Selecting AAPL Options
I've been reading up on Options trading for a little while, and it's time to get my feet wet (make my first options trade). Unfortunately, I don't know how to select the 'best choice' of options. I would like to buy Jan 09 calls and I expect Apple to be at least $200 by that time. How do y'all decide which option to go with? Do I choose a $100 strike? $130?
Best Answer
314 points
Ifly answered one year ago …
If you are definitely set on leaps ( and there is a lot of reasons why this may not be the best choice) then take the money you would spend on 1 ITM option and then choose an option at least 2 strikes out of the money and and buy as many as your trade budget allows. you will find that you will double your money quicker.
It has to do with how the options delta changes, An OTM options delta will increase faster. An ITM options delta will increase slower. So you get more 'bang for your buck' with an OTM option
When choosing an option you need to answer yourself the questions: when? where? and how long? to where the stock is going, then you can chose not only the best strike but also the best contract time.
Also if volatility is high then just buying a straight call is not the best strategy you need to look at spreads or OTM butterfly.
With due respect I suggest you keep reading and learning.
Cheers
IFLY
Answers
2183 points
ChaosNantuko answered one year ago …
I would wait till it stops falling first. Falling even another 5$ will make a big difference in your options trade. Also, i would go with 5 strikes itm, to minimize the amount of time value on the trade. The less time value, the smaller the impact of changes in volatility between then and now. Finally, if you expect it to do something by Jan 09, buy one strike more time then you need. In this case, Jan 10. That way, you lose less time value on the option, and so you have less risk, and greater profits. So i'd wait till there is a good upday. Consider waiting till it breaks the 150 mark to be sure its back on the way up. At the time you buy, i'd go either $35-$40 itm.
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123 points
realsure answered one year ago …
Feb 16 2008 Calls | 24 Days to Expiration
Symbol Bid Ask Type Last Change Vol Op Int
+APVBE 17.20 17.40 S 17.15 -17.65 4,644 677
+APVBF 13.55 13.65 S 13.60 -16.90 24,380 969
+APVBG 10.45 10.50 S 10.45 -15.70 22,840 1,306
+APVBH 7.80 7.95 S 7.95 -14.65 35,917 3,986
+APVBI 5.60 5.75 S 5.75 -13.35 15,434 1,831
+APVBJ 4.05 4.10 S 4.00 -12.00 27,522 5,201
Strike
125.00
130.00
135.00
140.00
145.00
150.00
123 points
realsure answered one year ago …
Apple Inc. said Chief Executive Steve Jobs in 2007 continued with his tradition of taking just $1 a year in salary. Apple made Jobs' salary public in a proxy statement filed in advance of the company's shareholders meeting, set for March 4. The proxy statement also said that Jobs gained $14.6 million on paper for exercising stock options that were set to expire in 2007.
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104 points
shekhar230 answered one year ago …
Rule of thumb for option trading is to get at least 3 strike in the money options and sell around 6 months before the option expires. This way your delta is higher so for every dollar upside you are making ~ 70+ cents and you loose very less time value. Time value goes down really fast during last 6 months. AAPL is trading at around ~130 which in my opinion is a very good price.
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