I love a trade review as much as anyone. Looking over a trader’s shoulder to see why and when they entered a position is instructive. Watching it through to fruition is even better. How and why did they manage and exit the way they did? Are there tactics that you can apply to your approach that will improve performance?

In this week’s Tales of a Technician blog I mentioned a few tickers that I traded last month. I received a few requests to provide more detail. For those that aren’t already aware, I sometimes review these trades in the Cash Flow Clubs so you can usually find more information there.

For today I want to reveal how I played a put calendar on AAPL this week.

The Setup

On August 31st, Apple shares notched their eighth consecutive up day. Given such a relentless rise, the stock was overbought. This is the type of pattern I look for when using put calendars. I expected AAPL to pause or pullback over the coming days. On the implied volatility front, options weren’t as cheap as I would have liked, BUT I was willing to bet that if AAPL did fall in price that implied vol would stay aloft, if not move higher.

So, with the stock at $227.50, I entered a Nov/Sep put calendar for $4.62. I bought November because it expires after the next earnings release and the pre-earnings volatility build would help keep it’s premium aloft. I sold September puts because they still had sufficient premium to make them worth selling. Otherwise, I would have sold October.

The strike I chose was slightly OTM at $220. This set the trade up as mildly bearish making it well-equipped to handle a drop in the stock.

The Plan

My plan was to add a $230 put calendar (again, using Sep & Nov) if AAPL kept rallying to $235. That would have turned my position into a double calendar with $220 and $230 as the tentpoles of my profit tent.

My profit target was a 15% gain. Sometimes I go for 20%, but it’s hard for me not to bail at 15% if I get the profit quick. If there’s one thing I’ve learned with managing put calendars, it’s to take the profit when you have it! Overstaying my welcome to milk more of the potential gain rarely ends well.

Since I purchased the spread for $4.62, I was shooting for about a 60 cent gain. I placed a GTC limit order to sell the put calendar at $5.20.

The stock ended up rallying one more day, and then gravity took hold. Is anyone who knows how to read a chart surprised at AAPL’s pullback yesterday and today? Was it not painfully obvious that Icarus was flying too close to the sun?

With the downdraft, AAPL came right into the heart of my profit zone. This morning’s low was $221.30 bringing the price ever so close to my $220 strike. Additionally, implied volatility has increased over the past few days inflating the value of my put calendar. The IV Rank was at 52% at entry and is now 58%.

My order to close the trade was filled at $5.20 netting a 58 cent gain in a little over six calendar days. Really, this was only three trading sessions. Could I stay in and try to milk more profits? Sure! The management comes down to personal preference. I’ve just found that guerilla trading works well for my personality.

Place trade, take quick profits, redeploy.

Now, let’s see if the magical fruit can provide us with a clean bull retracement pattern to play some bull puts.

---

Financial freedom is a journey

The Options Theory series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

# Sign up now for a 15-DAY FREE TRIAL #

---

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisers, to determine whether such trading or investment is appropriate for that user.