BY ANDREW GIOVINAZZI 

September 8, 2023

Yo Pit Crazies,

It all started when Mark Sebastian brought up the fact that some savvy customer was buying Apple Inc (Ticker: AAPL) puts for little tiny dollars:

When AAPL went to $175 on Thursday, those puts went to $7.50 and $5.00 for ginormous returns. Flat out nuts.

My trade idea did not do that well since it only made … 90%. The overnight risk on the position was just $10 bucks. I put the trade together in about two minutes during the Trading Desk.

Let’s see how I did it.

Learn to Take an Acceptable Risk

Don’t get me wrong, our Pro Pod Program is comprehensive, but traders need to learn how to take acceptable risks. I liked playing AAPL to the downside, but I didn’t want to take an aggressive short. 2023 has been the year the shorts have taken it, well, in the shorts.

I set my trade up as below in the Trading Desk, which is rapidly becoming Option Pit’s favorite service. With AAPL trading $181 I posted this trade:

It might look confusing … why would I buy a call calendar with a put?

The call calendar allows me to take risk to a point. If AAPL shot up for some reason, that would allow me to break even. The risk I took was that AAPL wouldn’t launch above $195 in the next few days. That was the risk I decided to take as that is what I felt was the least likely.

That was my opinion, and I traded my opinion. If AAPL fell apart, payday. And AAPL fell apart.

My overnight risk on my 5 lot was about $10 if AAPL just drifted up a few bucks and the implied vol went down.  IV was so low – I saw that from my Edge Hunter VBS sheets earlier in the morning – that I did not see substantial volatility risk.

That was my edge. By choosing a longer duration I could dial the risk way down and still have a nice payday on a drop in the stock. The call calendar saved me decay dollars.

I created a trade that would break even or pay from $195 and below to $0. A Pro Trader just takes smarter risks, for less risk dollars.

Learn to do this in our Pro Pods and you won’t regret it – $1400 on $10 in risk.  

See you after next week, as I’m going on vacation!

To Your Trading Success,

AG