MJ DeMarco
I followed the science; all I found was money.
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Here's An Option Opportunity I Recently Opened AND My Evaluation Process.
The reason why I love options is
1) Leverage
and
2) Time (Time always passes in the markets, you can't escape it -- options allows you to take advantage of time passage)
So today I'm going to show you an option trade I made, and WHY I made it, and how I evaluated the potential trade.
This was a trade I opened today -- therefore, I have no idea if I will make $$ or lose it. Yup, you can witness firsthand me making or losing money! HA HA.
The point here is to show you how I spotted the opportunity AND for you to witness me be right, or be wrong.
My option trade is a simple vertical call spread on AAPL based on several factors that I feel, put probability in my favor.
If you take a look at the chart, you see here that AAPL is in a clear downward trend.
The technicals support the trade.
That is point #1 and #2.
Second, you see that there was a GAP DOWN when AAPL reported earnings at around the 485 mark.
This means that there is significant OVERHEAD SUPPLY -- which basically means, when (or if) AAPL comes back to the 490 range, there will be a lot of sellers -- people who bought above this mark WANT THEIR MONEY BACK -- when AAPL opened the day after earnings, a lot of people lost $$ and they want it back!
If AAPL reclaims the gap, I imagine there will be a lot of selling pressure which will move the stock down.
Third, AAPL seems to be in a mode of negative sentiment with all the new competitors and possible commodization of the products.
Fourth, I prefer to sell options so I can take advantage of time passage, although with verticals this is somewhat diminished due to the long call.
That said, I'm looking to do sell a near term call (March expiration) at the 490 strike and buy a 510 and claim a credit for $4,100 -- the probability of profit is about 76%.
Now the bad news…
If AAPL busts through the overhead resistance and reverses direction and moves above 510, my max loss on this is about $16,300 -- yikes! (Probability about 12%)
Ill report back on how well (or poorly) I do.
Sell Mar13 490 Strike
Buy Mar13 510 Strike
The reason why I love options is
1) Leverage
and
2) Time (Time always passes in the markets, you can't escape it -- options allows you to take advantage of time passage)
So today I'm going to show you an option trade I made, and WHY I made it, and how I evaluated the potential trade.
This was a trade I opened today -- therefore, I have no idea if I will make $$ or lose it. Yup, you can witness firsthand me making or losing money! HA HA.
The point here is to show you how I spotted the opportunity AND for you to witness me be right, or be wrong.
My option trade is a simple vertical call spread on AAPL based on several factors that I feel, put probability in my favor.
If you take a look at the chart, you see here that AAPL is in a clear downward trend.
The technicals support the trade.
That is point #1 and #2.
Second, you see that there was a GAP DOWN when AAPL reported earnings at around the 485 mark.
This means that there is significant OVERHEAD SUPPLY -- which basically means, when (or if) AAPL comes back to the 490 range, there will be a lot of sellers -- people who bought above this mark WANT THEIR MONEY BACK -- when AAPL opened the day after earnings, a lot of people lost $$ and they want it back!
If AAPL reclaims the gap, I imagine there will be a lot of selling pressure which will move the stock down.
Third, AAPL seems to be in a mode of negative sentiment with all the new competitors and possible commodization of the products.
Fourth, I prefer to sell options so I can take advantage of time passage, although with verticals this is somewhat diminished due to the long call.
That said, I'm looking to do sell a near term call (March expiration) at the 490 strike and buy a 510 and claim a credit for $4,100 -- the probability of profit is about 76%.
Now the bad news…
If AAPL busts through the overhead resistance and reverses direction and moves above 510, my max loss on this is about $16,300 -- yikes! (Probability about 12%)
Ill report back on how well (or poorly) I do.
Sell Mar13 490 Strike
Buy Mar13 510 Strike
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