Home › Forums › Proactive Trade Setups › Vol Buy in AAPL
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July 29, 2016 at 8:43 am #6587Steven PlaceKeymaster
Normally into an earnings event, option premiums are bid higher because of the volatility risk.
This quarter, AAPL options didn’t even budge.
And after earnings, the VIX for AAPL came down into 19. These are not levels that should be touched.
The best way I see to play this is to buy some volatility, using the pivot levels we’ve seen over the past few months.
What I’m looking at is the Sep 95/110 strangle. So buying the Sep 110 call and buying the Sep 95 put. Current value is around 1.30, and I think you can get it down to 1.15.
Breakevens are 93.67 and 111.35. Here’s where it is on a chart… and the second red dotted line is where the options expire.
I think that’s good risk/reward. We’ll be headed into some Fed news before then, and the natural volatility of the stock can get us to either level pretty quickly.
If you’re worried about theta risk… well much of the premium will stay “stubborn” because the vol is already so low. It’s a cheap, low risk bet with better odds than you may think.
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You must be logged in to view attached files.August 2, 2016 at 11:30 am #6626Steven PlaceKeymasterOk we got a little reversion in AAPL so this price is still good:
IncomeLab Order Ticket Type Asset Duration Strike C/P BTO AAPL 16 SEP 16 110 Call BTO AAPL 16 SEP 16 95 Put Total Debit: 1.3 We’re not looking for a homerun here. Scale out half at 1.70 and then scale out the rest on a double.
August 8, 2016 at 11:41 am #6684Steven PlaceKeymasterTaking somem profits here… closing half size
IncomeLab Order Ticket Type Asset Duration Strike C/P STC AAPL 16 SEP 16 110 Call STC AAPL 16 SEP 16 95 Put Total Credit: 2.05 August 10, 2016 at 9:39 am #6695Steven PlaceKeymasterI’m taking the rest off here because I’m switching to a different strategy in just a second. I will continue that trade in this thread.
IncomeLab Order Ticket Type Asset Duration Strike C/P STC AAPL 16 SEP 16 110 Call STC AAPL 16 SEP 16 95 Put Total Credit: 2.10 August 11, 2016 at 10:09 am #6717Steven PlaceKeymasterMoving this back to the Proactive section as a new setup is coming through.
So AAPL has seen upside volatility expansion, running from 103 all the way to 108. Yet the IMPLIED volatility is still quite low, down at 20%.
If we get one more push up to 110, then we will enter the Sep/Oct 110 put calendar. This is a scaling calendar setup so I’ll add if/when AAPL tags 112.50.
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