By Chris Ebert/Fun Money
A case of too far too fast here overbought at 50% fib level resistance in tandem with the indexes being at resistance. In fact, AAPL is simply propping up the market today .
One more push up the red line has us b uying puts with either of the following alternatives:
Trade Option 1: Buy a Dec 22 put, $25 out-of-the-money ($575 strike with AAPL $597 – $603). The approximately $900 premium could easily double if AAPL falls back to the 38.2 Fib or below.
Trade Option 2: Sell a put at the 38.2 Fib with the expectation that this level will hold as support and therefore the sold put has a good chance of expiring worthless. The premium received can then be used to offset about half of the premium required to buy an at-the-money put.
SELL 1 DEC $580 PUT
BUY 1 DEC $600 PUT
Maximum reward is the difference in strike prices ($20 x 100 shares = $2,000) less the net premium paid. The risk in this trade is that AAPL moves sideways or continues the uptrend causing both options to expire worthless and causing a total loss of the net premium paid.
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