AAPL Straddle – Math Made Simple

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 $13.75With 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.

2 Comments
Marty Kearney

Mr. Kearney began his long association with the CBOE when he became an independent Market Maker in early 1981. Mr. Kearney traded options full time on the trading floor until 1992 and periodically thereafter until 1996. In early 1992 he became a founding partner and Registered Options Principal of a brokerage firm based in…

Tags

  • Bret Kenwell

    Think you have the wrong stock price in there.

    • SBTrades

      yeah, they should have $465 LOL