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DRJ's Blog

November 9, 2012

Just as I said on Fast Money last night, we were really close to a great entry in AAPL. Sure enough, my pal Doug Kass bought AAPL and I jumped in as well, but I did my investment by using options:

 

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 We put the trade out to our subscribers, and he're why I call it a turbo: We own the longer dated (Jan 510 ) calls, bought at-the-money Dec 535 calls and sold twice as many Dec 545 calls. We did this spread because: 1) the Jan calls act as a surrogate for the stock, so we spent $4800 per call rather than $53,700 per 100 shares of stock 2) we own the at-the-money call and are short twice as many Dec 545 calls, which generated a credit of $1630 per spread 3) running that against what we paid for the Jan 510 calls, our net is just $3,140. 

If you wanted to simulate a 1,000 share position this package would tie up $31,400, or about 6% of that $537,000 it would take to own 1,000 shares of Apple. 

Between $535 and $545 this acts like a turbo, providing nearly twice the performance of owning shares and that credit means we are still profitable down to around $520 in AAPL. 

That's moving the odds in your favor my friends and that's how we roll! Be sure to register for our FREE webinars with Jill Malandrino of TheStreet.com and OptionsProfits to get more of these strategie. You'll see more about these in the weeks to come. 

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