I really like that you are risking only 5% on this trade. It is a lot safer way to get rich if probability is truly on your side. Keep up the good trades! Your making me want to lay low on the forex spot market to put some time into some options strategies i have been wanting to try.
Funny, I made the decision to move away from spot FX to move to the options.... Just emptied most of my FX accounts.... Do lots of reading and learning now and will be funding my options account this week. Will start slower and more conservative then Mike, but I do enjoy reading the posts here.. I am learning lots. Thanks
There are things you said about this trade that are unrealistic, given the spread involved and volatility of AAPL. Closing bid price was $5.60. So if your "stop loss" is $5.50, you sold right ? Otherwise, your real stop loss is the entire position. Then you are risking 18% of your portfolio on an option expiring in 2 days.
Once again I would have gone with the QQQ 1-strike OTM puts instead of the AAPL 1-strike OTM puts for reasons stated earlier. In this case the QQQ Mar 2012 66.00 puts, todays range was 0.15 - 0.40, bid/ask spread 1 or 2 cents. In the previous trade the AAPL 1-strike ITM 550 puts declined from $9.90 to $0.24 (40x), the QQQ 1-strike ITM 65 puts declined from $0.58 to $0.06 (10x) during the same time period. The loss was much smaller in percentage terms, plus you can scale back the risk in dollar terms with the QQQ options, or risk as much as you want. If AAPL moves in your direction the profit potential is also greater in percentage terms with the QQQ options instead of the AAPL options.
LoL, I joined the crowd at the close yesterday.....closed out the 585 puts 6.00, and bought 3 march 590 calls at 7.75. Took a loss on those puts too...
Just realized how tuned in I've been to this AAPL trade.....I figure, if it traded above 590 again yesterday, then I'll grab them calls because we'll probably see 600 by Friday.....AAPL is up 40% in 8 weeks, way too fast for any stock, especially for the largest cap....I mean this thing is now 1.5 times the size of XOM. Just incredible here, of course $32B in net income with 80% growth will do that to you I guess.
I´m running some stock prices and wondering if those with experience like Ryan might have an idea? If a stock price increases 1%, how much does an ATM option increase?
I knew those traders were going to push AAPL to $600. AAPL was about to get crush yesterday going from 595 to 575 in 20 minutes, then gets push back to 590 to close out. It was as if the traders wanted to see 600 before letting the correction occur....I think today, all the pig traders are getting into it and we'll see a surge in the morning hours before the slaughter starts. At 600, all the big guys will have to look at locking in some gains.
From experience, most earning trades move by 10%, with exception of the few large slow growth caps like MSFT and INTC. After so many trades this year, I've started to notice that ATM options priced 5% above the current underlying price is considered fair value. Anything above that and the options start to feel overpriced, even though the underlying has an average of 15% pops/drops post earnings. Anything below the 5% mark, and I start to feel like they should be candidates for strangles/straddles (mostly played during expiration week). As for how much option prices increase, I'd say use the delta to give you the best estimate.