I grabbed 21 options of Jan 13 $600 for $4.60 today. Do you think this could be a good play before X Mas? I am really liking the March or even Feb options because I think that is when the stock will really pop if it doesnt turn around before then. I think the lowest we see is $480 and the highest we can see before this options exp is $630. What yalls thoughts?
Depending on your other positions with apple that trade may be a live by the sword die by the sword. The value of those 21 contracts may skyrocket, and they may dump. So long as you are fully aware of those dropping by 50-70% in 2-5 days then i'd rock on with the trade and take the gamble. To hedge you can either sell the Jan 605 or 610 or higher against and pick up some premium.
Or you can buy some December Puts to hedge against neartime downside risk. In a down market the December Puts, 525 or 520, will gain in value faster than a Jan 600c loses in value. So you can by 5 Dec puts for ~4-5k and if the market goes down your optoins position will pick up value with the puts and lose value with the jan calls. With delta's considered, the Dec puts (5 of em) will roughly cover price drop of 20 Jan 600 calls but overall you'd be better served in up market. If the market goes below 500 hang on to the puts and sell em as soon as market corrects.
Other thing you can do is get out of the 21 Jan contracts on open tommorow for what may be a considerable loss though relatively small loss compared to what can happen if the stock gets raped tommorow.
Any strategy is good so long as you fully aware of how quickly you can be wiped out if you are positioned for only one direction on a stock that has a habit of making big swings. There were numerous guys who bought the Jan 700's when the stock was at 600 or so a few months back who are now basically zero'd.
Low end is about right. The stock put in four lows in last month, 515, 519, 521 and 525. The last one was set in pm, and it hasn't set a low like that in almost a year. If any of these are broken with heavy volume that is it for the stock for a while and we go sub-500 for a bit. Depending on what the overall markets do. I'd watch the futures like a hawk.
Only buy weekly options on FRIDAYS. The premiums disappear... buy in both directions, calls and puts. I usually buy them at $10 above and below the current share price and as long as the stock runs one way or the other, serious $$ can be made. I have made in excess of 500% every friday with exception of a few weeks ago where the stock didn't run very much in ANY direction on that friday and i lost a boatload of cash... but generally speaking, the stock skyrockets or sinks heavily on fridays. You can lose your $$ on one of directions and then gain that and then some in the other.
I will assume that you bought Calls. Here's the problem, it may be a while before AAPL will have it's run. During this period of time your calls will drop rapidly because you only have a little more than a month of time value. Good idea to hedge your position by selling 605 calls. You can always buy back the calls when AAPL starts taking off.
There are many advantages to going with a bull-spread (what you're position wold be if you sold the 605's), the biggest being that you can "plant your flag" at a much lower strike because the premium you receive for the short side of the spread covers a lot of your long exposure.
I went for the Feb. $525 x $530 and paid about $2.70. My only bet is that AAPL will be above $530 come Feb. expiration. If I'm correct, then I see a roughly 80% return, which is A-Otay in my book.
Going with the spread in this fashion also cushions you against time-value decay since the short part of your spread will decay faster than your long side.
Best wishes, hopefully we are both right in our price predictions!
Sentiment: Strong Buy
what a waste of money? didn't you think one bit about ER? maximum premium is carried and held until after the ER, so if you buy any expiration after ER then you don't loose much on premium, granted that the stock doesn't just sink like a rock. Now roll over these options to any date after Jan 21st, 2013 with a bounce.