I would do a call spread VS buying AAPL
Buy 10 of the January 19 call options with a strike price of $550 for $18.70 (each 1 = 100 shares of stock) so that costs you $18,700
Sell 10 of the January 19 calls with a strike price of $575 for $11.10 - you collect $11,100.
Net you are out $7,600 - break even is AAPL at $558.
Most you can make is $25K less the $7,600 = $17,600 - but your loss is capped at $7,600.
You pay $60 - $100 in commissions -
Want to reduce the cost - sell a put spread -
Sell 10 of the January 19 puts with a strike price of $500 - collect $17,450
Buy 10 of the January 19 puts - take your pick on how much risk you want - I would buy the $485 strike at $12.63 - pay $12,630
Net you collect about $4,800 (before commission of another $60)
If Apple closes above $500 you keep the $4,800 - your max loss on the put spread would be $15,000 - the $4,850 you collected or about $10K.
In total these trades have a max gain of ~~$22K if AAPL closes above $575
Max loss is ~~ $17,500 if AAPL closes below $485.
Better check my math - because I didn't.
BTW - reason I picked the January 19 date is because AAPL reports earnings on January 22 - I want to be out of this trade before they report. If you like risk and think AAPL will blow earnings away - you could look at the February 16 options.
Last edited by Z71bill; 11-15-2012 at 20:19..