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Old 02-28-2013, 16:39   #16
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Join Date: Feb 2012
Location: Los Angeles, Man, Los Angeles
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Originally Posted by Z71bill View Post
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.
So, what were the final numbers for the loss? How far did you have to spread and how deep did you get hammered with your AAPL play?

AAPL is trading around $441.

Yep, the stock market is amazing. AAPL from $700 to $441 in about six months.

But gold is so dangerous to own. At least that is what many here have told me.

Sic semper evello mortem Tyrannis!
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