Apple is Ripe for Option Selling

I'm often asked why our options trading newsletter is called the "Market
Taker Edge". The premise for the trades in the newsletter is that they all
have what veteran option traders call Edge , a statistical advantage that
relates payout structure to chances of success. Apple Inc. (AAPL): Bull Put
Spread There are many ways to look at edge. We'll look at this week's trade,
the Apple (NASDAQ: AAPL ) June 310/320 Bull Put Spread , from a very
straightforward perspective. S hort the June 310/320 put spread by shorting the
June 320 put and simultaneously buying the June 310 put. The trader should
collect a net premium of at least $1.00. The premise to the trade is that if
AAPL is continuing to trade above the short put strike (320) when the options
expire, the maximum potential profit is locked in at 100% of the credit
collected (less commissions). The maximum loss, should Apple be trading below
310 at expiration, is $9.00, or the difference in strikes less the premium
collected. Breakeven at expiration for this spread is Apple at $319; as long as
Apple is trading north of this level when the options expire, the spread will be
profitable. Find more option analysis and trading ideas at Options Trading
Strategies . Edge is derived because of the relative expense of AAPL options.
Specifically, AAPL options are ripe for selling at this volatility level. From a
technical perspective, the 320 level offers huge support. This is a nice
high-probability trade. The trader risks nine to win one if you look at this
trade from a simple payout perspective. But I give the chances of success with
Apple currently trading north of 345, the odds are much better than 9:1. That
means the trade has statistical edge . Dan Passarelli of MarketTaker.com writes
the Market Taker Edge  options newsletter . Dan has more than 17 years'
experience in the options industry as a market maker, Options Institute
instructor and author of "Trading Option Greeks."