AAPL: Option-Trading Strategies for Bullish and Bearish Investors in Apple Inc.

Mad About Options takes a look at the stocks getting coverage from Jim Cramer, Fast Money casts and other heavy hitters in the financial press and reviews strategies option traders might have used if they agree or disagree with these assessments of the underlying stocks.

The Pick – Apple Inc. (AAPL):

In the October 30th episode of Mad Money, Jim Cramer sounded the bullish horn on Apple, saying he could not get enough of the company’s power.

Bullish Option Traders on AAPL:

Bullish investors who expect Apple to continue rising in the next few months could buy bull call spreads in the stock. Traders could do this by buying two deep-in-the-money January 140 calls for $50 each and selling two near-the-money January 185 calls for $14.40 apiece, for a net cost of $71.20. These call spreads will be profitable if AAPL is trading above $175.60 at expiration. Maximum gain on this trade is $18.80 minus commissions ($9.40 per spread) and maximum loss is the premium paid – $71.20 plus commissions. For more options strategies on bull call spreads watch this episode of Options Physics.

Bearish Option Traders on AAPL:

Those investors who are bearish on Apple might consider a put one-by-two, traded by buying one April 170 put for $12 and selling two April 150 puts for $6, resulting in a net cost of zero (plus commissions). This strategy is successful if Apple is trading anywhere between 150 and 170 at April expiration. The maximum gain is $20 (minus commissions) and the maximum loss is $130 (plus commissions).

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