How I realized large overnight gains with Apple Call Options

Summary of Analysis on how I realized large overnight gains with Apple Inc.  January 13, 2017, $117 Call Options (gains realized on 1/6/17).

I earned an 88.37% return and a 73.51% return on two Apple Inc. call option trades done on January 5, 2017, with gains realized on January 6, 2017. I posted my thoughts on how Apple’s stock would perform to StockTwits after executing my call option purchases. I also posted my first trade and execution price:

http://stocktwits.com/KoolNupe/message/70950938

On January 5, 2017, I anticipated Apple Inc. stock’s price would gap down overnight (stock’s overnight price < previous business day’s closing price), and the gap would fill by market open (stock’s price at market open > or = to previous business day’s closing price) based on the facts:

  1. AAPL Call Option Open Interest on 1/5/17 was consistently greater at higher strike prices than current 1/15/17 market price going all the way to and beyond January 2018.
  2. AAPL Put/Call ratio increased on 1/5/17 to >.5, and the P/C ratio of AAPL often reverts to around .4 (frequently with a violent move to ~.4).
  3. Since AAPL traded choppy for several days without a significant move down, a surge higher was likely, as a floor had been set (bears failed to break AAPL).
  4. I anticipated algorithms, and institutions would look at # 1 and trigger long trades at market open, driving Apple’s price up, enticing more buyers, causing short sellers to cover, and put holders to eat losses. Many professional traders would know this, which would drive the pre-market open action to the upside.
  5. I like buying near expiration call options, 1 to 2 strikes above market price (out of the money).  This is high risk / high return scenario:  If I’m right I get paid, if  I’m wrong , I cut my losses quick!

BOOM!

 

 

 

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