The Dream Is Over on Apple Trade: Sebastian

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Sept.11 (Bloomberg) -- In today's "Options Update," Bloomberg's Julie Hyman and Mark Sebastian, director of trading at Swan Wealth Advisors, examine the options trade on Apple in "On The Markets." They speak on Bloomberg Television's "Lunch Money."

What has happened with apple is the dream is over with apple.

It is not going for $700 in the next three months and investors need to get over that.

If you look at vxapl applied to the apple options -- a measure of volatility in apple stock -- it's great, if you look at the last two announcement, they had earnings and this product announcement and the vxapl has not moved the way it has in the past with huge volatility with investors expecting major moves.

When you combine that with a lower stock by him and lower option volume, we are looking at a stock that has gone from exciting to a stock that is a nice cheese sandwich.

It tastes good but it is not exciting.

I don't think an apple manager would like you to say that exactly.

How do you trade on something like that?

Moving back to the wheel trade, it is a great way to use options to create income in stocks that i might want to own.

I will sell and out of the money put like five-10 % of the money.

I will keep selling it until i take delivery.

Once i take delivery, i am hoping i collect the dividend and i am hoping the stock begins to depreciate and i will begin a call selling routine.

The wheel is sell-foot, take the stock, take the dividend, and cell calls against it.

You are in and out of the stock and you take a stock that does not move around much and does not have a lot of and create an income stream using options, plus the we'll take you in and out -- thus the wheel takes you in and out of apple stock.

You are betting that the relatively low volatility will continue within this range.

Absolutely, it is great for mature stocks like apple, microsoft.

And like general electric.

What's great about apple is that it has many options that are 1/10 the size of a contract so a retail investor can do a mini option will selling the mini apple out of the money put with 10 shares of stock.

Apple are options, even the retail investor can use that to their advantage which was not available until six months ago.

Thanks a lot.

Some new terminology, the trip

This text has been automatically generated. It may not be 100% accurate.


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