2-Day Trade in Apple (AAPL), Plus 2 Alternatives

For traders, two days is an eternity--but it can pay off big


When options people – if that is the correct term, since many of the traders I have met on Wall Street barely qualify as human – think short term, two days can be a long time. In part, that’s because they have bought options that could always lose value in an instant. The two day trades that consistently generate high returns – on an annualized basis – are the sale of options, covered calls and puts.

Let’s go the most traded of stocks – Apple (NASDAQ:AAPL). As I write this the stock is set to around $451.50 and my screens tell me the March, Week Four $450 put can be sold for $2.50 or $250 a contract. Sell that put and if it expires worthless you have a gain of 0.56% – a pittance, you mightsay. Multiply by fifty and you have a 28% return. The worst things that could happen is a) you get out the stock and you sell calls, selling weeklies on AAPL will generate 18%-25% returns on an annualized basis or b) you roll the put to next week or next month, the big technical support level for the shares is, to my mind, $440.

If you want some breathing room, based on a ten day chart, you could sell the $440 put. The annualized return on that position if it expires worthless, is 3.6%.

If you own 100 shares or more, think calls. (I own AAPL shares and have sold the May $465 calls). If you sell the $460 call you get $60 a contract, if you sell the $455, you get $160 a contract. The annualized returns, respectively, are 6.65% and 17.74% – plus any appreciation in the stock and the dividend.

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