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  Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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arpangup...@gmail.com  
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(1 user)  More options Jan 29 2008, 11:59 pm
From: ArpanGup...@gmail.com
Date: Tue, 29 Jan 2008 20:59:37 -0800 (PST)
Local: Tues, Jan 29 2008 11:59 pm
Subject: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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I am bullish on AAPL, but not bullish on the market.  Who knows what's
going to happen.  If this is like 2002 it could be bouncing 10% right
now just to sell off another 20% by next summer.  Either way, I'm
happy making 100% returns in a fairly low risk play I believe.

Many people think...no...no...no...no...no I'm not going to deal with
naked options, but hear me out.

Sell January 2009 Naked Puts on AAPL Strike price 110.  The premium is
13$.  What does this mean?
Basically you will buy Apple from anyone for $110 til January
2009....so your net cost is an Apple share for $97.  Shoot, I'd be
comfortable holding on to shares at that price if a nuclear bomb hit
Cupertino.

The margin requirement for such a trade is that you hold 10% of the
strike price in cash in your account.  So basically, for every $1100
cash you have in your account, you can sell 1 contract for a $13
premium....so you will take in $1300.  Now of course you do not have
the right to the premium until the contract expires, or you buy back
the puts.

This strategy lets you make money in two ways.....
1) Hold to maturity and make you 118% as long as Apple does not close
below 110 in January 2009.
2) If Apple shoots up to say 150 in the next month, these will be
worth about $7 each....so buy them back and make your 50% profit in
one month...or however long it takes.

I did this last week.  I sold 10 conracts of July 2008 for $8.5 each
strike price 110.  I bought them back for $7.05 when Apple went to
136.  I sold March 125 for $7.5 each and bought them back for $5.  But
I am trying to say what I think a good conservative strategy would be.

Think about it, let me know what you think....maybe I'm nuts.


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davi...@mac.com  
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(2 users)  More options Jan 30 2008, 12:26 am
From: davi...@mac.com
Date: Tue, 29 Jan 2008 21:26:36 -0800 (PST)
Local: Wed, Jan 30 2008 12:26 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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Selling puts is a good move if you're bullish...I would recommend a)
go for short timeframes (ie. Jan 09 is not a great idea, go for apr or
jul), and b) use a put spread, or more succinctly, use some of the
cash you get from selling a put to buy a lower price, further out of
the money put to protect your downside.

I had a $180/$160 Put spread (sell the $180, buy the $160) on for this
past January which netted me a $9.50 credit in October.  As we blew
through $180 and onto $200, I could have closed out the position for
around $2 in Dec but passed.  I was thinking there was no WAY we would
ever see my approx. $171 break even when we were sitting above $190.
Well, you know the story--we were sitting under the $160 level and I
was looking at a max loss on the trade.  Man was I glad to have the
downside $160 puts as this thing tanked.  As we went under $150, I was
relatively calm thinking I'm already at max loss (thanks to my
spread), so I'll stick it out and see if I can do better before I
exit.  I was able to get out at an approx. $7 debit--I think it was
expiration day, I sold into the am strength.  If I hadn't had the
downside protection at $160 (ie. naked at $180), I would have panicked
at $150 and sold, taking a much bigger loss than I ended up with on
this trade.  Use spreads, especially when betting against downward
movement.  Downdrafts tend to be quicker and more severe, so don't
leave your butt swinging in the wind...protect it.  Word to the wise.


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davi...@mac.com  
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(1 user)  More options Jan 30 2008, 12:28 am
From: davi...@mac.com
Date: Tue, 29 Jan 2008 21:28:54 -0800 (PST)
Local: Wed, Jan 30 2008 12:28 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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correction--it was a $17 debit on my exit...($7.50 loss on the trade).

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Rey  
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 More options Jan 30 2008, 12:33 am
From: Rey <r.ma...@comcast.net>
Date: Tue, 29 Jan 2008 21:33:59 -0800 (PST)
Local: Wed, Jan 30 2008 12:33 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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davi...@mac.com wrote:
> correction--it was a $17 debit on my exit...($7.50 loss on the trade).

