By Dmitry Pargamanik
If You Are Bullish On AAPL, Here Is A Credit Put Spread, Expiring On Nov 01, To Consider
As you can see from the bottom section of the trade idea card, this strategy involves selling the 01-Nov-24 227.5 put and buying the 01-Nov-24 227.5 put.
Here Are The Highlights Of The Strategy
- Market Price (Credit): 0.80
- Theoretical Value: 0.63
- Theoretical Edge: 10.3%
- Yield Potential: 47.1%
What Needs To Happen?
AAPL Needs To Remain Above 227.5
At the time of this writing, AAPL was priced at 230.56. To achieve maximum profit from this spread, the stock must maintain a closing price above 227.5 on the option expiration date of November 01, 2024.
How Much Can You Make?
Max Profit of 0.80 Equates To A 47.1% Potential Return
In such a scenario, both puts would expire worthless, and you would retain the full credit received from selling the spread, which amounts to 0.80. When expressed as a percentage of the amount at risk, this put spread has the potential to yield a return of 47.1% (0.80 credit / 1.70 amount at risk).
What Is The Estimated Win Rate Of This Put Spread?
Estimated Win Rate Of 75%
Historical stock behavior implies that this particular put spread has an estimated success rate of 75%, but there is no guarantee or way of knowing AAPL's future performance with certainty.
What Is The Risk?
AAPL Stock Could Decline
Since this is a bullish strategy, it carries the risk of a stock decline. In this case, the break-even point on the downside is 226.70.
How Much Can It Lose?
Max Loss of $1.70 On A Stock Decline Below $225
If, at the option's expiration, AAPL's price drops below the $225 strike, both put options will be in-the-money, causing the spread to be valued at $2.50 .In such a scenario, the max loss would amount to $1.70, assuming no exercise or assignment risks.
In Summary
What Makes This Opportunity Compelling?
This AAPL bull put spread, set to expire on Nov 01, 2024, appears to have a theoretical trading edge and has a potential to generate significant returns while limiting risk.
When Should You Consider This AAPL Bull Spread?
It is important to remember that the outcome is uncertain and that the strategy is of a bullish outlook. The stock has to stay above 227.5 at expiration to fully pay off.
As always keep in mind that all investments carry risk, and success is never guaranteed.
Don't Let an Opportunity Pass You By!
Find More AAPL Credit Put Spread Strategies
And if you want to find more credit put spreads for other stocks, go to the bull put spread screener
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