AAPL Bull Put Credit Spread
April 30, 2008 by Daniel Beatty
Looking at placing a Bull Put Credit Spread below 160on Apple (AAPL). A May 150/155 for more than .30.
AAPL is peaking out at resistance of 180, MACD and Slow Stochs are still bullish, and there is a support at 160. At .30 the trade will net a 6% gain as long as AAPL does not drop below 160 in the next two weeks. It is a more risking credit spread than what I normally suggest but still worth a look.
To place the trade I would wait a little in the morning and see how the market and this stock plays out. I would be looking for a drop which may increase volatility, which in turn will raise the premium values and the put prices making it easier to gain a little bit more on the credit say around .40. However if the market really decides to make a nose dive then follow the first rule of option playing - do not go against the market.
Other Recent Opinion on AAPL…
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[...] clipped from creditoptionspreads.com [...]
Hi,
I have really enjoyed reading the insights in your blog. I have just started trading credit spreads, and really like the fact that the underlying can move against you a little and you still make money.
I have stumbled upon a “good” problem. In the case above - I am bullish AAPL. I also have a Bull Put Spread on AAPL. However it has moved so that I have only got a small amount left in the spread. I still see AAPL moving up.
What are the best adjustments to capture any further move? I have been considering:
a) buying back the initial spread for a small debit and selling a further credit spread.
b) buying a very OTM put as protection and selling another credit spread.
c) keeping the same spread.
Any hints/advice would be greatly appreciated.
Matt
Matt,
You can do any of those. It is more of what you are comfortable with. For my trading I have found it useful when doing adjustments to look at each trade as a new trade.
For example, I examine the stock and trade as a whole new trade. Is it still sound and logical and fit my trading parameters to make a new trade? Acting as if I did not have the old trade at all. IF I find that it is good to place a trade at a higher price point then I usually close the old trade and place a new spread. Taking the profits from the old and making an entirely new trade. I may on occasion just roll up my sold option leaving the bought option at the same strike lowering my commissions but taking on more capital risk. I only do this if I am fairly certain the stock will not break the new support/resistance level, such as in a large gain or drop in one day.
SO I guess what I am telling you is that if there is only a little left to go on the credit spread you are holding, why hold the risk of losing the capital for a mere few bucks more? Just close the trade and be happy with your profit. If the stock still warrants a credit spread make a new trade. For me it may be more in commissions but my peace of mind is worth it.
Dan