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Matthew Whiz Buckley
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Matthew Buckley is the founder and CEO of Top Gun Options LLC and a Managing Partner at Wealth Creation Investing LLC. Matt was formerly the Managing Director of Strategy for PEAK6 Investments, L.P., one of the largest volatility arbitrage options trading firms in the country. He was the founder... More
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Top Gun Options
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Top Gun Options Intel Brief
  • Advanced AAPL BPS Trade Alert  4 comments
    Aug 30, 2012 3:58 PM | about stocks: AAPL

    Strategic Mindset:Flat to upward Bias

    Target:AAPL trading @ $665.32

    Commit Criteria: AAPL Implied Volatility is overpriced relative to its forecast volatility of 2.83% over the trade period. We are looking for flat to upward possible price movement but for it to stay above $645.00 until the exit of this trade.

    Tactic:Opening 5 AAPL September 2012 Bull Put Spreads (strikes [640/645]) for a $0.60 credit

    Tactical Employment of Bull Put Spread:

    - Selling to Open 5 AAPL Sep 2012 $645.00 Puts

    - Buying to Open 5 AAPL Sep 2012 $640.00 Puts

    - Net Credit: $60.00 per Bull Put Spread for a total of $300.00

    - Max Gain: $300.00

    - Max Risk: -$440.00 per Iron Condor for a total risk of -$2200.00

    Mid-Course Guidance:

    We will be watching for a price movement near the short strike. As the short strike is threatened we will adjust the Bull Put as necessary.

    Profitability Target:

    We will wait for this Bull Put to expire worthless taking the $300.00 credit as profit.

    Exit Tactic: We will wait for this Bull Put to expire worthless, adjusting as necessary.

    Disclosure: I am short AAPL.

    Additional disclosure: We are looking to enter this position in our Advanced Model Portfolio at Top Gun Options

    Stocks: AAPL
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Comments (4)
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  • Matt,
    I am trying to make sure that wasn't a typo . You mentioned that you are short apple so you are expecting the stock to go down . why are you advocating a bull put spread ?
    please elaborate
    30 Aug 2012, 04:55 PM Reply Like
  • Author’s reply » Seeking Alpha has long or short as their publishing options...they're not fully up to speed on options terminology.

     

    We're selling a Bull Put Spread which technically makes us short since we sold the spread.

     

    Hope this helps.

     

    W
    4 Sep 2012, 05:26 PM Reply Like
  • On max risk, what do u mean by -440 per iron condor? I thought it is a put credit spread?
    Also, u risk $2200 to make $300?
    31 Aug 2012, 12:16 AM Reply Like
  • Author’s reply » -4.40 is the max risk per contract. We're taking in .60 and it's a $5 wide spread.

     

    We have various risk management criteria at Top Gun Options and the contract size reflects that.

     

    Adjusting contract size obviously will impact the risk vs reward ratio. This was also a weekly trade. 4 days.

     

    Thanks!

     

    W
    4 Sep 2012, 05:30 PM Reply Like
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