AAPL Options Strategy

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    Posted: 29 March 2012 01:53 AM #106

    Why, Rudyo?  I made the trade, not you! raspberry LOL

    Call me a little impatient I suppose.  Inertia will prevail for now.  It’s just that I’m puzzling over the risk/reward and appreciation scenarios.  I’m temporarily more bullish than usual and for me that means risk bucket reevaluation.  For example I sold my Oct 490/550 and May 440/460s or something a while ago and haven’t looked back.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 29 March 2012 02:02 AM #107

    mad - No. smile

    If memory serves, from my normalized-number-for-easier-maths-not-to-scale 10k I booked 11.5k from the short call and “left” 3k in the negative equity credit BCS.  So, it’s the 3k that could turn into up to 10k.  The 1.5k in proceeds has nothing to do with the BCS.  I think.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 29 March 2012 02:12 AM #108

    The grass is ALWAYS greener on the other side of the fence…right?

    It rarely is. 

    A deep ITM spread is like a golden goose. As much of a sure thing as there is.  Once I get one, deep ITM, I embrace it and cherish it and ride it for “ALL THE GAIN” TM

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    Jan13 $600 or BUST! LEAP Spread Trial: Bought Jan13 590/600 BCS @1.45 on 9-21-2011
    Max Profit: 689%  Current Price:
    4.50 +210% as of 5-2-2012 - Woohoo! Finally Green!

         
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    Posted: 29 March 2012 02:15 AM #109

    I don’t.  :D

    I’m sure one day, I might regret it.  But not this minute.  wink  By foregoing the re-investment opportunity (“re-trading” just sounds…weird), I would’ve given up a TON of gains.  I’ve gotten pretty nimble, though, so I can and will switch back to shares or cash on a moment’s notice.

    Bear in mind, the Jan 13 credit BCS isn’t in the money.  Yet.

    Signature

    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 29 March 2012 02:22 AM #110

    Rudyo - 29 March 2012 05:12 AM

    The grass is ALWAYS greener on the other side of the fence…right?

    It rarely is. 

    A deep ITM spread is like a golden goose. As much of a sure thing as there is.  Once I get one, deep ITM, I embrace it and cherish it and ride it for “ALL THE GAIN” TM

    I normally hit the eject button when I have achieved 80 to 90% of the max gain, but to each his/her own.  FWIW, I cherish all gains, big or small!!!

         
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    Posted: 29 March 2012 08:51 AM #111

    madmaxroi - 29 March 2012 04:18 AM

    iPad, in the intraday thread you were providing a roll-up ( is it breakfast already?) and roll-out suggestion for my July 450/460 BCS.  There is currently a $21,000 paper gain and a maximum gain of $30,000.  I would normally wait until 80% of the gain is realized before changing anything.  Do you agree or no?

    In any case, are you suggesting I enter another multiple-leg option order such as BTC July 460 and say STO July 550 or what?  If I were to do that, I would be closing the short leg at a loss and reselling a higher strike short leg for less premium, or a net debit.

    Would it make more sense just to close out the existing spread entirely and re-enter a brand new higher strike BCS?

    1) 10K of unrealized gain in the existing spread.  If you did not already own this spread, would you BTO this position today at this price with this same amount of capital that you currently have invested in it?  If yes, stay put.  If no, STC.

    2) No-no-no on rolling only the short leg up.  Yes-yes-yes on closing the intact spread and opening a new spread with higher strikes (rolling up) and/or later expiration (rolling out).

    3) Big congrats on the gains!!! smile

         
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    Posted: 29 March 2012 09:47 AM #112

    Mav - 29 March 2012 05:02 AM

    mad - No. smile

    If memory serves, from my normalized-number-for-easier-maths-not-to-scale 10k I booked 11.5k from the short call and “left” 3k in the negative equity credit BCS.  So, it’s the 3k that could turn into up to 10k.  The 1.5k in proceeds has nothing to do with the BCS.  I think.

    Mav, you are very right that I often Trade “More” Scared than you!  That said (compliment alert!): you have continually impressed me in 2012 with your risk management (IMHO new-and-improved thought process) and open-mindedness to learning new trading approaches, whether bull call spreads (intact, intentionally legged, conditionally legged, etc.) or TA.  Big, heartfelt kudos to you on that!!! smile

    So here is how I think of that legged credit spread.  Rudyo is correct in that it translates to taking part of your profits from the long call and using those proceeds to open a spread.  To me, it’s a form of risk management.  Analogous to: with every paycheck, you put a portion in checking and a portion in savings.  Using your numbers, your paycheck was 4.5K.  You put 1.5K in your checking account—to add to your play money trading capital!—and you put 3K in a savings account that will theoretically return 10K in less than a year without you lifting a finger!

    Sure, if you think you can grow that 3K into more than 10k by compounding profit on profit, that is valid.  My questions: why bother and why risk it?  Bird in hand versus two in the bush.  You added 1.5K to your trading capital.  Consider rinsing and repeating.  Last time, you did it with 10k.  Go do it again with 11.5K.  IMHO, this is how wealth is built.  With every profit, you take some to add to your trading allowance, and you invest the rest.  In this manner, your trading funds your investments…you’re simultaneously growing both…and one has the other’s back, so to speak. smile

    Also, I always try to remind myself it doesn’t have to be all or nothing, whether that means scaling into and out of positions, or in your case:, the choice isn’t selling the 650/670 today versus JAN’13.  Consider letting it ripen.  Let it go ITM.  See where your trading capital is by then. smile

         
  • Posted: 29 March 2012 11:09 AM #113

    Nevyn - 29 March 2012 04:13 AM

    TFSA are great. Mine has grown from 15k to six figures with aapl options. My strategy is has been to play the earnings by buying itm quarterly options.

