As many of you read my post two days ago outlining how to play Apple earnings, I want to check in and see how the position is performing. Despite the position being relatively expensive, Apple did not disappointing and is currently down 10 percent after hours, trading at $460.
If you recall, I created a strangle on Apple using the current January weeklys. I paid a net cost of $23.40 to establish the position using long position in a $490 put and $510 call. Since the position was relatively expensive to create, I had break even points at $463.60 and $536.40. Obviously, the more important break even point in this situation is the $436.60.
Looking back, the position was probably too expensive and had already priced in the volatility. However, As of a few minutes ago, The position is in the money. I am looking for this position to continue deeper into the money for the following reason.
Apple has broken below its 3 year upward trend line, which in my opinion is the start of a significant down trend. Even after the dip below this trend line, technical indicators are not indicating that the stock is, by any means , oversold.