The first clue to buying at the bottom is having the ability to buy when stocks are in the ashcan.
No one wants to buy stocks since that is the reason they are at the bottom in the first place.
I am quite surprised how far and fast stocks like Apple Inc (Ticker: AAPL) have rallied from lows of the 130s to recent 170s. I was hoping for around $100 for a nice scoop, but it never got there.
The 100 puts were all there was to sell for that level. It is easy to see now that AAPL would be a great buy for 130 … but hindsight is not a trade.
We jumped into buying stocks and controlled risk. Let’s see how we did.
Gilead Sciences Inc. (Ticker: GILD) Got Some Good Cancer Results
I bought GILD around $62.40 when the market looked pretty rotten, but I bought a 57.5 put and 65 call, as well.
Buying the straddle and stock got my risk down to around $6 and still had the ability to win 2 to 1 on the upside.
GILD dividends at .75 per quarter paid for half of the strangle. That is almost 5% per year in dividends alone.
If GILD gets to $70, which is looking very good now after the cancer drug news, I can roughly double the money I had at risk.
It’s important to note that money at risk is different from margin cost. I still had to put up the margin for the stock, but my real risk dollar was stopped at $57.5. That allowed me to get double long if and when stocks recovered.
Small risk with higher payout!
We call it the Dividend+ strategy and it’s part of Option Pit Mentoring.
Flow, Short Term Trading and Div/Option plays are all waiting for you there.
And don’t forget …
To Your Trading Success,
AG