No Upside Risk On Apple Stock Trade
A unique options trading strategy called a broken wing butterfly could provide investors with a way to minimize risk on one side while still potentially profiting from Apple stock. This strategy involves creating a position with a larger gap on one side, resulting in less risk on that side and more risk on the opposite side.
To execute this trade, investors would buy 1 May 17, 165 put for $2.15 and sell 2 May 17, 175 puts for $4.30 each. They would then buy 1 May 17, 180 put for $6.05. By executing this trade, investors can potentially earn a slight credit of around $40, which means that there is no risk on the upside.
The worst-case scenario for this trade is that all the puts expire worthless, leaving the trader with about a $40 return. On the downside, the maximum loss is $460, but the maximum gain is $540. Therefore, there is potential for a substantial profit if the trade is successful.
For this trade to be profitable, it is ideal for Apple stock to stay between 170 and 180 for the next few months. In terms of risk management, it is recommended to set a stop loss if Apple breaks below 170 and a profit target of 10% to 15%. This ensures that losses can be limited while still allowing for potential gains.
However, it is important to keep in mind that options trading is inherently risky, and investors can lose 100% of their investment. This article is for educational purposes only and should not be considered a trade recommendation. Due diligence and consultation with a financial advisor are strongly advised before making any investment decisions.
Analyst comment
Positive news: The article highlights a unique options trading strategy that could minimize risk and potentially profit from Apple stock. The strategy offers potential for substantial gains if successful.
As an analyst, the market for Apple stock is likely to remain stable or experience slight fluctuations within the range of 170 to 180 over the next few months, as this is the ideal scenario for the trade to be profitable. It is recommended to set a stop loss if Apple breaks below 170 and a profit target of 10% to 15% for risk management purposes. Investors should exercise caution and seek advice from a financial advisor before making any investment decisions. Overall, the market outlook is cautiously optimistic for this trade strategy.
