Trade Alert: Nasdaq 3K Magnet and Buying some APOL puts

Boy that Nasdaq wants to get to 3k, doesn’t it? It’s just 1% away, and it’s just an arbitrary number, but it sure seems like a magnet for now. Trying to game the next 1% move in an index full of thousands of stocks isn’t a good idea though, so let’s not try.

This morning, I’ve gone ahead and added to my Apollo puts. I bought APOL puts that expire out in May of this year with strike prices anywhere below $50 a share. Buying a put is a bet that the stock will go down because it’s a contract that guarantees me the right to sell 100 shares of APOL at whatever the strike price is, say, $50 in this case. So for every 1 APOL May $50 put contract with a price of $2 costs me $200 in capital and gives me the right to sell 100 shares of APOL at $50 at any time between now and the third Friday of May. If the stock were to drop to $40, I’d be able to sell these puts for $10 each, for a $800 gain on each contract vs the $200 I spent on each contract. If the stock were to stay above $50 a share, the puts would expire worthless because there’s no sense in me trying to exercise the right to sell APOL at $50 when it’s above that price in the markets anyway, meaning I could get more by just going out and selling the shares above the $50 strike price. And all this will play out before the third Friday in May when these put contracts expire.

To read the full analysis and rationale behind the Apollo short read this New trade: Flunk this for-profit educator.

No other moves so far this morning. Back in a bit.