How My Students Made 300% On This Popular Tech Stock

Throughout the course of the past week or so, many of the indices I focus on for my trades all formed solid support levels. For the Nasdaq 100, that level was right around the 14,000 mark. For the S&P 500 and the Russell 2000, those levels were 4,300 and 2,000, respectively.

Typically, these are signs I like to look for before making any trade. In this case, these important levels laid the groundwork for a big winner we recently closed.

Holding these levels signaled to us that if we could break through and trade above these prices, a rally would follow, taking Apple (AAPL) stock with it.

Over the past few days, we saw AAPL forming a key support level around $165, which is a level AAPL has paid attention to for some time, making it what I call a “meaningful” level. This gave me the confidence to create a trade around this area.

Meaningful levels are meaningful for a reason; they’re levels that thousands and thousands of other investors and traders are also watching. As we find these price levels, so do other traders. Once the stock crosses this level and hits our “buy” trigger, it’s also hitting their “buy” triggers, causing a large number of people to make a move on the stock at once, creating a rally.

Let’s dive a bit deeper into the AAPL trade we made. As I mentioned at the top, we started by taking a look at the broader market conditions (all major indices forming and holding meaningful support) and AAPL’s technical picture (trading near its meaningful $165 level). From there, I was able to make a plan for our trade.

• We knew the major indices had formed strong support levels and that a broad-market rally would likely lift all stocks, including AAPL.
• AAPL was trading around $164, just below a meaningful level at $165 that a large number of other traders are also likely watching.
• If AAPL moved above $165, we could see a nice surge toward $170.

Based on this plan, on Wednesday I recommended that my trading students buy the AAPL Mar-4 $167.50 Calls, which were trading around $0.50.

Now, you may be wondering why I chose to recommend the $167.50 strike price, which was out of the money, rather than an in-the-money strike like the $162.50s. Out-of-the-money options are often considered to be higher-risk trades because the underlying stock usually has to make a somewhat significant move before the options have any intrinsic value.

Based on that, it may surprise you to hear that I recommended the $167.50 strike specifically because of its risk/reward profile.

Buying these contracts when we did gave us an excellent risk/reward ratio.

When I recommended the trade, the AAPL Mar-4 $167.50 Calls were trading for only $0.50. Based on my analysis, it was likely that we would see the broader market continue to rally, which would likely push AAPL above $165 — and possibly higher. If AAPL made it all the way up to my $170 price target, the $167.50 calls would be worth at least $2.50… or a potential 400% profit.

In other words, we were risking $0.50 to make a $2.00 profit — a risk/reward ratio of 1-to-4.

I come back to this concept time after time in my live trading classes. If you manage your risk/reward profile the right way, you don’t even have to be that good at picking stocks.

Soon after we bought the calls Wednesday, the market gave us the rally we were hoping for, taking Apple with it. When the market opened on Thursday, AAPL was trading above $168 and our calls had jumped up to $2.00, that right there is a gain of 300% for just a few minutes of work the day before.

We had a number of students book their profits at this level, giving them a nice 300% win.

For some, the trade paid them as much or even more than they make in a day at their normal job. How about that for a side hustle?

We officially closed out of the trade on Thursday when the calls were valued for $1.00, which still gave anyone left in the trade a 100% win.

However, winners like these, if we can get them consistently where students are making 300%, sets us up for a great average risk/reward ratio. Trades where you risk 1 to make 3 or 4 is exactly what we shoot for on services like The Profit Machine.

So if you want to be a part of trades like these, then be sure to sign up for The Profit Machine and join us on next week’s live trading call!

And for a more in-depth breakdown of the trade, just check out the full video of my AAPL analysis below.

Happy trading!