AAPL – BPS – Here are the analytic’s from TradeMonster – Assumes 10 contracts: Numbers shown were taken after the close on Wednesday 2/8.
Sell 10 AAPL Mar 12 450/460 Put Vertical @ 2.45
MAX profit $2,450 w/probability of 70.15%
MAX loss $7,550 w/probability of 20.24%
Risk/Reward 1 to 0.32
In comparison here are the figures for a Mar 12 440/450 BPS
Sell 10 AAPL Mar 12 440/450 Put Vertical @ $1.60
MAX profit $1,650 w/probability of 79.76%
MAX loss $8,400 w/probability of 12.62%
Risk/Reward 1 to 0.19
I don’t know the math regarding the calculation of probabilities shown but given that the MAX PROFIT probabilities differ by less than 10% and the Risk/Reward for Dan’s trade is 3:1 verse 5:1 for the “safer” trade my take is that Dan’s trade makes a bit more sense. Anybody see this differently? Can anyone elaborate on the calculation of probabilities? Is it important?
AAPL – BuPS – I am looking at 20 contracts of the April 445/440. Max profit is $2,220, max risk is $7,760 with a 70.11% probability of max profit. Next earnings are 4/18, options expire 4/20. AAPL usually runs up before earnings, if we get a pull back, the trade should still be OK. If AAPL continues to move up short term as Dan suggested, I should be able to still get close to max profit within 30 days (look at theta on the TradeMonster analysis tool – the rate of theta is greater on OTM options vs options ATM, my trade is further OTM). I am also under $450, a nice round number and I believe buyers will step in at that level (but what do I know). I am giving up a little bit of profit for more room for the trade to move. Thats my plan, I think it is more conservative.
AAPL – BPS – Here are the analytic’s from TradeMonster – Assumes 10 contracts: Numbers shown were taken after the close on Wednesday 2/8.
Sell 10 AAPL Mar 12 450/460 Put Vertical @ 2.45
MAX profit $2,450 w/probability of 70.15%
MAX loss $7,550 w/probability of 20.24%
Risk/Reward 1 to 0.32
In comparison here are the figures for a Mar 12 440/450 BPS
Sell 10 AAPL Mar 12 440/450 Put Vertical @ $1.60
MAX profit $1,650 w/probability of 79.76%
MAX loss $8,400 w/probability of 12.62%
Risk/Reward 1 to 0.19
I don’t know the math regarding the calculation of probabilities shown but given that the MAX PROFIT probabilities differ by less than 10% and the Risk/Reward for Dan’s trade is 3:1 verse 5:1 for the “safer” trade my take is that Dan’s trade makes a bit more sense. Anybody see this differently? Can anyone elaborate on the calculation of probabilities? Is it important?
AAPL – BuPS – I am looking at 20 contracts of the April 445/440. Max profit is $2,220, max risk is $7,760 with a 70.11% probability of max profit. Next earnings are 4/18, options expire 4/20. AAPL usually runs up before earnings, if we get a pull back, the trade should still be OK. If AAPL continues to move up short term as Dan suggested, I should be able to still get close to max profit within 30 days (look at theta on the TradeMonster analysis tool – the rate of theta is greater on OTM options vs options ATM, my trade is further OTM). I am also under $450, a nice round number and I believe buyers will step in at that level (but what do I know). I am giving up a little bit of profit for more room for the trade to move. Thats my plan, I think it is more conservative.
My probability should be 75.92% vs 70.11%. Something got hosed up on OptionsXpress.