We’ve had a few inquiries about the AAPL Straddle mentioned in this mornings “Blogging Options“.
With AAPL trading at ~$506 at the close yesterday, the September Weeklys (this Friday 9/13) Straddle closed at $17.20. The talking heads on the business channels are guessing what the stock will do after AAPL’s “Special Event”, starting at noon CDT today.
Here’s a very simple look at what the straddle price is telling us. A Straddle points to the shares ~2/3 of the time moving within a range approximating 80% of the Straddle price. The Straddle is trading at $17.20, and 80% of that is $13.75. With AAPL near $506, we would expect that 2/3 of the time we would see AAPL trade within a range between $492.25 to $519.75.
~1/3 of the time we would expect a move outside that range, keep that in mind. A Straddle doesn’t point to a direction, just an expected range.
See, math is simple, and knowing what the Straddle is telling you can at times be helpful.