Monday, March 19, 2012

closing $AAPL trade today from 21mar

3apr - closed this position today, with 18days to go to opex was right at 75% of max profit, if stock pulls back from all the hype i will look to reenter.

Sell Apr 560/565 credit put spreads at 1.10 x 7 = $770 credit
bought back at .27 x 7 = $1.89
Profit = $581

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original posts
21mar - using the post below as a reference.. i just missed an entry yesterday, my AON order for the strikes i was looking at was on the ask then apple went up from today keeping under that 570 i mentioned below, i entered:

Sell Apr 560/565 credit put spreads at 1.10 x 7 = $770 credit

went with a half size order since i am not getting it at a support level to shoot against.
Spread shows a 77% probability of max profit using Trademonster Analyse tab at time of entry. The Apr570 short call i also have within diagonal is worth about $4700 right now so that is my hedge. I may be adding a few more lots to this position on a pullback.

follow me on twitter @mark_lexus for more free setups and my trades
19mar - if you just reviewed this same strategy with CF from a few months ago, i am now considering the same thing with AAPL The CF Add Credit Put Spread to ITM diagonal post

A strategy i sometimes use when i have a diagonal spread where the short call is in-the-money (ITM).. i have AAPL diagonals which is a Deep-in-the-money (DITM) 2014 call and a Apr short 570 call. The objective with entering a diagonal is that the DITM call is way cheaper than 100 shares of stock and that i want to collect the premium of the short call.. essentially just like a covered call.. to be able to get some upside participation with the DITM call and collect the short call premium. if youve followed my trades you will remember that the Apr 570 short call was rolled from the Mar550 for zero. so , on to the trade..

That Apr570 short call is worth about $4400. so if stock closes at opex at 570 or below i keep that $4400, and i keep the long DITM call and will sell another short call for May. remember, i will be keeping that 2014 long call regardless of what the day to day movement of the stock is so i ignore that LEAP, i have 2 years to keep selling short calls or doing ratio spreads, or whatever. like i said, the short 570 call is worth about $4400 today, that gives me a $4400 worth of downside protection (hedge if you want to call it that). now i would look at adding credit put spreads to this "position" . objective is to get strikes UNDER that short call strike of 570.. at or below 570.. point being is if stock goes down i want all of that $4400 short call premium to offset any loss i may have with the credit put spreads. Using this thought process you could go as high as the Apr565/570 credit put spreads. now that is an possible option with a juicy premium. Best case for me would be for that 570 level to line up with some type of support level.. nothing really there, small gap fill. The level that jumps out at me is the previous breakout level near 550. might get some support there. Even though i can go as high as 565/570 i still want the credit put spread to adher to my other rules.. the probability of max profit goal and lining up with some type of support level. that brings me to being at/below the 550 level so a 545/550 spread is first one i will look at. its probability was 75% of max profit when i looked earlier today.

This "setup" is noticably different that my previous setup..different levels. Let me again stress this one is ONLY IF YOU ALREADY HAVE A DIAGONAL SPREAD. ideally where short call is already ITM because stock took off. Again, i am ignoring what happens to the value of the DITM 2014 call since i will hold that anway. heres what happens with the "position":

1. Stock stays above 570 at opex. the credit put spreads expire at max profit. The short calls will get rolled to the next month, i will pick a strike where i will either roll up for no cost or for a credit.
2. Stock between 550 - 570. credit put spreads expire at max profit. Short call expires worthless and i keep the $4400 and sell another short call for next month.
3. Stock below 545 at opex. Credit put spreads will get rolled down and out to next month just like i would do with any spreads where stock moved against me. Short call expires worthless, i keep the $4400 and apply that to any debit i need to roll the puts. oh, and resell another short call, bringing in more premium, which i can also apply to the put roll

2 out of 3 clear cut profitable scenarios. the key is for you to have the same thought process i do about that LEAP. i bought it to hold to 2014, i didnt buy it to flip after aaple moves 20bucks or drops 20bucks. if stock takes off i will just make less.. really hard to lose money with diagonals when you use LEAPs that far out. so like my buddy @traderDr once said..heads i make money, tails i just make less money.

i will be pricing out this strategy tomorrow (20 mar).. note: a sudden selloff will be ideal to get in on this