Home › Forums › Swing Trades › Oversold Signal In AAPL
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January 7, 2016 at 11:14 am #4608Steven PlaceKeymaster
This one is not the easiest trade, because AAPL is not in an uptrend anymore.
Nevertheless… the stock has dropped 19% in a 20 day period. This is something that doesn’t happen very often and the odds of the same rate of change to continue is quite low.
Here’s the trade:
Sell to Open AAPL Feb 90/85 Bull Put Spread @.90
Close at 0.25
Add at 1.30
Add at 1.70
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You must be logged in to view attached files.January 26, 2016 at 11:33 am #4649Steven PlaceKeymasterAAPL is coming into earnings tonight, here are some of my notes on the trade right now.
If you’re in the AAPL spread, you should only have 1/3 size on right now. If you managed to add and scale out during the selloff and bounce last week, then you’ve already taken some profits off the table.
On top of that, the current spread is profitable, not massively so, but it’s got a decent buffer.
Now here’s a look at AAPL earnings reactions:
AAPL on average tends to move 5% after earnings. With the stock trading at 99, that means the expected downside is 4 points lower at 95.
The worst move it’s seen was around 8%, which puts the downside expectation around 91. Both of these levels are currently above the short strike of the option spread we have on.
Given the fact that the trade only has 1/3 size on and has a decent buffer relative to past volatility, I’m OK with holding this through earnings.
Now if AAPL manages to gap down I will close the Feb spread and roll it down and out to some March spreads.
Odds are with many of these high beta tech stocks that have sold off aggressively, bad news is already baked into the company. For example, since the last earnings event AAPL is already off 20%. I’m assuming if there are garbage numbers that come out or maybe margins are getting squeezed then that could be viewed as *bad* … yet if the stock is already off 20% from last earnings some of the bad news may already be priced into the stock.
That’s what I’m seeing right now.
January 30, 2016 at 10:35 pm #4673Chris ParkerParticipantI am just getting started and want to make sure I am understanding the strategy.
Sell to Open AAPL Feb 90/85 Bull Put Spread @.90
Close at 0.25
Add at 1.30
Add at 1.70
from the trade the idea is sell the feb90 put, buy the feb85 put at a net of +.90 on the spread.
then if the net drops to .25 we close out or when the net increases to 1.30 we add to our position and add again if the net cont. to go to 1.70Then if aapl does get our strike price then roll them down and out (which would likely be at a loss (which the buffer is the initial +.90 that we started.
Why did we target 85/90 to start? was it because it was outside of the 5-8% that aapl has shown to drop? was there a delta target?
Thanks for any and all help,
ChrisFebruary 5, 2016 at 11:32 am #4687Steven PlaceKeymasterGoing to close the trade here. If AAPL gets oversold again I’ll do the same trade but out in March options.
Buy to close AAPL feb 90/85 put spread @0.42
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