Wednesday, March 14, 2012

Heres why i dont use credit CALL spreads $AAPL

3apr, recent price action warrants a repost of this:

i know what your thinking... its gone up too far too fast, its going to reverse soon, its a blowout top, its a crowded trade, etc.. lots of legit reasons why apple should go down.. so then youre wondering how to play that without actually shorting the stock, then you think youll just sell some credit call spreads, collect the premium and laugh all the way to the bank, thanking the market for inflating the premiums at these levels. heres why i dont:

First reason i dont sell credit call spreads is my history.. i have had a poor record picking tops. for every one i get right i seem to get one wrong and spend months rolling it to get my money with Mastercard now. so it has become a coin record with credit put spreads is 85%+ the choice is easy. do what works, dont do what doesnt work.

   Second, i really dont like the feeling of being in a position to be rooting for a stock to not go up. just doesnt fit with the way i look at things.
   Third, using $AAPL as example..the stock is hitting high after high..a big part of my method is to base entries on technical analysis and select short strikes against other TA levels..moving averages/support lines/trend lines/fibs. with call spreads there is no overhead resistence..yeah, no shit, its at a high, nothing but air that takes away a big part of my risk management.
  Now you may be skillfull and profitable with credit call spreads but i have to go with what has worked for me and what hasnt worked for me. i too think apple will pull back..whether thats this week or next month it doesnt matter, there is no hurry, another setup will form and at that point i will be able to make an entry.

what does jennifer love hewitt have to do with this post....nothing