After writing about Apple, Inc (AAPL) yesterday, I sold one October 120 naked put (QAAVD) on it this afternoon while it was trading at 131.07. I received $419.25 after commissions, a decent bit less than I could have made yesterdy, but now with a much better chart. The ceiling I drew was broken after news hit that AAPL has signed and agreement to break into the European market. Thestreet.com had a good short write-up on it.
I started with a limit for an October 125 naked put, but decided to reduce my risk and went with the 120 strike instead. The return on the money I’m keeping in reserve is still good. I don’t think it’s going to drop in the next two months, but if it does, I’ll be able to handle it better with the $3+ net difference in strike and premium at the 120 mark. In addition, I believe the volatility will stay high on AAPL and selling covered calls will be profitable if I’m assigned the stock.
I was planning to wait longer before my next trade since I’m getting more heavily invested than I had planned to, but I’m selling nearly 10% OTM with this one and think AAPL will stay strong, at least until Europe starts showing what kinds of numbers they can deliver for the iPhone. Throw in the Christmas season only a few months away and I don’t feel too worried about this move. I’ll keep second guessing my decision to sell the 120 strike instead of the 125 for a couple of days I’m sure. Eventually I’ll remember the $150-200 extra profit wasn’t worth the extra $300-350 risk.
All I need now is for Marathon (MRO) to come back up some. My covered call is at 60 while MRO is trading at 51.34. My original naked put was at 62.50. At least while oil drops, the rest of the market tends to rise (minus credit fears).
Technorati Tags: naked puts, investing, stocks, options, covered calls, options strategies, trade, stock chart, trend lines
Wow, this is pretty cool. I am not an options trader by any means and still have yet to really get a good grasp of the game. Apple has seen some pretty strong price volatility as of late though. Good luck with the MRO position.
Hey btw just an idea, turn off the you have to register to comment setting, it makes it a lot of work to comment! Just get Akismet for spam protection and the rest is a piece of cake.
Thanks for the suggestion. I’ll give it a try. For now, I’ve removed the “must register” requirement and have requested a user name from Akismet.
For everyone else, check out the great list on StockTradingToGo: http://www.stocktradingtogo.com/2007/08/22/50-ways-you-know-you-are-an-emotional-investor/
That is a great list on the site above. I had to add it to my favorites. Also, the Amazon story makes me sick, imagine if you had kept the stock! Why is it so hard for people to buy and hold?
Alos, i’m wondering if AAPL sold off enough yet or can really tank more. Finally, if you knew someone who was smart, and unemotional in his decisions, would you trust him to invest for you? Plus, i like “doing” trading, so i’d have to give that up, as well as “trust” someone—-who may do TONS better than me.
You can never tell with AAPL, I think it’ll be fine which is why I sold a naked put on it, but I know it can bounce around a lot which is why I sold so far OTM.
I like handling my own investments, so I doubt I’d hand over the reigns to someone else. I also do well (beat the indexes) and don’t know who could do better without taking a good sized commission off of my little $60k account.