Don the party hats and pull out the pom-poms — the Nasdaq Composite finally surpassed its previous record closing price of 5,048 from March 2000.
‘Tis a feat that seemed mere fantasy during the depths of the dot-com crash, and yet, here we are.
Yesterday’s close of 5,056 was just enough to vault the tech-heavy Nasdaq Index into record territory, scoring yet another milestone for our aging bull market.
Since most active traders use the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) as a proxy for the Nasdaq Index, we’ll use the QQQ for today’s commentary. Bear in mind the QQQ ETF tracks the top 100 stocks in the Nasdaq Composite, affectionately called the Nasdaq-100, so its performance varies slightly from the Index.
While the broader Nasdaq Composite was able to power higher on Thursday and close outside of its recent range, the QQQ’s breakout attempt was stymied by a mean bout of profit-taking into the close.
We will find out soon enough if yesterday’s resistance breach was a head fake or a precursor of things to come.
With the QQQ ETF already up a quick 3.3% in the past week, perhaps a short breather is in order before the long-awaited breakout takes center stage. Regardless, recent price action looks positive giving the bulls the upper hand in tech land.
Play the Tech Boom with QQQ Call Options
Options are being offered on the cheap these days in QQQ. Blame it on depressed demand, a lack of fireworks on the horizon, or maybe just the general apathy pervading our go-nowhere market this year.
Implied volatility sits at the lowly 17th percentile, suggesting that a long option play is the way to go for those looking for tech stocks to build on their recent record breaker.
Gunslingers can buy the Jun $109 calls for $2.50. The risk is limited to the initial $250 cost while the reward is limited.
Those with a more moderate temperament might consider buying the June $109/$113 call spread for $1.84 instead. The risk is limited to the initial $184 cost and will be lost if QQQ sits below $109 at expiration.
The maximum reward is limited to the distance between strikes minus the net debit, or $2.16, and will be captured if QQQ can rise above $113.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
