Skip to main content
No. of Recommendations: 3
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.
-JMP
Print the post Back To Top
No. of Recommendations: 0
Can you delineate the legs?

Thanks,

Jack
Print the post Back To Top
No. of Recommendations: 0
Can you delineate the legs?

Sure. All contracts were November calls. For each contract, I was long 1 @ 190, short 2 @ 195, and long 1 @ 200. Barring an exceptionally good day for AAPL today, the entire thing will expire worthless, but since I was paid 2 cents/share to open the position (after commissions), I come out slightly ahead.

Back when I started watching the live quote for the spread, AAPL was on an uptrend and trading in the low 190s. In that case, I was expecting that AAPL would expire close to 195. An expiration at 195 would make the spread worth $5/share.
-JMP
Print the post Back To Top
No. of Recommendations: 0
I haven't looked a butterfly spreads for years and forget how they work, but, cool, take the $ and run. I will check them out. In the mean time I'm selling bear calls on AAPL just above resistance. I expect the Nov will expire worthless today and my Dec just executed.

Jack
Print the post Back To Top