Don't Panic Yet
It is time to close my Apple (AAPL) trade from July 3 in which I established a long position via the $595-$605-$610 skip-strike call butterfly and a short position via the $595-$585-$580 skip strike out butterfly to this. My total cost was $5.30. The weakness in AAPL today has brought this one back into a profit zone. There doesn't appear to be a lot of risk of seeing $610 today, and $605 looks like a possible pin; however, with the trade sitting around $7.40 in value, it is certainly time to take at least two-thirds off the table to greatly reduce risk.
As long as AAPL stays above $596, then this will still be profitable. By simply buying the $600 puts that expire today for around $0.22 against as little as one-third of the remaining portion of the position, I can lock in a profit regardless of where AAPL moves the rest of the day. I will probably go ahead and buy the puts against the entire portion of the remaining position. Those with a higher risk tolerance could look to let this one run for another hour or so to try and pick up a few more dollars on the combination. AAPL has been jumping all around, so it won't be for the faint of heart.
I get the feeling many players out there want to buy or trade today, but they are looking for someone to hand them a trade -- or at least provide heavy-handed guidance. If this is the case, then just sit it out and reassess this weekend. I'm not doing a lot today. I am looking at adding an Amarin (AMRN) position via some August options by adding the $16-$20-$22 skip strike butterfly if I can get them at $0.85 or less. I'm not sure this will get executed or not, but on this the type of day, I would rather wait for my price.
Speaking of waiting, it worked to wait on Research In Motion (RIMM) because it worked out to be a much better play than I originally anticipated. I was targeting $7.80, but we actually saw $8.00. Although I thought there were better plays out there, RIMM certainly served itself well. I'm not going to be greedy and, as I mentioned a bit earlier via the Twitter feed on the site, I have stepped to the side on this one as well.
Judging by the daily chart on the SPDR S&P 500 (SPY), today's action is shaping up like it will matter for more than just a day. The price support is intersecting near today's low and stochastics is threatening a double dip below 80. I don't want to be anywhere near a lot of long exposure should we see the double dip. It isn't time to panic yet, but this manic action in the market will make it very tough to head into the weekend in a long position if we lose either price support or the momentum shown on the stochastics....16 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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