Wow, what a day!
Now aren't you glad we added those hedges on Tuesday? Keep in mind that I can only tell you what the market is going to do and how to profit from it – the rest is up to you… Our trade idea from Tuesday morning's post was:
- Buy 40 June SQQQ $17 calls for $2 ($8,000)
- Sell 40 June SQQQ $21 calls for 0.85 ($3,400)
- Sell 5 AAPL 2018 $85 puts for $7 ($3,500)
The idea is we REALLY want to own 500 shares of AAPL at $85, so the $3,500 we collected for selling the puts is free money and AAPL only fell to $95 anyway, so we're feeling very good about our 2018 obligation. Meanwhile, the Nasdaq Ultra-Short (SQQQ) June $17 calls are already $3.10 ($12,400) whille the short June $21 calls are $1.15 ($4,600) so we could close that spread now for $7,800 off our $700 cash outlay on Monday and that's a gain of $7,100 (1,014%) in 4 days – you are very welcome indeed and THAT is how we hedge!
That then leaves us with just the obligation to buy 500 shares of AAPL at $85 in Jan, 2018 if it is below $85. The current ordinary margin on 5 short puts is $4,225 according to Think or Swim or we could buy them back for $9.80 ($4,900) and then we'd be cleanly out of the entire trade with a $2,200 gain (314%) in 5 days.
Our portfolios, on the whole, took very little damage on the dip (so far), and keep in mind the upside on the SQQQ spread is $16,000 – so still good protection in case things don't improve…
