Hey Guys,

I think that today and maybe tomorrow will be the lowest aapl price we
will see before the iphone launch.

Anyway, I had established debit spread contracts. Here is what I have
done:

I have bought 650 contracts of June 105 call
I have sold 650 contracts of June 110 call
NET DEBIT $4.00

If the price of aapl will hold $110 and above by June OE, it means I
will make $1 on every $4 I have invested, which is a 25% return.

I established this position on Tuesday, but now you can get this
position for a $3.40 spread. I have invested $260,000 in order to make
$65K.

I love doing ITM debit spreads, as they are a safe strategy with great
probability of a 25% return per month.

Now, if the stock goes down to $109 on the day of expiration of June
contracts, I will break even, anything below that will hurt me.

I have been trading aapl for more than 3 years now and I know the
patterns of this stock. The chances of seeing AAPL below $110 on June
15th is VERY LOW.

If you trade options, lets exchange some ideas here.

Regards,

Lev

thanks for sharing your strategy :)

i absolutely agree and am happy with the odds.  I personally think
that AAPL will close below $110 at end of June with less than 1 in 10
chance, and with a 25% payoff with that chance, my expected payoff is
2.5% return.

but i'd say an expected value of 2.5% return is a bit too low for a
260k investment, for me anyways.  so i'll probably be doing just that
but with 2% of the amount you've invested in :p

If there are *ANY* problem or persistent negative rumor leading into
the iPhone launch, you will lose $260,000, 100% in 15 trading days.

I would normally call that a stupid gamble, but since this is a public
forum, I'll just say it is too risky.  And please don't ever use the
'invest' to refer to such a trade.  It is speculation at best.

In any event, good luck!

Debit spreads? Sounds familiar. But you didn't post a link to your
subscription site? Disappointing....

I could be wrong - in which case I'll not provide past posts with
those links so conspicuously missing. But I will hold to my thought
that you are spamming, trying to take advantage of new members.
Hopefully I'm wrong....

Peace.

I actually think Lev's play is a pretty reasonable one, if he strongly
believes that Apple will stay above $110 and he has the bankroll.  I
was considering something similar with about 5% of my portfolio.  Lev,
you have $5 million to work with?

dnl, as for your calculation of a return of 2.5%, I'm just not sure
where you're getting that.  According to your estimate that there's a
10% chance of AAPL being below $110, he has a 90% chance of making a
25% return (in less than a month).  And he has a 10% chance of making
less than that, all the way down to -100%.  Sticking with your
estimates, even if it was a 10% chance of a -100% return, I believe
he's left with a 12.5% expected return (paid $4/share; expected value
= 0.9 * $5 + 0.1 * $0 = $4.5; $4.5/$4 = 112.5%)... again, in less than
a month.

If I'm messing something up here, let me know.

Jon

hi jon :)

the part i think you've 'messed up' is that you haven't taken into
account of the initial cost. yes there's a 0.9 chance for him to make
$5, but also remember there's a 0.1 chance for him to LOSE $4, but
you've attached $0 instead of -$4 with that probability ;)

although i must say we've grossly simplified this calculation.  do
remember that break even point (according to him, i can't be bothered
to look up the actual prices :p) is at $109, and at $108 he loses $1,
at $107 he loses $2 etc.  so us assuming that pay off is actually
either only $5 or -$4 has actually understated the actual payoff.  if
we do it 'properly' and attach probabilities to every single cent
going from $105 to $109, i suspect that the expected payoff should be
more around 4-5%.

upon reading your post again you HAVE actually taken account of the
-100% loss, but you haven't plugged that figure into the actual
equation :)

lol i can't tell u how many times i've done that during my actuarial
papers.  the concept is there, the logic is there, but i've always
somehow let my numbers say something otherwise

AAPL has no chance of being below $110 at June 15th unless iphone is
delayed. If the stock drops to $109 in a week or so, I will buy back
my spread and roll back one strike below.

Follow up is very important and you have to manage your risk at all
times.

@eric & dnl & dave:

You guys really nailed this one:  dnl actually taking the risk of the
trade losing $$$ into the ROI and eric pointing out that it is more of
a gamble than an "investment".

Starting with any assumption that "XYZ stock can't go below ABC price"
is a dangerously blind method of investing.  Quantifying the risk of
an investment (as dnl did) is the only way to make good investment
decisions.  I've certainly made some bad decisions over the many
decades by ignoring the improbable.  Nothing is impossible, and at
some point even the improbable will sneak up on you and wipe you right
out!

And Dave:  I think you nailed this one 2.  I smell a familiar fish.

Best regards to all,
Mike

You guys are right. If you have traded long enough you know it is easy
to be wrong. I had that happen to me a few years ago on Nokia. Biggest
phone maker in the world - can't go down. Stock went from 22 to 11. Be
careful. There is always somebody with an opposite agenda trying to
hurt the stock.

Hey mark,

I took a bath on NOK at the same price (22 => 11)!  Ungreat minds
think alike (well ungreat in my case anyway).  F was another "winner"
of mine when it "couldn't go any lower".

Best Regards and GL,
Mike

markaufi...@bellsouth.net schrieb:
 Be

WELL SAID

At least I sold my F at 13.50. But I watched it, unbelivingly, go down
from high 20's after they spun offf Visteon, which thank God I sold at
16. Do you like Apple here in the short term or do you think all good
news is in the stock for awhile. Frankly I thought Apple on last
earnings would be at 130 by now. Serious because many stocks will go
30 % higher on great news. F & GM could be great stocks if they just
built (VERY) fuel efficent cars - but you got oil men in the WH so
that's like a dog chasing its tail.

I AM VERY NEW TO THIS...PLEASE EXPLAIN IN LAYMAN's HOW THIS WORKS.
THANKS.

I have bought 650 contracts of June 105 call
I have sold 650 contracts of June 110 call
NET DEBIT $4.00
If the price of aapl will hold $110 and above by June OE, it means I
will make $1 on every $4 I have invested, which is a 25% return.
I established this position on Tuesday, but now you can get this
position for a $3.40 spread. I have invested $260,000 in order to
make
$65K.

1 contract = 100 underlying stocks.
june 105 call = call option that expires in june 07 at strike price of
105
OE = option expiry = expiry date

now all you need is google. read what options are, i've already
explained the rest.

http://finance.google.com/group/google.finance.22144/browse_thread/th...