Hey everyone!
If you set up your bear call spreads on AAPL around two weeks ago, you can consider closing your positions and locking in your profits. Remember, the reason why you are profitable with your AAPL bear call spreads is because AAPL didn't move for a while and both of your option legs were decayed by theta.
AMD Bear Call Spread
I am considering moving to AMD to set up my bear call spreads now. I'm seeing that AMD might still bounce around the next couple of days and have some obstacles to jump over to reach back to it's all time highs. You can follow along this trade if you have the risk tolerance for it and you are willing to own AMD shares if the stock decided to rally back up.
Step 1: Buy one July 16, 2021 call option at the $115 strike for $7 (Delta 0.01)
Step 2: Sell one July 16, 2021 call option at the $90 strike for $99 (Delta 0.21)
Step 3: Set a buy stop order for 100 shares at $89.
Profit: $99 - $7 = $92 per contract
This is just one contract of a bear call spread for AMD. Some of you who have larger accounts may be able to trade 5-10 contracts, meaning that the credit you receive can range from $460 to $920. If this is your first time setting up a bear call spread, remember to take it easy and you can just start off with one contract to get your feet wet. Or, you can even just sit on the sidelines and observe how the numbers fluctuate in time due to theta decay and changes in delta.
If AMD stays below $90 on expiration, then both my legs will expire and I get to keep all the premium. If AMD rallies above $90 on expiration, then I will have purchased 100 shares for $89 and sell the 100 shares for $90, which gives me another $100 capital gain.
Remember that when you set up your bear call spreads, you don't have to wait until expiration to close you position. You can technically close your position within a week or two, or even when you make a profit from the theta decay. Once you close your positions, you can then restart your bear call spreads again. Wash, rinse, and repeat.
Happy trading and investing! 😎
-Steve and the Call to Leap Team
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