Sold QQQ and AAPL Naked Puts

I’ve regretted not being invested in AAPL with every dollar it pushed higher for the past few months, but I stayed out with the expectation that it’d have a pull back offering a better opportunity. After missing the June and July mini-dips, I decided the stock was worth some risk because I expect any new dip, or even correction, to be short-lived. Finally, I made another trade on an Apple option to give me some exposure today. While AAPL was trading at $160.56, I sold one AAPL October $160 naked put for $5.50 and received $549.31 after paying $0.69 in commission.

The Apple trade worked in a funny way for me today because I entered the order when this October $160 put had a bid/ask of around $4.70-4.80. I entered my order for $5.20, but apparently forgot to hit the Transmit button. I moved on and entered a limit order for a QQQ option too and remembered to hit Transmit on it. A couple of hours later, after being away from my desk for a while, I saw the QQQ order hit. While QQQ was trading at $144.24, I sold one QQQ October $142 naked put for $2.80 and received $279.32 after paying $0.68 in commission. I couldn’t believe my AAPL order hadn’t hit when the stock had dropped $1.50 or more from when I entered the order. That’s when I looked to see I didn’t transmit it. By then, the option contract was trading around $5.50-5.60, so I checked the news and chart again before changing my limit order to $5.50 and actually transmitting it. The bid/ask had fallen to $5.20/5.30 by then, so I took a risk of my order not hitting. It did hit as AAPL continued to fall another $0.41 and the contract hit a high of $5.71 for the day. While I didn’t get the high trade of the day, I did bring in an extra $30 that I hadn’t planned to, so that’s a good thing.

My risk with both of these trades going through on the same day is that AAPL makes up 11% of QQQ. If something odd happens to AAPL, QQQ will get dragged down a bit with it. I’m targeting a good reward for the risk in AAPL with a 3.55% potential gain, 17.6% annualized while being able to take a drop in AAPL of 3.77% before I take any cut into my profit. I don’t have quite the cushion on my QQQ naked put at 3.49%, but the risk isn’t all on a single stock either. My potential gain is a good bit less too. I could make 2.01%, only 9.93% annualized.

You can see my YouTube trade videos here:

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DISCLAIMER: While I am a Registered Investment Advisor Representative, the information contained within this site does not constitue personalized investment advice. This material is meant as entertainment and is only a view into how I invest my own account, but not necessarily how you should invest your own funds. Trade using your own research at your own risk. This is impersonal investment advice which means the material written here, in email exchanges, on Twitter and/or other social networking sites do not purport to meet the objectives or needs of specific individuals or accounts.

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