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Posts Tagged ‘debit spreads’

Update on Another AAPL Spread Idea

Monday, April 2nd, 2012

This week I would like to tell you the results of the AAPL spread idea I told you about last week. 

Update on Another AAPL Spread Idea

Last week I suggested buying 3 AAPL calendar spreads (buying April-12 options and selling Mar5-12 options) at the 595 strike price (using puts) and the 600 and 605 strike prices using calls, and to increase all these strikes by $5 if the stock opened up about $5 higher on Monday (which it did).

I purchased these calendar spreads in my own account at the 600, 605, and 610 strikes, paying an average of $11.50 ($1150), slightly higher than I expected they would cost in last week’s report.

When AAPL fell by $10.30 on Friday, all of my short call options expired worthless and I had to pay $.50  ($50) to buy back the about-to-expire Mar5-12 600 put.  The value of my remaining April-12 options were $16.85, $14.45, and $12.30, and my net gain after commissions was $905, or about 38% on my $3500 investment.  Not bad for a week’s effort.

The gains I made were remarkably similar to those that the risk profile graph I included last week said they would be.  That gives me confidence in those graphs I refer to every day and display for my paying subscribers each week.

In spite of AAPL being essentially flat for the week, the Terry’s Tips portfolio which has traded this company exclusively for almost two years has now gained 703% over that time period.  It is our most successful portfolio.

I think the exact same spreads I suggested last week could be placed again this week, this time selling the Apr1-12 Weeklys and buying the Apr-12 monthlys.  The spreads should be less expensive this week (averaging about $8.50 per spread rather than $11.50.

Happy trading if you choose to duplicate those positions.  Of course, you should never risk money that you can’t afford to lose.

We have made 3 short videos which explain the 3-week results of our AAPL trading. The original positions were set out in an actual account carried out at Terry’s Tips.  The YouTube link is http://youtu.be/6J9KPuimyXk

The portfolio was updated in the Week 2 video -
http://youtu.be/e0B7_6e_5AE 

And finally, adjustment trades we made were displayed in this little video –
http://youtu.be/YC3d2NuX2MI  Be sure to enlarge it to full-screen mode so you can see the numbers. 

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