I wrote a put on Apple Inc. (AAPL) on Monday.

music selection: “Revolution” — The Beatles

I’m getting back to basics with the Big Cheap Tech theme.  I am also playing a little defense at least until the market shows signs that it can make and sustain new highs.

The spot price for shares when I wrote my put was 106.18.  I went with a 100 strike which was the first strike that offered a minimum 12% annualized yield.  The contract is AAPL160129P00100000 which I sold for 2.10.  The trade will be in play for 41 days and yields an annualized 18.70%.  Importantly, I picked up 7.8% of downside protection for this trade.  A roughly 8% downward move in 41 days would be unusual for a slow moving mega cap like AAPL.  It can happen but I have a greater than usual amount of wiggle room if the underlying starts to move against me.

That is part of the power of selling options.  You can make a return that outpaces the average for the broad indexes with much lower volatility.  Some people think options are risky but when you use them right, they provide superior *risk adjusted* returns.

Ravenous lizard playing the home game version might note that the near the money strike was offering a 38.5% annualized yield.  I’m always hungry but currently have an appreciation for concept of “enough.”  Twelve plus percent will do just fine, thank you.

Merry Christmas and devour your prey raptors!

Write Put Apple Inc. (AAPL)

Never miss another opportunity to devour prey!

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