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An Update on Our Last Trade and a New One on AAPL:
This trade on APPL will only yield about 30% after commissions, and you have to wait six months to get it, but the stock can fall over $8 during that time, and you would still make your 30%. Annualized, 30% every six months works out to 60% for the year. Where else are you going to find that kind of return on your investment dollars even if the stock goes down?
This is an actual trade we made today in one of our Terry's Tips’ portfolios last Friday. It replaced an earlier trade we made on AAPL which gained over 20% in less than a month. We closed it out early because we had made nearly 90% of the possible maximum gain, and clearing up the maintenance requirement allowed us to make the following trade with AAPL trading about $129:
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Buy To Open 3 AAPL 21Jul17 115 put (AAPL170721P115)
Sell To Open 3 AAPL 21Jul17 120 put (AAPL170721P120) for a credit of $1.17 (selling a vertical)
This is called a vertical put credit spread. $117 per spread less $2.50 commissions, or $114.50 x 3 = $343.50 was put into our account. The broker charges a maintenance requirement of $500 per spread, or $1500. Subtracting out the $343.50 we received from $1500 makes our net investment $1156.50.
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If AAPL is trading at any price above $120 on July 21, 2017, both of the puts will expire worthless, and we will be able to keep the $343.50 we were paid on Friday. In this case, no commissions will be charged on the closing end of the trade. You don’t have to do anything except wait for the big day to come.
If AAPL is trading at any price below $120 on July 21, you will have to buy back the 120 put for $100 for every dollar it ends up below $120. If this happens in our Terry's Tips portfolio, we will probably roll the spread out to a further-out month, hopefully at a credit.
This trade is most appropriate for people who believe in AAPL, and feel confident that if it does fall a little, it will end up being less than $9 lower in 6 months. We like our chances here.
As with all investments, this trade should only be made with money that you can afford to lose.
Happy trading.
Terry
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts. seth@terrystips.com
You can see every trade made in the actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80). You get $300.65 worth of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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