There's a Time for Everything: Thoughts on AAPL Option Strategies
Posted on Friday, November 16, 2012 at 3:28 PM
Do you know how many different types of options strategies there are? A lot: Thatís how many! But thatís not really the important question. More importantly: Do you know why there are so many different types of options strategies? Now we have something to discuss and getting a proper options education can help a trader better understand all of those strategies and when and how to use them.
Different options strategies exist because each one serves a unique purpose for a unique market condition. For example, take bullish AAPL traders. Now that the stock has severely declined in price, there are traders who are extremely bullish on AAPL and want to get more bang for their buck and buy short-term out-of-the-money calls. Less bullish traders might buy at- or in-the-money calls. Traders bullish just to a point may buy a limited risk/limited reward bull call spread. If implied volatility is high and the trader is bullish just to a point, the trader might sell a bull put spread, and so on.
The differences in options strategies, no matter how apparently subtle, help traders exploit something slightly different each time. Traders should consider all the nuances that affect the profitability (or potential loss) of an option position and, in turn, structure a position that addresses each nuance. Traders need to consider the following criteria:
- Directional bias
- Degree of bullishness or bearishness
- Time horizon
- Implied volatility
- Bid-ask spreads
- And more
Senior Options Instructor