AAPL

[mosaic 0]

Hi Kim,

 

AAPL seems like the stock could be volatile with an upside bias given the battle with Greenlight.  Do you have any thoughts on how to best structure an options trade to capture potential volatility with a bias to the upside over the short and interim 2-6 month time frame?  

 

Thanks,

[Marco 221]

if you want to be long vol and long delta you want to buy either a Call or a CallSpread (bit less exposure to vol) the further out of the money you go with either the higher the stock has to go for you to break even and the shorter the time frame (expiry) you pick the quicker this needs to happen for you to make money on this, And loss potential is 100% if the stock stays below the strike you own (call or CS) at expiry

[K. Miller 3]

You could buy something like the Oct 470 call, and either do a call spread (sell the 480 or other otm strike) to reduce cost, or do Kim's rent a option, sell near term otm options against the call.  (sell the Mar 1 465 or 470 call) and roll those forward each week.  The risk to the first is the stock never moves, and the options expire worthless, costing your premium.  In the case of the second is a sudden move past your strike, making the option your short increase in value far faster than your long dated option, as well as requiring more capital.

[Kim 7,497]

I usually like the call spread better than a straight call. It gives you more flexibility, and depending how you structure it, the gains can still be very substantial. For example, with the stock around 445, you can do 440/450 call spread for around $5. You don't lose money if the stock stays unchanged, and you make ~100% if it goes above $450 at expiration. Much less capital and loser breakeven than straight call. Of course if the stock makes a quick and sharp move, the call will be better, but everything has its tradeoff.

 

Another option is a bullish calendar. The idea is to buy OTM call (for example, June 470) and sell the same strike against it every month.

[Turtle 1]

if you are bullish AAPL, I would buy an ITM long dated CALL when the price drops down and/or volatility goes down. I would check IV and then estimate what I would be willing to pay for the ITM. I would then setup a limit order and wait...once i am long I would then sell SHORT DATED OTM CALLS against my long call position to reduce my cost base

The big premise here is that you are bullish on APPLE but you have no clue as to when the market will recognize that the stock is undervalued. This may be a more expensive trade (ITM CALLs cost more) and might require holding on a position for a few weeks or months but i feel it is safer....my 2 cents....

Edited February 22, 2013 by ECA

[jfouche 12]

A lot of eyes on this one ... and a lot of public $ is piling into the near term calls at 500 and higher. I agree a diagonal long position that lets you write those pipe-dream calls to the public is probably the best way to go. Vol is down for you today, too. 

 

From a contrarian perspective, I will say I have seen a lot of unsophisticated coworkers signing up with brokers and asking me about AAPL calls...

[mosaic 0]

thanks everyone for their thoughtful ideas!

[Geos 0]

I'd be really careful. Some of the technical analysis I'm seeing is not pretty in the near term.