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December Option Position

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Apple Inc. (APPL) is still somewhat attractive in the mid 80s. However, the stock price is currently at $92.67. Some of the preliminary sales results from Black Friday and Saturday are showing that sales of APPL products are some of the most popular. According to Amazon.com, three of the top 10 electronics are made by APPL. However, this is down from last years 5 of the top 10. Other speculation surrounding APPL is related to Steve Jobs health. Finally, one assessment on the stocks decline was that less people would buy the more expensive Apple computer.

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The stock price ran up to and then declined from the downtrend line on Friday while the broader markets advanced. Therefore, I want to be positioned to sell the calls and the puts on APPL. I think selling the December 110 Calls (QAA LB) provides enough room if the stock breaks out. The reason I chose 110 is from the Upper Bollinger band's current level. The chart looks weak according to the RSI and Slow Stochastics. The December 110 Calls are selling for about $1.10 per contract. That is about half of our return goal. If you choose to be more aggressive, you could sell the Dec 100 Calls for about $3.30 per contract and cover them if the stock breaks and closes above the downtrend line. Finally, the overall position is created by selling the December 75 Puts (QAA XO) for about $1.50 per contract. Since the stock is in a downtrend, I wanted to give the price more room to decline without risking getting stopped out while the stock establishes a double bottom. Finally, if the stock breaks above the downtrend line, cover the 75 Put and sell the 80 or 85 strike. The technical stop is at a break below $79.00 which is a little below the recent low. The initial margin on 1 contract is about $900. The overall Delta is -1.70 which is basically neutral.

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