I am planning to purchase 10 calls for Feb (a few today and balance over few days in this week) to play earnings.
I plan to buy all OTM calls for Feb expiry.
I am hoping if AAPL jumps $70-$100, I can make some good money.
Hedge with out of the money puts with closer expiration. Aim to break even or slight loss if heads down, but nice profit if signifcant move up. Worst case is no significant move and both expire worthless, which seems likely.
I am buying the weekly ITM QQQ's during the week of AAPL's earnings...not as much leverage but don't have to deal with that bloated premium in the AAPL options...I have been successful each earnings with a spread..
Ask yourself how much money you expect to make and then realize there is an associated risk and a very real risk that if you are setting yourself up to make a lot, you are also setting yourself up to lose a lot (everything you put into the play)
Seen a few guys do this and just get destroyed, one strong down day can crush your position given we are so close to expiry in Feb and there is NO GUARUNTEE appl corrects by that time.
Much better off owning and holding the stock. But if you must do options, ask yourself why you need to make quick buck and answer with what happens to 99% of those schemes, and then if you still must buy options then the earliest expiration you should consider is Jan 14, preferably Jan 15. By then appl will certainly have china and this dip will be seen for the buying oppurtunity it is. We could very well be deep into 2013 with apple trading low 500's.... if you can't figure that scenario (macro concerns in addition to aapl concerns) then you should not be playing options.
I bought 1 january 19th $575 call..I'm confident we will see a bounce towards that range before earnings..This stock has been beaten down enough and I dont see it breaking $500..
Sentiment: Strong Buy
I am sitting on 50 feb 600 calls that I bought for $10. If we get above 600 before earning I should at least 4x my money and will probably get out. I would prefer to sell prior to earnings rather than risk getting burned.
Are you ok financially if those 50 contracts are worth zero come feb?
Trade those into Feb 500's or 525's and then figure the payout for aapl at 550, 575, 600, 625, 650, 675, 700 and then figure out likelyhood of trading at 625+ from here. Then ask yourself what the same money does invested in shares instead of options at those price points.
The big money doesn't sell these options for nothing, they can crush you in a number of ways and one of the best ways is kill your premium by driving down implied volitity where you find that stock is up 10$ and your option value stayed same or possibly went negative. OTM optoins are VERY risky bets.
I hope you really get that those Feb 600's are much more likely to expire at zero than be worth even a dollar.
Don't be too far out because the big boys will be ready to eat up anyone thats not in the money after earnings. To be safe, by 3 calls closer in. More like $20 OTM. I am playing weekly calls leading to earnings just in case. I am hoping apple will be $610 by Jan 18th. The Bulls will be coming in this week.
Sentiment: Strong Sell