Thursday, March 15, 2012

comments on those $AAPL credit put spreads for new entry

15mar - below is the trade i closed yesterday. so as you can see the apr510/515 credit put spread closed for .50... now just the next day the stock is about 15 points higher and this spread can likely be sold for .55-.60 ... since i dont speak in "greeks" mentioned online and on cnbc..the volitity (IV) of the options have increased with all the giddyness...usually as the stock goes up the pricing of these spreads goes this case the increase in IV has negated that...same thing happens if there is some event in future that is getting priced in.. as in earnings. which is why i always say i dont sell credit spreads where earnings are before opex. the rise in IV negates the time decay. selling spreads because you have an opinion on what earnings will do is something else and is up to you and your research/thesis.
   so bottom line with IV up on this spread if stock pulls back 10-15 bucks this spread will also increase more than usual and may allow me to get back into this position 20 bucks higher than i did last time.. have alert set for 575.

14mar- closed the credit put spreads i entered 2days ago. remember my rule of if the spread gets 40-50% of the max profit in 2-3 days i take profits. Good chance stock will reverse and can enter spread again.

Sell Apr510/515 credit put spreads at $1.03 x 11 = $1133 credit
bought back today at .50 x 11 = $550
profit on 2 day trade = $583 for 51% of max profit