Wednesday, November 21, 2012

Implied Volatility Crush in AAPL Can Lead to Profits

The last time our trading partner J.W. Jones showed us a set up for Apple [AAPL] options it was one of our most popular post in years, and it paid off big for readers. And J.W. is at it again with a pre-holiday call on Apple.......

The recent massive sell off in AAPL stock has presented some interesting opportunities for low risk trades. For long time readers of this column, you may recognize that my portfolio usually contains an AAPL position.

Why? I cannot overemphasize the importance of trading liquid instruments, and in the current world, very few underlying issues have options with the degree of liquidity routinely available in a wide spectrum of strike prices and expiration dates.

What is the big deal about liquidity? When markets trade in an orderly fashion it is usually possible to negotiate a reasonable price for all but the most illiquid underlying. However, when blood is running in the street, market makers will routinely widen bid / ask spreads and attempt to extract well more than a pound of flesh. It is only in the most liquid series that any hope of a reasonable exit in these times can be found.

OK, sermon is over.... I like AAPL! For those who have not looked at the option chain for AAPL since last Thursday, I want to call attention to another new aspect of the tremendous flexibility that exists in this name.
Entirely new sets of weekly options are now trading, not just those for the next upcoming Friday expiration..... 

Click here to read J.W.s entire post "Implied Volatility Crush in AAPL Can Lead to Profits"

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