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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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Bull Split-Strike Combo

Greg Collier's Blog

A top trader once told me, “don’t take risks with your money, take risks with other peoples money.” Such an attitude made many folks on Wall Street rich, and helped fuel a global financial crisis. With ethics, one always wins in the end. To make things clear, when trading short-term, or investing long-term, there’s always risk involved. If anyone advises otherwise, they either lack competence or they’re lying. When trading or advising others, I often use directional strategies that can be reversed if they’re not working.

One of my favorite bullish strategies is a Bull Split-Strike Combo. I employ this strategy when I’m:

  1. Bullish on an underlying security
  2. Generally bullish on the broad market
  3. Want to buy a security at a specific price

With this strategy, I am partially financing the purchase of Call Options, by selling Put Options. This strategy is similar to a synthetic long position, the difference…

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