In just two weeks, we enter the holiday shopping season. Black Friday is coming, and this year is all about consumer technology.
The war has already started between Wal-Mart (WMT:NYSE) and Target (TGT:NYSE), with massive “doorbuster” deals, like Wal-Mart’s 42-inch Emerson 1080p LCD HDTV for $ 398 and Target’s Sony wireless Blu-ray player for $ 99.
These deals are typically kept under wraps until one week before Black Friday, but this year both companies experienced a “leak,” and their ad circulars are touting things like $ 3 appliances and the lowest prices on key electronics like Apple’s (AAPL:NASDAQ) iPad.
As in previous years, all eyes are looking to consumer technology to lift sales this holiday season.
Wal-Mart in particular could benefit from a tech boost, as it’s gained less than 2% in the last 52 weeks.
Consider this from Investopedia.com:
With the Nasdaq now closing in on its pre-Lehman crisis highs, the tech sector in general is getting lots of media play. And rightfully so, if one measures success by market leadership. Thus far this year, tech stocks have led all sectors in gains, with nearly half of the top-10 performing issues in 2010 coming from that group.
And now, with Black Friday looming, the technology sector will be in the limelight.
With the exception of 2009, most tech stocks like Apple, Inc. and Sony Corp. (SNE:NYSE) climb in the second half of November and into December.
Clearly the past five years have been unequally generous to these six companies. But the holiday season seems to bring some uniformity. This means there is a Black Friday trading opportunity in the technology sector.
Of this group, Apple is clearly the most consistent performer, bringing in gains of 13.5%, 8%, 6%, 3%, and -2% between Nov. 14 and Nov. 28 from 2005 through 2009.
Of the rest, Sony and HP offer the chance at significant two-week gains, such as Sony’s 11% and 12.5% gains in 2005 and 2007, and HP’s gain of 16% in 2008… all between Nov. 14 and Nov. 28 — the two weeks leading up to Black Friday (approximately).
All three offer options, though HP and Apple options are significantly more liquid.
Taking the gains from the past five years over the last two weeks of November, we find Apple gains an average 5.7%, HP gains 3.75%, and Sony climbs 1.4%.
That means that by Nov. 26, this year’s Black Friday:
* Apple could move from $ 308.03 to $ 325.59
* HP could climb from $ 42.21 to $ 43.79
* Sony could inch up from $ 32.95 to $ 33.41
These price movement, though not large, are very optionable. And slightly out-of-the-money calls can save you a large amount of cash… Consider the difference between the Apple December 300 calls and the December 310 calls. The Dec. 300 calls, which are in the money, closed at $ 10.30 per contract, while the Dec. 310 calls, which are out of the money, closed at $ 3.95 per contract.
In the money (for call options) means the strike price (in this case 300) is below the market price of the stock. Since Apple closed at $ 308.03, the December 300 calls are in the money. That makes them “safer” than out-of-the-money calls because in-the-money call options give you the right to buy the stock for a lower price than the market.
Out of the money (for call options) means the strike price is above the market price of the stock. The December 310 calls are out of the money. That’s why they’re so much cheaper. In the money calls already have value because you can by the stock under market value.
But judging by the potential gains of Apple, HP and Sony options, slightly out-of-the-money call options could offer a nice ride over the next two weeks.
Black Friday is just around the corner, and we’re seeing huge discounts from department stores, particularly for personal electronics. This push could give these technology stocks a fair amount of momentum heading into December.
Consider taking any gains on Black Friday, because in this still-struggling economy, bad sales could affect share prices very quickly.
