AAPL by Joab

Quote from Tums:

the long 100c acts as a cover for the short 95c.

we get to keep the full credit of $1.40 if AAPL finishes at or below the lower strike of $95 on expiration day.


IF AAPL trades above the lower strike of $95, the 95c becomes ITM, and we have to give back whatever the difference.

The BE point is ~$96.50.
i.e. if AAPL finishes at $96.50 on expiration day, we have to give back the credit of $1.40. We do not make any money, nor lose any.

The maximum risk (i.e. loss) is when AAPL finishes at or above the upper strike of $100 on expiration day. Both 95c and 100c beomes ITM/ATM.
If that happens,
- and if we our stops did not kick in,
- and we are still holding the positions,
our loss will be $3.60.



The profit/loss question is
- will AAPL restest the top at $97 before April 21, 2007 ?
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I'm confused again. You bought a call with strike 100, so if the price at expiration is >100, how is that your max loss?
 
Quote from annaland:

I'm confused again. You bought a call with strike 100, so if the price at expiration is >100, how is that your max loss?
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95/100 = max value on spread of 5.00 - credit of 1.40 = 3.60
 
hey joab, I'm just wondering why you wouldn't just short the stock? If you really believe in this double top don't you think you will see a considerable amount more downside then 1.40?
 
Quote from quin8670:

hey joab, I'm just wondering why you wouldn't just short the stock? If you really believe in this double top don't you think you will see a considerable amount more downside then 1.40?
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I've also been daytrading it all week but that's too difficult to post in the forums.


As previously mentioned it's a time play NOT necessarily a price play.
 
Quote from Joab:

I've also been daytrading it all week but that's too difficult to post in the forums.


As previously mentioned it's a time play NOT necessarily a price play.
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If you're looking for a 'time play', why don't you do a long calendar spread? The short May 100, long Jul 100 could work nicely.
Additionally, you could resell the Jun 100 depending on AAPL's price. This could work well as well with the IV collapse that will kill May's options when earnings is announced. Its much less directional a trade and offers profit opportunities on many angles. In fact, I may take it on Monday.

If earnings are poor, it still works because iphone enthusiasm may still cause a runup despite giving you an opportunity to cover the May calls after selling. And if earnings are great, its still profitable w/ AAPL at or around 100. Another point - the Jul 07s may hold their value nicely despite a May collapse because Jul has its own earnings call.

I have a gut feeling that ipod sales will disappoint, and Mac sales will support. The iphone and iTV sales are key - thus more than anything, a Jun-July runup seems inevitable.
 
Quote from quin8670:

hey joab, I'm just wondering why you wouldn't just short the stock? If you really believe in this double top don't you think you will see a considerable amount more downside then 1.40?
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BCS and short stock are two distinctly different plays, for different purposes and outlooks.

BCS is a limited time, limited risk, limited reward strategy.
The limited risk (in the worst case scenario) is $3.60.
The limited reward (if AAPL goes bankrupt tomorrow) is $1.40.
The RRR is 39% in 23 days

Short stock is an unlimited risk, unlimited reward strategy.
(ok, the reward limit is AAPL -> 0)
I will let you work out your RRR (depends on your buying power) to see if you can better 39% in 23 days.
 
Quote from Tums:

BCS and short stock are two distinctly different plays, for different purposes and outlooks.

BCS is a limited time, limited risk, limited reward strategy.
The limited risk (in the worst case scenario) is $3.60.
The limited reward (if AAPL goes bankrupt tomorrow) is $1.40.
The RRR is 39% in 23 days

Short stock is an unlimited risk, unlimited reward strategy.
(ok, the reward limit is AAPL -> 0)
I will let you work out your RRR (depends on your buying power) to see if you can better 39% in 23 days.
More...

apples to oranges. probabilities determine leverage amounts, thus your return on capital isn't appropriately comparable between an options position versus underlying.

That said, even if you see 39% in 23 days, you likely are committing much less capital to the trade since your probability of return or failure is much higher than comparable move in the underlying.

I'd put 5:1 leverage in AAPL stock much sooner than all my cash in an options position like this, especially a net short limited reward position so close to the current price.
 
rumors are rumors but news is apple will announce the availability of the beatles catalog as soon as tomorrow for sale on itunes.

will create bump of some sort i'm sure.
 
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