Entries by Dan Sheridan

AAPL Trade Idea

June 16, 2014 in , , /by

Oh, how I miss the expensive AAPL stock price before the split, let me name the ways: More premium for credit spreads, less commissions because I didn’t have to do as many contracts with a $500 stock price. Any positive things about the split? Yes, liquidity, which was great before the split, should be better. Why? Option bid/ask spreads will be narrower and more folk will be trading options with these cheaper stock prices. Option Volatilities are a bit higher, maybe 15%, than before the split. At-the-money Implied volatilities are around 20 now and they were around 17 before the split. This is pretty normal when stocks get less expensive after a split, moderate increases in Implied Volatility usually result. Range Bound Trade with great risk/reward? Iron Butterfly (2 Credit Spreads). AAPL price around $91.90 Using the July 3 expiration, Buy one 95 call and sell one 92 call. In the puts, buy one 89 put and sell one 92 put. Total Credit around $210. The total risk if AAPL goes to zero or up to a billion is $90. How did we get $90 Maximum loss? If AAPL goes to zero, I did a 3 point wide put credit […]

AAPL June Bullish Play

April 15, 2014 in , , /by

  This is a Bullish play in AAPL for the June expiration. It is inspired by one of the Sheridan mentoring resident AAPL experts and my friend , Leo Andrade. With AAPL at around $518 , I am going to take a bit of a bullish bias as I look out to June. The strategy is a Bullish Butterfly: Buy 1 June 530 call , Sell 2 June 540 calls, Buy 1 June 550 call for a total debit around $70. The good the bad and the ugly: if the stock goes to 540 over next 30-66 days, great! If it goes to $540 over next week, we yell ” Where’s the beef”! In bullish Butterflies, we want the stock to go near the short strike, but closer to expiration , not right away.Total risk is $70 cost, just like a long option. Directional Butterflies are very forgiving. If we go outside profit area of 530 and 550 over next 30 days, the spread doesn’t go against us nearly as bad as if we go out side our profit area of 530 and 550 near expiration. This is a cheap speculative trade of $70. If I did it 3 times, 3-6-3, it would […]

Covered Writes for the Downside?

December 4, 2013 in , /by

    2013 has been a banner year for Covered Writes. The market is up big and this bullish strategy has been like an ATM machine. The S and P’s have climbed from the 1400 level to its current peak around 1800. That’s an increase of over 25%! What are your expectations for the rest of 2013? How about 2014? Maybe you are still bullish, but you would like to have a little less exposure on the downside in 2014? If you did 4 covered writes per month in 2013, maybe you’d like to cut back a bit and take a little capital off the table? How can I diversify my covered write risk? One way is to have a few covered writes for the downside to diversify my exposure in my retirement portfolio. Most stocks are in the upper end of their 12-24 month price range. I will show you an example of a covered write type strategy for the downside that doesn’t involve stock. This will keep the cost and margin down significantly. Before I give an example for the downside, let me give an example of a covered write and Long Diagonal for the upside to lay […]

Setting Your Trading Goals

October 22, 2013 in , /by

As traders many times we tend to only look to the short term and what trades we have on or are about to enter. To be successful with any longer term goal you not only have to know where you are headed but how best to get there. Having a plan and setting mile posts to mark progress along the way is fundamental to a successful trading business. Determine a Long Term Goal First, we want to determine our long term goal. To give two trading examples perhaps you either want to generate a certain monthly income or build a certain dollar value in your account. Whichever of these you choose it is important to set a monthly goal to track how you are doing in reaching the goal. That way if things are getting off track you can address any problems before your get too far off your success path. Realistic Goals Secondly, setting realistic goals is key. Let’s say for instance that you want to generate a monthly income of $5000. If you are trying to reach that amount using a $100k account size it will be easier than to reach it with $20k account size. A simple […]