out the 47.50 and use 48's for a net debit of .30.

Trade is profitable between 46.61-48.39.

C I like buying the Jan 19th 43 calls and selling two times as many 44.50 for a net debit of about .25

Trade is profitable between 43.26-45.74.

COF buying the 62.50 call and selling two times as many 65 calls for about .50 is my least favorite of them all.

Trade is profitable between 63.01-66.99.

If one played each of these their total outlay would be $1.45 total per lot.

So how can we play all of these with some protection just in case the reports are not good enough or if there is just some profit taking well lets look to FAS.  You can add a 133-130 put spread for about .70.  If all plays were total losses I think it is safe to put FAS below 130, which would be a 2.30 profit.  So, if you played 10 lots of each a hedge of 5 lots of FAS would suffice to keep you protected.

EBAY earnings:  I generall position in EBAY with a way to get paid in either direction the 2.50 increments above $50 are a bit annoying, but one could play it by buying a 50 Jan 19th put and selling twice as many 49 puts for a credit of about .15 per lot.

Trade is profitable 47.86-100+

Shippers saw a lot of large call buying in them last week and could really accelerate and make massive runs especially in the smaller cap names such as GNK in the FEB $5 calls.

Last week on Twitter I highlighted XLV FEB 41 calls as being my favorite theme for the week, and I entered at .49 and finished the week at 1.07 for a 116.43% gain.

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