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Become a Great Options Trader
Home › Forums › Swing Trades › Volatility Buy in AAPL
Here is my trade setup for this:
The Bollinger Bands are really compressed. AAPL really hasn’t done anything over the past month, and has been in a range that is getting tighter and tighter. We will probably see volatility expansion soon.
Simply put, the April options are getting cheap. The 95 straddle is going for just under 8 bucks.
Think about this… what are the odds we’ll see 8 points in AAPL between now and April opex? That’s a lot of time, and there’s a lot of catalysts out in the market that could make it happen.
So I’m bullish realized volatility and bullish implied volatility. Straddles make sense here.
Here’s the trade:
Buy to Open AAPL Apr 95 Straddle @7.20 or lower
As expected, AAPL saw volatility expansion. It’s now up 4 days in a row and is breaking above a key level of resistance.
There’s a couple ways to manage the trade.
First, you can bail completely. Straddle profits can be incredibly short lived, especially if the stock sees any kind of reversion.
Second, you can scale and trail. This is where you exit out half of the trade and then bail on the rest if the stock loses its trendline… or puts in a higher low. This is the technique I’ll be using and will sell some here at 9.60 and if the stock loses 101.25 then I’ll bail.
Third… and I don’t think this is appropriate for this trade but I’ll discuss it so you can learn… you could sell calls against your straddle position. This would reduce the risk in your trade in exchange for capping off your gains. You could also short stock here to scalp the gamma in the trade. Refer to the video training about gamma scalping to see what I mean.