[Options] Quietly Gathering Momentum

Sean McLaughlin
August 18, 2021

The team had our weekly internal strategy session this morning where we go over things we're seeing in the markets. What's moving? What's not? Where is there hidden risk? What's the market missing or not pricing in?

One of the things I brought up is: "Is anyone paying attention to this breakout in Apple?" I hadn't seen or heard much chatter about it and it seems to me few are aware this is happening or thinking through the implications of what this might mean for the broader indexes.

The team did highlight the move in our recent Monthly Conference call, so it's not happening in a vacuum. But it feels that outside our walls, few are paying attention.

Check out this chart of $AAPL:

Shouldn't this trend and recent breakout be getting more attention? I think so.

As we discussed the setup during our call, JC mentioned that we definitely want to be careful with this one. We don't want to get too aggressively bullish because if $AAPL loses the July lows, it could meet a similar fate to one we observed in $AMZN recently.

So with a recently slight uptick in implied volatility in $AAPL options, a pullback in share price over the past two days, and a backdrop of not wanting to be too aggressive, we're going to angle into a bullish bet using a more conservative bull call spread trade.

Here's the Play:

I'm buying an $AAPL December 150/170 Bull Call Spread for an approximately $6.15 debit. This means I'll be long the 150 calls and short an equal amount of 170 calls for a combined net debit which represents the most I can lose in this trade if we're dead wrong.

Of course, I hope not to suffer the maximum loss. If $AAPL sees a close below $142 per share at any time during our hold, then I'll look to close the spread to protect against any further losses. Below $142 and $AAPL most definitely will not look bullish to us, so we want out.

In the meantime, I'll leave a resting order to exit the spread for a profit at $13.10. This would earn me a double on my invested capital while representing a capture of 50% of the maximum possible profit in this spread that could be earned if I held it all the way until December expiration. I'd rather just capture the win early and move on the next idea.

If you have any questions on this trade, please send them here.

~ @chicagosean

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!

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