January 16, 2021

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AAPL Stock Calendar Spread Offers Limited Risk Upside

2 min read

Apple (AAPL) stock had a strong day yesterday to close back above the 21-day moving average.


Holding above a rising 21-day moving average is a good sign the stock might be ready to make another run toward the 135-140 level. AAPL stock has a reasonable outlook with a Composite Rating of 80, an EPS Rating of 80 and an RS Rating of 73.

Traders that think AAPL stock might head higher in the next two weeks could look at a bullish calendar spread. A calendar spread is a trade that involves selling a short-term option and buying a longer-term option with the same strike price. Traders with a price target of 140 could place the bullish calendar spread at that price. Placing the trade at 135 would result in a slightly less bullish setup.

AAPL Stock: How To Construct The Calendar Spread Trade With Options

Selling the Jan. 29 140 call option will generate around $185 in premium and buying the Feb. 12 140 call will cost around $300. That results in a net cost for the trade of $115 per spread and that is the most the trade can lose up until the first expiration. The estimated maximum profit is around $350 but that can vary depending on changes in implied volatility.

The idea with the trade is that if AAPL stock trades up to around 140, the calendar spread will increase, resulting in a net profit. A bullish calendar spread is a good way to gain some upside exposure on a stock without risking too much if the move doesn’t happen.

The ideal scenario is a rise up to 140 around Jan. 29 with very little change in implied volatility. Apple is due to report earnings on Jan 27, so I would look to close this trade before then if I did not want exposure to earnings.

Travelers (TRV) and Uber (UBER) are two other strong stocks that may be considered for this type of bullish option strategy.

It’s important to remember that options are risky and investors can lose 100% of their investment.

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on Twitter at @OptiontradinIQ


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