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
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.
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