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Dr. Terry Allen

 
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  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    Mike - Thanks for your kind words. Looks like you have found a profitable way to trade these options on your own. Continued good luck.

    Terry
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    Since about 80% of options eventually expire worthless and the buyers of them lose their entire investment, I do not think just buying options is a very good idea. I like spreads better, especially calendar spreads.

    With a calendar spread, since your long side always has more remaining life than your short side, you will always have some value left and will never lose the entire investment.

    That being said, the further away your strike price is from the stock price when the short side expires, the less you make (or the more you lose as you noted). That is why I suggest buying these spreads at several different strike prices, some above and some below the stock price to maximize your chances of making gains on at least one of the spreads.

    With calendar spreads, you buy a further-out option (either a put or call) and sell a same-strike option (put or call, the same you chose for the purchase) which has a shorter lifespan. For example, you might buy an Oct-12 675 call and sell a Sep1-12 (weekly) 675 call and only have to come up with the difference between the two options (about $2100 at today's prices).

    Your maximum gain comes about when the stock ends up exactly at the strike price when the short option expires.

    Since I am bullish on AAPL, I would buy more call calendar spreads which are out of the money (i.e. at strikes which are higher than the stock price).


    Terry
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    Good thinking. I couldn't agree with you more on doing some serious homework before ever jumping on the options bandwagon.

    Terry
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    Since about 80% of all options eventually expire worthless and the buyers of them lose 100% of their investment, the straight buying of options never seemed like a good idea to me. I would much rather buy spreads which have a greater chance of success.

    With calendar spreads, you buy a further-out option (either a put or call) and sell a same-strike option (put or call, the same you chose for the purchase) which has a shorter lifespan. For example, you might buy an Oct-12 675 call and sell a Sep1-12 (weekly) 675 call and only have to come up with the difference between the two options (about $2100 at today's prices).

    Your maximum gain comes about when the stock ends up exactly at the strike price when the short option expires. Since you really don't know exactly where that price might be, I usually buy calendar spreads at several different prices, some at strikes above and some below the stock price.

    Since I am bullish on AAPL, I would buy more call calendar spreads which are out of the money (i.e. at strikes which are higher than the stock price).

    Just my thinking...
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    There is no margin requirement whatsoever on a calendar spread. Would that change your thinking?

    I prefer giving up some of the potential gain that might be lost if I bought a straight call in exchange for a vertical spread where I make a small gain if the stock stays flat (as it quite often does) while buyers of a call at that strike lose 100% of their money.
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    I totally agree with your idea of not selling out-of-the-money calls on AAPL for the near future, unless it is part of a vertical spread of some sort.
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    When you buy a vertical or calendar spread, you only have to come up with the difference between what you pay for the long option and what you receive from selling the other option, so the vertical spread I was talking about, 6 months out, only requires $2500 to be put up.

    Terry
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    I'm delighted that you enjoyed my article. Good to see that there is a kindred soul out there who also likes AAPL options. Thanks for sharing.

    Terry
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • 2 Strategies For Making Extraordinary Returns With Apple Options [View article]
    With calendar spreads, you buy a further-out option (either a put or call) and sell a same-strike option (put or call, the same you chose for the purchase) which has a shorter lifespan. For example, you might buy an Oct-12 675 call and sell a Sep1-12 (weekly) 675 call and only have to come up with the difference between the two options (about $2100 at today's prices).

    Your maximum gain comes about when the stock ends up exactly at the strike price when the short option expires. Since you really don't know exactly where that price might be, I usually buy calendar spreads at several different prices, some at strikes above and some below the stock price.

    Since I am bullish on AAPL, I would buy more call calendar spreads which are out of the money (i.e. at strikes which are higher than the stock price).

    Hope that helps.

    Terry
    Sep 4 03:50 PM | Likes Like |Link to Comment
  • Apple: Playing The News [View article]
    I have made a good living the last few years trading AAPL options and agree that options are the best way to go. But making investment decisions on small differences in implied volatilities is one of the dumbest ideas I have ever heard of.

    Selling naked calls on AAPL is equally dumb. How much cash do you have to post to collect a meager premium? Your ROI is tiny and you have the potential for unlimited loss.

    Options are wonderful, but not the way you are using them.
    Aug 28 09:59 AM | Likes Like |Link to Comment
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