Gap Strategies around Earnings Conferences
This trade has a positive and negative price target. On the upside we expect a move to 215 or 220 and on the downside we expect price to decline to nearly 170.
In recent weeks AAPL (Apple Computer) went up 46.44% and should be due for a pullback. The analysis we have conducted has provided an opportunity to make money whether the stock gaps up or if it gaps down. Through the use of options we will be using price movement to profit from a continuation of the move higher ($215-220/share) or a reversal into the $170 range.
There is more money to be made on the downside from a risk/reward perspective. The most recent daily candlestick formation has exhibited a shooting star which is a bearish reversal pattern. In any scenario we will still profit from a directional move in AAPL whether it keeps running or slides 37 points.
The first scenario, it would be to position ourselves for a pullback and make 17% or $784 on the drop when and if it drops to the March 11th gap. This would go in the opposite direction of what we have experienced for most of this year and would be like having a protective hedge; this trade also is half of the normal sized position we would have on for this type of short sale.
The second scenario is if the stock goes to $215-$218 per share and we would increase the size of the position to make 5.58% or $2312 overall and close the position
Because of earnings coming up next week that might accelerate any built up enthusiasm in these shares to reach this higher target sooner, on the other hand that could hasten the process of making a possible decline of 17.36%. Although the risk/reward ratio is better for selling this short we would still like to be protected should anything unforeseen happen.
We will keep updating this trade.
In recent weeks AAPL (Apple Computer) went up 46.44% and should be due for a pullback. The analysis we have conducted has provided an opportunity to make money whether the stock gaps up or if it gaps down. Through the use of options we will be using price movement to profit from a continuation of the move higher ($215-220/share) or a reversal into the $170 range.
There is more money to be made on the downside from a risk/reward perspective. The most recent daily candlestick formation has exhibited a shooting star which is a bearish reversal pattern. In any scenario we will still profit from a directional move in AAPL whether it keeps running or slides 37 points.
The first scenario, it would be to position ourselves for a pullback and make 17% or $784 on the drop when and if it drops to the March 11th gap. This would go in the opposite direction of what we have experienced for most of this year and would be like having a protective hedge; this trade also is half of the normal sized position we would have on for this type of short sale.
The second scenario is if the stock goes to $215-$218 per share and we would increase the size of the position to make 5.58% or $2312 overall and close the position
Because of earnings coming up next week that might accelerate any built up enthusiasm in these shares to reach this higher target sooner, on the other hand that could hasten the process of making a possible decline of 17.36%. Although the risk/reward ratio is better for selling this short we would still like to be protected should anything unforeseen happen.
We will keep updating this trade.
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