Buy an Apple Put today based on a technical reversal
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I’m buying an Apple June 100 Put today.
Here’s why.
Based on the chart below, I believe Apple is due for a small correction/consolidation back towards its trendline. There was one reversal based on RSI and the upward trend and I believe we are in the early stages of another reversal. I don’t have full confirmation from RSI yet, but it is forming.
Click on the charts to expand.
Volatility is at a low for Apple right now. If Apple makes a move to the downside, volatility should increase increasing the bang for the buck on my purchased option. I could buy a straddle, but I’m fairly confident Apple is moving to the downside. As such I will be taking a directional position. My put started moving downwards and I believe it is in stable territory now. It is hovering around $1.95/$2.00 right now offering an opportunity to get in right now. If Apple makes its move today, you may be able to cash out today with a 35% gain if you sell at intraday high of $2.70(as of noon). Of course if Apple makes a real strong move you are looking at 75-100%+ gains. I will post an update at end of trading today on what happened.
Let’s make some fast money!
*** End of Trading Update: My option closed down .15 so I lost $15/contract so far. At points through the day I was up $15/contract. I will be holding the contract through Friday. If I don’t see my downward move by then I’ll cut my losses (if any).
8 Comments on this post
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john anthony said:
Why wouldn’t you consider the gap up in late April to be a high volume break out?
May 8th, 2007 at 11:21 pm -
Q at $1 Million to My Name said:
I have never traded options - can you recommend any online resources where I could learn the ins and outs of options?
May 9th, 2007 at 12:47 pm -
Dax Desai said:
Go to http://www.888options.com
It is an excellent non-profit resource to learn more about options. Click on “Online Classes”. They have many online classes from basic to advanced.
Good Luck and always feel free to ask questions on this site.
May 10th, 2007 at 8:42 am -
Dax Desai said:
I don’t think it has formed a new support level. If it drops it has a ways to go. Also I may have gotten in on my put a little too early. Based on RSI indicators, the stock should see some strong resistance and correct. I’m not saying it will hit $95, but sub-$100 is not out of the question.
That being said, I have a feeling I am about to eat crow on this one. With the Apple iPhone coming out and the buzz that will be coming I may have chosen the wrong stock to short.
In options trading you only need to be right maybe 60-70% of the time on a consistant basis to make money. My last options play on Apple was on earnings. I made a killing.
http://www.daxdesai.com/2007/04/26/stock-pick-aapl-update-wrapping-up-the-trade/
May 10th, 2007 at 8:47 am -
Q at $1 Million to My Name said:
This is awesome, thanks!
May 10th, 2007 at 9:01 am -
Dax Desai said:
I was too early on the trade. I jumped at the confirmation today and made some series money in 1 1/2 hrs. I updated the blog accordingly.
May 16th, 2007 at 12:20 pm -
Dax Desai said:
I highly recommend using stop limits to limit your losses for those rare times you are wrong. Preservation of capital is of utmost importance.
May 16th, 2007 at 12:21 pm
[...] time ago I told my readers I would buy an Apple put based on a technical reversal and overall weakness in the stock. That trade went sour. I bought too early before I had [...]