Weekly Trade Idea in AAPL

Trade idea: AAPL Iron Butterfly
With AAPL near $466:

Sell 1 Weekly March 470 call
Buy 1 Weekly March 475 call

Sell 1 Weekly March 465 put
Buy 1 Weekly March 460 put

These March weeklies expire this week on March 28.

$3.40 credit. Two break-evens on this trade (I’m excluding commissions); $473.40 and $461.60. Maximum profit reached if between 465 and 470 if held until expiration (see next paragraph, probably out before then), $3.40. Max Risk is $1.40.

Why am I doing this? For the wonderful THETA. We put on today to avoid weekend risk and potential gap on Monday mornings. Looking to be in the trade maybe 2 days. A slight bullish bias on this trade.

What if Iā€™m wrong? If AAPL goes under 160, I might buy an OTM put to cut position deltas in half. On upside around 475, I would look to buy an OTM call to cut my position deltas in half. My adjustments if needed would be in the April 5 expiration.

Would I do this every week? Absolutely! This is a very good risk reward, high theta trade that I would put on almost every week (maybe not the week of earnings or the week before). Key is to keep losing weeks at about the same dollar amount as the winning months.

Dan Sheridan
dan@sheridanmentoring.com