Real Deal – Feb 2016 #1 (AAPL – Bull Put Spread)

Happy Chinese New Year to all! Last year was a great year to me and I hope this year will be another fantastic year!

Though this is a festive session, I never stop reading, listening, discussing market news, commentaries, as well as options trading/investing. I always believe that trading the market will make us young. 🙂

I will start sharing my live trade in my real account with my commentary.

Feb 2016 #1 (AAPL – Bull Put Spread)
Enter AAPL Bull Put Spread, 36 DTE and capture $1.10 ($110 per options contract) premium. Options detail as per the screenshot below.

Rationale:
1. Market is bearish today but I expect S&P Futures to hold strong at 1800 support. As a contrarian, I initiate a bullish to neutral position (Bull Put Spread) against a strong fundamental stock, Apple (AAPL).
2. AAPL has been ranging between $92 to $112 since Jan 2016. There is a higher chance that this range-bounce continue for the next month or two unless there is fundamental change that push the price out of the range.
3. I am risking $390 to make $110 in the next 36 days. As long as AAPL stock price remains above $90, I will profit $110. If AAPL stock price goes against me within the 36 days, I will repair the trade base on the market condition. Trades follow up will be blogged in the future post.
4. The Return On Margin of the trade is 28% ($110/$390) in 36 days. However, I have the tendency to capture 50%-60% of the premium rather than 100% of the premium (meaning I will not wait 36 days to profit $110, I will close the position if I capture $50 to $60). This allows me deploy my available dollar to other trades and also avoid a winning trade to become a losing trade.
Stay tune for my next updates!

 

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