There's a Time for Everything: Thoughts on AAPL Option Strategies
Thereís a Time for Everything: Thoughts on AAPL Option Strategies
Do you know how many different types of options strategies there are? A lot: That's how many! But thatís not really the important question. More importantly: Do you know why there are so many different types of options strategies? Now we have something to discuss.
Different options strategies exist because each one serves a unique purpose for a unique market condition. For example, take bullish AAPL traders. Traders who are extremely bullish on AAPL get more bang for their buck buying out-of-the-money calls. Less bullish AAPL traders may buy at- or in-the-money calls. Traders bullish just to a point may buy a limited risk/limited reward bull call spread. If implied volatility is high and the trader is bullish just to a point, the trader might sell a bull put spread, and so on.
The differences in options strategies, no matter how apparently subtle, help traders exploit something slightly different each time. Traders should consider all the nuances that affect the profitability (or potential loss) of an option position and, in turn, structure a position that addresses each nuance. Traders need to consider the following criteria:
- Directional bias
- Degree of bullishness or bearishness
- Time horizon
- Implied volatility
- Bid-ask spreads
- And more
Carefully selecting options strategies makes all the difference in a traderís long-term success. Leaving money on the table with winners, or taking losses bigger than necessary can be unfortunate byproducts of selecting inappropriate options strategies. Be sure to spend time optimizing your options strategies over the next few weeks to build the habit.
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