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Subject:  Too good to be true AAPL spread... Date:  11/14/2007  10:57 AM
Author:  jmpNYC Number:  8483 of 11351

Based on some positions I'd been looking at before last week's dip, I still had a quote running in realtime for an AAPL 190-195-200 butterfly. Now, given that if the stock price is below 190 or above 200 by the end of the week the spread is worth zero, I had sort of written off the idea of buying into it when AAPL dropped from 192 to 151 in 3 trading days.

However, during yesterday's rebound, I noticed that I could open the position for a credit. I managed to open 40 contracts for credits averaging 4 cents per share, which is more than my commissions on the transaction. After commissions, I pocketed about 2 cents per share for opening the position.

So, if AAPL is below 190 at expiration, which I currently expect, my worst case is that I pocket about $80 after commissions. However, if AAPL has another couple of days of big rises (stranger things have happened), I should be able to close out the position for substantially more than I paid yesterday.

Perhaps I should build a screener to watch for these types of positions, which I'm assuming will pop up from time to time when volatility gets extremely high, as it did this past week.
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