    That is fantastic Nevyn! Mine has actually lost money as I’ve been trying to stay conservative.

    Can you please further elaborate on your strategy? TIA

         
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    Posted: 29 March 2012 11:42 AM #114

    Cashed out my BCS weeklies for 96% of the maximum spread profit.

    Feeling a bit adventurous, I decided to try a bull put credit spread as a learning experience.

    Visualizing the BPS was headache inducing, but I think I got it down:

    BTO 2x AAPL 30Mar12(W) 615 Put
    STO 2x AAPL 30Mar12(W) 620 Put

    Credit/Max Gain = $600 ($3.00/spread)
    Max loss = $400

    Scenarios

    A) AAPL is $620+ and both put contracts expire worthless. I keep the full credit.

    B) AAPL is below $615, then the max loss of $400 occurs.

    C) AAPL is between $615-620. Let’s say AAPL is $618. Then the $615 put will be worthless, but the $620 put will have $2 of intrinsic value.
    In this case, the $400 loss would be offset by the $600 credit, for a $200 profit.

    Is there any advantage to a BPS over a BCS besides getting the maximum potential gain upfront and not having to do anything on expiry if price is above the strikes of both legs? Also, I think that if there is enough OI, perhaps someone who buys the contract would not have sufficient cash or margin to exercise the put contract (assuming they don’t own shares). Potential plus?

    One of these weeks I’ll have to try a butterfly lol smile

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    Fortes fortuna adiuvat.

         
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    Posted: 29 March 2012 01:09 PM #115

    Well thanks iPad.  In trading I’m always learning as I go.  I just have to in these crazy times.

    The free-but-not-really credit BCS spread Rudyo despises so much LOL which I legged into to protect some gain/slow down the game/buy time to figure out what the heck I’m gonna do estimated taxes-wise (good problem to have I guess) is at a normalized, not-to-scale 3.5k at present, roughly.  So, there’s still 6.5k to go.  No reason to be impatient just yet. smile

    [ Edited: 29 March 2012 01:11 PM by Mav ]

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 29 March 2012 01:29 PM #116

    This dip is a bit scary, but it let me complete the bottom portion of my condor for this week.  sold the 620/625 top end call spread tuesday and just finished selling the 595/600 put spread.  Total credit is $2.98, achieved if we stick between 600 and 620 by tomorrow’s end. Max loss is $2.02 for below 595 or above 625.  now we wait!

         
  • Posted: 29 March 2012 09:37 PM #117

    Hi,
    This is my first option reaching expiration.
    Please bear with my newbie questions. 

    I have 10 Mar30 BCS 605/610 bought for $2.2, and I didn’t close it out today when AAPL was above 610. My thinking was that we will probably hit 610 tomorrow and I can get a value closer to the $5 spread when I close it out tomorrow. In retrospect I think I made a mistake. 

    Should I have closed it out when the short leg is so close to the money?

    I also have a 10 Mar30 BCS 590/595 that I am planning to let expire tomorrow because I think both legs will be in the money at expiration.  Is that OK, or should I close it out?

    Hoping for close over 610 tomorrow.

    [ Edited: 29 March 2012 09:40 PM by oncdoc ]      
  • Posted: 29 March 2012 10:07 PM #118

    oncdoc - 30 March 2012 12:37 AM

    Hi,
    This is my first option reaching expiration.
    Please bear with my newbie questions. 

    I have 10 Mar30 BCS 605/610 bought for $2.2, and I didn’t close it out today when AAPL was above 610. My thinking was that we will probably hit 610 tomorrow and I can get a value closer to the $5 spread when I close it out tomorrow. In retrospect I think I made a mistake. 

    Should I have closed it out when the short leg is so close to the money?

    I also have a 10 Mar30 BCS 590/595 that I am planning to let expire tomorrow because I think both legs will be in the money at expiration.  Is that OK, or should I close it out?

    Hoping for close over 610 tomorrow.

    More than likely greed is going to cost you on the 605/610’s.  You should have sold when we were above 615.  There was very little additional profit to gain by holding spreads with the short leg so close to the money.  We may open below 605 tomorrow.  You other spread may be ok, but, if we lose 595 look out below.  I would watch very closely, or take profits at the open,  consider rolling up and out if there is more of a dip

         
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    Posted: 29 March 2012 10:21 PM #119

    Short-dated options are particularly dangerous and your relatively (on an absolute scale) small wager shows your full awareness of this.

    Your risk barometer is your first and often best indicator of when to sell.  I’ve subsumed that once you have a sense of self as a trader, you as a matter of course define goals for each and every trade (that’s built into the barometer).

    For the 605/610, it’ll be fairly straightforward.  The higher half of that BCS in terms of AAPL price is good.  The lower half, not so much.  It’s up to you to decide when to exit or at what point you want to try to exit.  For example, if you’re OK with making a pre-market “call”, of course you have limit orders available - I find that GTC/G60 order terms help your order remain in play the entire trading day, but your brokerage’s rules may vary.

    Rudyo and others will have personal experience about a BCS that could expire fully in the money.

    [ Edited: 29 March 2012 10:26 PM by Mav ]

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 29 March 2012 10:21 PM #120

    Jcaron - 30 March 2012 01:07 AM

    More than likely greed is going to cost you on the 605/610’s.  You should have sold when we were above 615.  There was very little additional profit to gain by holding spreads with the short leg so close to the money.  We may open below 605 tomorrow.  You other spread may be ok, but, if we lose 595 look out below.  I would watch very closely, or take profits at the open,  consider rolling up and out if there is more of a dip

    What do you think about APR1 610/615?

    [ Edited: 30 March 2012 12:00 AM by lovemyipad ]