How to recoup your trading losses after AAPL earnings
Today is a grim day for Apple Inc. (NASDAQ:AAPL) investors.
The stock is down $28 as I’m writing this and a lot of people are
wondering what to do next.
In this article I’m going to share with you some strategies you
can do to recoup your trading losses and even make some extra coin in the process.
The chart on the right shows AAPL’s gap down and the huge drop
in implied volatility after the announcement.
When to buy, when to sell and when to wait
To everything… there is a season. The Byrds said it best when they covered this song in 1965 and I think it turns true again today. Investors who study AAPL seasonality know that May, June, August and November are amongst the worst performing months for AAPL. These are the months to scale back and possibly even buy some protection or sell some covered calls while you wait for AAPL to grow again.
Understanding AAPL’s seasonality is just one part to a bigger puzzle, especially when trading options (which I know most people prefer because of the enormous amount of leverage you can get with very little capital, however it is important to remember… leverage cuts both ways)
When to Buy
October through March is usually the big bull season for the market and for AAPL, this is the best time to really press your longs. I like to use the heikin ashi chart on ThinkOrSwim combined with the cross over of the 5 & 13 DEMA (moving averages) as a trigger to initiate bullish positions. This works great for swing trading pay day cycles.
To learn more about using these triggers make sure you check out a recent webinar I did
The confession: Last week I made an earnings call for AAPL to have another blow away earnings due to the growing market overseas and wow! I couldn’t of been more off base. Even know I was wrong about the announcement, the bigger picture was that - I was on the sidelines.
Trading and investing is a patience play. There are times to press, times to sell and times where waiting on the sidelines is the best bet. Yesterday I got a huge amount of emails and messages from people wondering why I wasn’t holding my calls over earnings.
Here was one of my responses:
“Thanks for your message and an excellent question. As I stated earlier, AAPL will probably beat expectations however a beat in earnings doesn’t always mean a gap up. I think AAPL is long term bullish and I will get long again, just not over the announcement.
Yes, you are right, between now and Jan expiration for 2013, we are likely to see more bullish action.
I made some serious cash in the last few weeks on AAPL and it’s all nestled safely in my account. Over the years trading AAPL, my batting average is ridiculously high, this is because I swing trade high probability technical setups. Sure I’ve missed some nice gaps on earnings, but I’ve also avoided some big drops.
Hope this helps,
Strategies for making More Money
1. Use seasonality and triggers. Understanding when to press and when to wait combined with entry triggers is going to increase your probability of success and batting average.
2. Use options. Strategies like the covered call can increase your cash flow if your sitting on AAPL shares. However, it is equally important to time your covered call selling just like you would a normal swing trade. Sure, selling covered calls does reduce your upside, that’s why it’s important to time it – however the big picture here is that it gives you some downside buffer. A good friend of mine who has a near perfect trading record once said “Options were designed to help manage risk, not speculate.”
3. Getting educated is the single best thing you can do to make more money in the markets. There are two ways to do this. First way is through time and experience, this is also the hardest and most painful way because it often comes from losing trades and wondering – “how can I avoid this pain in the future”. Second way is to learn from people who are more successful then you are. This is like the apprenticeship program humans have been using for thousands of years to learn new trades.
4. Expand your physiological capital. Having the right mind set as a trader is almost more important then knowing a million trading strategies. Some books that have helped me in the past are “The Disciplined Trader” by Mark Douglas and “The secrets of the Millionaire Mind” by T. Harv Eker. These books will support you in developing a winning mind set.
Also, make sure you check out “How To Handle Your Emotions While Trading” by my friend Eric.
in the World!