In today's Flow Show, Steve Strazza and I discuss the signal (if any) being sent from $VIX with a 13 handle, and we cautioned viewers to not just automatically think that a low VIX means the next spike is imminent.
Then, we got into the opportunity that looks most appealing over the next 6-12 months.
You can watch the full episode here and get the trade details below:
Apple has been in a year-long range (see video) that appears to have been decisively broken.
Here's a zoomed-in one-year chart showing the current breakout about the 234-235 range:
While it may feel like a bit of a chase here, I've got a plan to get us positioned small now, with the potential to get systematically larger into a pull back.
If we don't get the full position on, then at least we'll have a small winning position on that took no heat. In other words, a great risk-adjusted return!
Here's the Play:
I like buying $AAPL December 2025 300-strike calls for approximately $7.50. With options volatility relatively cheap in this name, these calls are currently rather affordable in volatility terms. But I will only purchase 1/3rd of my intended position size today at this price. After getting this fill, then I'll place good-till-canceled (GTC limit orders to purchase more calls (equal size) at $6.75 and then a third GTC limit order to purchase more at $6.00.
If we were over eager to position 1/3rd of our position today, then we'll be rewarded by being able to add to the position at better prices later on. But if we were right to chase, then at least we'll have something to show for it in the form of a partial position.
For risk management purposes, if these calls get offered at $5.00 or below, then I'm either early or wrong and will close the entire position to preserve my trading capital. Additionally, if $AAPL can't hold the $233 per share price level, that too is a signal to get out.
As far as taking profits goes, if I'm fortunate enough to get two or three entry fills at my limit prices, then I'll look to scale out of some of the position if/when the calls have doubled in value, while leaving half or a third of the position on for the full ride to the three-hundred-dollar-roll.
I'll update everyone on the latest moves in this position in the ASO live chat room and during the weekly Options Jam Sessions (every Thursday).
P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.
Sean McLaughlin | Chief Options Strategist, All Star Charts
