Medium term
Trade view / 27 May 2016 at 14:31 GMT

#SaxoStrats: Apple filling the gap

Head of Futures & Listed Options / Saxo Bank


After a nice bounce since the low of 89.47 on May 12, Apple is now filling up its gap (103.91/98.71).

We will meet resistance around the 50-day moving average at 102.07 and the filling of the gap at 103.91. Stochastics are overbought and we have a three-day weekend due to the US Memorial Day holiday to cash in some Theta (time decay).

Let's sell the Jun16 (Expiry 17 June) 102/103 Call Spread to cash in some premium with limited risk on the upside.

Apple Daily Bar Chart
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Source: Saxo Bank

Management and risk description

Entry: Sell 10 Jun16 102/103 Call Spread at $0.26
=> Sell 10 Jun16 102 Call at $0.96
& Buy 10 Jun16 103 Call at $0.70

Maximum profit at expiry is limited
Maximum profit at expiry is limited to the premium received ($0.26 or $260 for 10 Call Spreads).

Maximum loss at expiry is limited
Maximum loss is: Short Strike Price - Long Strike Price - Premium Received
103 - 102 - 0.26 = $0.74 or $740 for 10 Call Spreads.

Note that you maximum loss will be equal to the margin you need to post the trade.

Return on Investment at expiry if the market closes at 102 or below
= Premium received/margin posted X 100
= $260/$740 X 100
= 35.14% in 21 days

Breakeven point at expiry
= short strike price + premium received
= 102 + 0.26
= 102.26

Target: 102 or below

Time horizon: 21 days

Five-year chart:
Apple Daily Bar Chart 5 years
Source: Saxo Bank 

— Edited by Michael McKenna

For more on contract options click here.

Non-independent investment research disclaimer applies. Read more
30 May
vsquare007 vsquare007
How often you post option trade ideas and what is the best way to get alerted. Also do you do legging of credit spreads for minor improvement in spreads.
30 May
Clare MacCarthy Clare MacCarthy
Hi vsquare007, the frequency varies but it's usually around a couple a day. To be alerted when they appear, click "Topics" at the top left of the toolbar. Scroll down and select "FX Options" to bring you to the home page for this instrument. Then simply click "Follow" (on the top right) and you'll get an email every time something new is posted. Follow the same procedure for updates on Stock Options and Contract Options.
30 May
Patrice Henault Patrice Henault
Hi vsquare007, I only deal with Stock Options and Contract Options as for legging of Credit Spreads we aim at releasing a combination order ticket for US Stock Options and ETF in September 2016.


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