CodyWillard.com

Lessons from Jim Cramer

cody — Sat, 25 Feb 2012 02:02:53 +0000

Here’s the transcript of this week’s chat from my TradingWithCody.com service (not affiliated with Marketwach). See you next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything. Q. Cody, Yahoo and eTrade are both considered by some to be take over plays. Which of the two do you think [...]

Facebook’s nudity guidelines revealed

cody — Fri, 24 Feb 2012 02:02:52 +0000

Did you breathlessly hop out of your bed this morning to check on the latest developments from Greece and the Euro-crisis? No? Me neither. I’m not looking to force anything here, but I am considering adding to my Apollo Group APOL -0.41% put position. Will let you guys know any details if and when I pull [...]

How Apple gets to $1000

cody — Thu, 23 Feb 2012 02:02:44 +0000

It’s an endless source of angst, hope, fear, optimism and fodder for my readers — Apple’s AAPL -0.77% current trading and investment set up. For me, personally, it’s still our biggest position and there’s a whole lot of cross currents around this company and stock right now. First, the good: *Apple’s still one of the [...]

The biggest, baddest bubble of them all waiting to pop

cody — Sat, 18 Feb 2012 01:55:15 +0000

Here’s what I was reading and thinking about this morning when I wasn’t shooting hoops outside in the brisk mountain air. The Biggest, Baddest Bubble of Them All – David Merkel writes: “The biggest bubble, waiting to pop, is that of [I don't want to give away the plot, so click through and read through [...]

Who’s scared now as the market tanks intraday?

cody — Fri, 17 Feb 2012 01:54:39 +0000

This question was just posed in the Daily Chat area on TradingWithCody.com, and I’ve been getting variations of this question all week. Everyone I know and here as well seems to be bullish .. even me. A thought comes to mind if we need to hedge portfolio. I would love to hear what you folks [...]

The Europe crisis jumps the shark

cody — Thu, 16 Feb 2012 01:52:56 +0000

The phrase “jump the shark” comes from a scene in the fifth season premiere episode of the American TV series Happy Days that aired on September 20, 1977. In the episode, the central characters visit Los Angeles, where a water-skiing Fonzie (Henry Winkler), wearing swim trunks and his trademark leather jacket, jumps over a confined shark, answering a [...]

The next Black Swan is coming

cody — Thu, 09 Feb 2012 01:38:23 +0000

Here’s what I was reading and thinking about when I wasn’t cutting wood this morning. CBO Solution to Budget Crisis – Everyone Bend Over! – Bruce’s title says it all. His words, not mine. I might call it “The next Black Swan”. That said, you have to read his column, because his conclusion absolutely blew [...]

Apple’s headed to $1500 and other stock picks for the tech bubble

cody — Wed, 08 Feb 2012 01:37:44 +0000

Cross-posted from TradingWithCody.com, where I post all my trades in real-time (a service not affiliated with Marketwatch). With the Nasdaq now at 11-year highs, highs it hasn’t seen since the good ol’ dot com bubble days of late 2000, it’s time to revisit the question that everybody’s asking once again, “Are we in a new [...]

How to trade this wildly cheap stock with a chart that’s on fire now

cody — Tue, 07 Feb 2012 01:37:37 +0000

A few weeks ago, when the stock was trading at about $18 a share, I wrote a column called, “Seagate: A wildly cheap stock with a chart that’s on fire. First off, I want to thank Robert Marcin, whom you’ve seen me call “The best value investor I know” for tipping me off to the [...]

Another very high-risk earnings trade

cody — Sun, 05 Feb 2012 01:37:10 +0000

Good morning and welcome back to the office. It started out as a slightly higher market and it’s faded into a slightly lower market. I’d like to see a 2-3% pullback to start scaling more aggressively into a net-longer stance than I have right now, and this kind of action can lead us there. Let the pitches come and don’t be in a rush if and when the markets start to crack.

Speaking of pitches, here’s another very high-risk earnings trade: Amazon calls. (Click here to read about how I was wrong about SanDisk’s report last week, but being wrong comes with the territory.) I’m buying some April calls with strike prices above $200 per share.

To review, buying calls means that I’m betting that the stock is going higher because for every call I purchase, it gives me the right to buy 100 shares of the underlying stock for the predetermined strike price. If Amazon is right now at $190 and I pay $5 for one call, that gives me the right to buy 100 shares of Amazon at $205 per share on the third Friday of April. (Options always expire on the third Friday of each month.)

Then if the stock goes up to, say, $210 tomorrow, that call option will be worth probably about $10 to $12 each because they went from being “out of the money” to “in the money” after the stock passed $205. And if the stock goes down tomorrow to, say $170, then those call options will likely be worth about $2 or less because they are so far from being “in the money” since the stock would have to rally from $170 to more than $205 before the third Friday in April for those calls to be worth money before they expire.

The reasoning behind buying AMZN calls today (counterpoints to each reason is in italics and parenthesis):

The stock is still down from $246 where it was last year, and has been hard hit since last quarter. (Of course, it’s also up in nearly a straight line from $160 in the last few weeks.)
Few tech traders I know are willing to buy AMZN ahead of earnings this time because of the big hit they took after last quarter’s report. (But they’re also definitely “bullish” on the stock, even though they won’t put their money where their mouth is.)
The Kindle Fire likely outperformed expectations as much as the iPad did for Apple last quarter. The question is, will the big bump to the revenues that come from selling so many Kindle Fires make analysts and investors happy? (Or will the hit to the gross margins that will come from selling Kindle Fires make analysts and investors wince?)
Earnings estimates from the sell-siders for Amazon this quarter are as disparate and wide-ranging as I’ve ever seen. Some guys expect a loss of more than a quarter per share, while others are looking for nearly 90 cents per share in earnings. The “whisper” number (the number that most of the bulls are expecting to see as we head into the report tonight) is for earnings per share of 20 cents (1 cent ahead of “consensus estimates”). That sure could lead to a big jump if the company delivers on the bottom line despite the big Kindle Fire numbers I’m looking for. (Then again, that would also likely lead to a sharp selloff if the company’s top and bottom lines both come in light.)

I think most analysts know that Amazon’s not concerning itself with trying to appease the sell-side analysts and to hit their estimates in tonight’s quarter. Amazon’s trying to beat Netflix and iTunes five years from now. The more Kindle Fires they sold and the more subscriptions to their Prime service they sold is what I think will catalyze the stock tomorrow. And I’m expecting both of those key metrics to come in much better than expected. So I’m buying Amazon calls even though I know how high risk EVERY earnings trade ALWAYS is.