Trading Apple Stock Options is Low Risk with Potential Profits

Yesterday we talked about the importance of using risk-based options trades when the market is under pressure. Today we’ll look at a less commonly used strategy called call ratio inverse spread using Apple stock as an example.




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Apple (AAPL) has been under selling pressure in recent days, as have other high-tech stocks, as the yield on 10-year Treasuries rallies.

This trade may be appropriate in the current market conditions because it can be built with zero downside risk and also allows some profit if the stock retraces.

Apple Stock Options Trading

This is how Apple stock trading will look like.

Sell ​​to open Jan 1, 2022 AAPL 145 strike at $ 7.60.

Buy to open 2 January 2022 AAPLs, 155 Calls at $ 3.75.

The purchase of call 145 cost $ 760, and the sale of two 155 calls gives a credit of $ 750. Thus, the net worth of the trade is $ 10 – the maximum that the trade can lose if Apple shares stay below 145.

If Apple shares rise early in trading, profits can be made quickly. For example, if Apple shares rise to 155 next week, the deal is expected to generate a profit of about $ 250.

The faster and further Apple shares grow, the better this deal will be.

The gimmick is the “valley of death” which occurs when the expiration date is between 145 and 165, so this is not a deal to be held until expiration.

I would keep this deal for no more than two or three weeks in order not to fall into the valley of death.

Maximum loss

The maximum possible loss on a trade is $ 1,000, which could happen if Apple closes at 155 on the expiration date in January.

This is why we would not like to hold this deal until the expiration date.

If you are not familiar with this type of strategy, it is best to use an options simulation software to visualize trading results on different dates and stock prices. Most brokers will allow you to do this.

Call back spreads are an advanced options trading strategy, but may be appropriate in this environment.

Remember, options are risky and investors can lose 100% of their investment.

This article is for educational purposes only and not trading advice. Remember to always do your due diligence and consult your financial advisor before making any investment decisions.

Gavin McMaster holds an MSc in Applied Finance and Investment. He specializes in profitable options trading, is very conservative in his style and believes that patience while waiting for the best settings is the key to successful trading. Follow him on Twitter at @OptiontradinIQ

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