A look at AAPL's relative strength compared to the market will tell you that AAPL is one of the strongest stocks in the market, and has been steadily getting stronger over the last 6 months or so.
139.142.147.218
AAPL will correct. Trees don't grow to the sky. But it's a freight train. I wouldn't try to kiss a freight train if I were you.
A better strategy would be to wait a while for both AAPL and the market to correct. Then, when the market shows its hand and a resumption of the long-term uptrend begins, buy calls. How much longer this medium-term correction will last is highly uncertain. It could all end in a week, or it might take a month or two. It just depends on how fast and how furious the markets head south, and how the supportive volume patterns shape up as the indexes move down. Remember last July?
139.142.147.218
The markets plunged sharply, formed a V-bottom, and pivoted 180 degrees in just 7 weeks, and that was the end of that medium-term correction. They reversed sharply and headed north with a vengeance, fueled by a big surge of supportive volume. Now, we are beginning the 6th week of the current correction, and there are already indications that the correction is weakening. I don't think this will get drawn out for several months.
Buying front month puts that expire in just a few weeks is a strategy that incurs substantial risk. IMHO (with very rare exceptions) the potential reward doesn't adequately compensate for the risk. The exponential decay of time value in Feb. puts means the stategy won't work if AAPL merely goes down, it has to go down fairly hard and fast---highly unlikely for AAPL. It is even worse if you end up being right, because that will just encourage taking positions with unfavorable risk/reward profiles, a strategy with no future.
There's plenty of overbought stocks out there to short, also anything in a downtrend is a possibility. If they are both overbought AND in a downtrend, you've got the probabilities and the trends on your side, especially if the downtrend was just initiated within the last 3 months or so.
JMVHO....
T |