Gentlemen,
Those were two great posts.  Thanks for educating us.

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davi...@mac.com  
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 More options Jan 30 2008, 12:41 am
From: davi...@mac.com
Date: Tue, 29 Jan 2008 21:41:51 -0800 (PST)
Local: Wed, Jan 30 2008 12:41 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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Rey--I learned a lot of what I know about option trading hanging
around in here, believe it or not.  There is about a 1% treasure rate
in here if you're willing to dig...
Rey wrote:
> davi...@mac.com wrote:
> > correction--it was a $17 debit on my exit...($7.50 loss on the trade).

> Gentlemen,
> Those were two great posts.  Thanks for educating us.


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peregrinepha...@gmail.com  
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 More options Jan 30 2008, 12:55 am
From: peregrinepha...@gmail.com
Date: Tue, 29 Jan 2008 21:55:21 -0800 (PST)
Local: Wed, Jan 30 2008 12:55 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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That's a very bullish way to invest as well.  As long as AAPL is above
$110 in JAN 17, 09 then your good but if for any reason it does not
then you would have to buy back your PUT at a much higher premium and
maybe lose money if it becomes more then what you sold it for or
you'll have to pony up $110,000.00 to buy the 1000 in your 10
contracts.

Either way it's bullish and I'm long on AAPL so it should definitely
help your trade.

ArpanGup...@gmail.com wrote:
> I am bullish on AAPL, but not bullish on the market.  Who knows what's
> going to happen.  If this is like 2002 it could be bouncing 10% right
> now just to sell off another 20% by next summer.  Either way, I'm
> happy making 100% returns in a fairly low risk play I believe.

> Many people think...no...no...no...no...no I'm not going to deal with
> naked options, but hear me out.

> Sell January 2009 Naked Puts on AAPL Strike price 110.  The premium is
> 13$.  What does this mean?
> Basically you will buy Apple from anyone for $110 til January
> 2009....so your net cost is an Apple share for $97.  Shoot, I'd be
> comfortable holding on to shares at that price if a nuclear bomb hit
> Cupertino.

> The margin requirement for such a trade is that you hold 10% of the
> strike price in cash in your account.  So basically, for every $1100
> cash you have in your account, you can sell 1 contract for a $13
> premium....so you will take in $1300.  Now of course you do not have
> the right to the premium until the contract expires, or you buy back
> the puts.

> This strategy lets you make money in two ways.....
> 1) Hold to maturity and make you 118% as long as Apple does not close
> below 110 in January 2009.
> 2) If Apple shoots up to say 150 in the next month, these will be
> worth about $7 each....so buy them back and make your 50% profit in
> one month...or however long it takes.

> I did this last week.  I sold 10 conracts of July 2008 for $8.5 each
> strike price 110.  I bought them back for $7.05 when Apple went to
> 136.  I sold March 125 for $7.5 each and bought them back for $5.  But
> I am trying to say what I think a good conservative strategy would be.

> Think about it, let me know what you think....maybe I'm nuts.


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peregrinepha...@gmail.com  
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 More options Jan 30 2008, 12:58 am
From: peregrinepha...@gmail.com
Date: Tue, 29 Jan 2008 21:58:45 -0800 (PST)
Local: Wed, Jan 30 2008 12:58 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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Nice write up.  I think I will try that one out soon.
davi...@mac.com wrote:
> Selling puts is a good move if you're bullish...I would recommend a)
> go for short timeframes (ie. Jan 09 is not a great idea, go for apr or
> jul), and b) use a put spread, or more succinctly, use some of the
> cash you get from selling a put to buy a lower price, further out of
> the money put to protect your downside.

> I had a $180/$160 Put spread (sell the $180, buy the $160) on for this
> past January which netted me a $9.50 credit in October.  As we blew
> through $180 and onto $200, I could have closed out the position for
> around $2 in Dec but passed.  I was thinking there was no WAY we would
> ever see my approx. $171 break even when we were sitting above $190.
> Well, you know the story--we were sitting under the $160 level and I
> was looking at a max loss on the trade.  Man was I glad to have the
> downside $160 puts as this thing tanked.  As we went under $150, I was
> relatively calm thinking I'm already at max loss (thanks to my
> spread), so I'll stick it out and see if I can do better before I
> exit.  I was able to get out at an approx. $7 debit--I think it was
> expiration day, I sold into the am strength.  If I hadn't had the
> downside protection at $160 (ie. naked at $180), I would have panicked
> at $150 and sold, taking a much bigger loss than I ended up with on
> this trade.  Use spreads, especially when betting against downward
> movement.  Downdrafts tend to be quicker and more severe, so don't
> leave your butt swinging in the wind...protect it.  Word to the wise.


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arpangup...@gmail.com  
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 More options Jan 30 2008, 10:56 am
From: ArpanGup...@gmail.com
Date: Wed, 30 Jan 2008 07:56:23 -0800 (PST)
Local: Wed, Jan 30 2008 10:56 am
Subject: Re: Conservative options strategy on AAPL, if you are okay with 118% returns by January 2009....better than owning the stock.
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Oh I agree it is definitely a bullish position, and I would never in
my right mind sell naked puts on a stock I was unwilling to own.  BUT
in this case my point is that even if I ahave to pny up the $97 one
year from now to buy AAPL I feel it is a great long term
investment.....but thats a huge if, I doubt the stock trades at a PE
of 15 (which is what APPL PE would be if they post in line with
expectations the next 12 months and it traded at $97)

The problem with the put spread in this place, is that you have to put
up a lot more of your own cash.  Say $7000 a spread to hopefully make
$3000, so your returns are 35%, and if the stock does trade at 89
somehow, you are at a loss.

Now I never, (no offense intended), would have placed the put spread
at 180 to 160 even with Apple at 200, cuz although I am bullish, at
200 this stock was crazy.  I bought at 120 the day the Iphones started
selling in June last year, sold at 140, bought back at 120, sold at
160 and saw it ride to 200, but never bought back in.  On a valuation
standpoint, I can easily see the stock drop from the PE of 57 (which
is what it was at 200 a share) to 140-150....and its PE was still 40.

The reason I feel this is conservative is becasue of the valuations we
speak of now....are much lower, and more bullish, even with a market
downturn, PE ratios on tech stocks rarely, EVER go to 15-16....but of
course, crazier things have happened, so of course this is BY NO MEANS
a guarantee.

peregrinepha...@gmail.com wrote:
> Nice write up.  I think I will try that one out soon.

> davi...@mac.com wrote:
> > Selling puts is a good move if you're bullish...I would recommend a)
> > go for short timeframes (ie. Jan 09 is not a great idea, go for apr or
> > jul), and b) use a put spread, or more succinctly, use some of the
> > cash you get from selling a put to buy a lower price, further out of
> > the money put to protect your downside.

> > I had a $180/$160 Put spread (sell the $180, buy the $160) on for this
> > past January which netted me a $9.50 credit in October.  As we blew
> > through $180 and onto $200, I could have closed out the position for
> > around $2 in Dec but passed.  I was thinking there was no WAY we would
> > ever see my approx. $171 break even when we were sitting above $190.
> > Well, you know the story--we were sitting under the $160 level and I
> > was looking at a max loss on the trade.  Man was I glad to have the
> > downside $160 puts as this thing tanked.  As we went under $150, I was
> > relatively calm thinking I'm already at max loss (thanks to my
> > spread), so I'll stick it out and see if I can do better before I
> > exit.  I was able to get out at an approx. $7 debit--I think it was
> > expiration day, I sold into the am strength.  If I hadn't had the
> > downside protection at $160 (ie. naked at $180), I would have panicked
> > at $150 and sold, taking a much bigger loss than I ended up with on
> > this trade.  Use spreads, especially when betting against downward
> > movement.  Downdrafts tend to be quicker and more severe, so don't
> > leave your butt swinging in the wind...protect it.  Word to the wise.


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