I didn’t get my ‘flys on AAPL, but I did get a few bear call spreads. So I am going to run thru my thought process on the way I looked at trades. So first is my general thought process on option trading. This is a speculative trade,so I don’t follow my normal rules on option trading. I also limit my speculative trades to a smaller part of my account.

[1] Look and analyze the situation,[2] Look at the market,[3] Find the best strategy to fit that trade,[4] Worry about how much pain you will be in if you get it wrong., [5] Make the trade.

Well, I looked at AAPL, and I had an opinion. When I looked at AAPL the morning of the conference, the options had not moved to a point that I would have been comfortable placing on a trade.

So here is how I made the trade.

[1] Look and analyze the situation
I thought that IV would spike on AAPL options and then an IV drop , same as what happened last year’s WWDC. ( It turned out I was wrong on both counts. But that would have been taken care of because my other rules stopped me from taking the trade )

[2] Look at the market
Monday morning, the IV’s didn’t move the way I needed them to move. I ended up not taking the trade because I could not get a wide enough profit band. I guess when Cramer is talking about it, it is hard to outguess everyone. But the JUN 135/140 calls had a really high IV, and they were cheap. So I looked for a way to trade those.

[3] Find the best strategy to fit that trade
When I looked at AAPL the morning of the conference, the options had not moved to a point that I would have been comfortable placing on a trade. By looking into the options ‘playbook’ showed that bear call spreads would work and I would feel comfortable with trading them. I normally do not trade bear call spreads ( or credit spreads for that matter ), but that was the best tool for the job. The options were expiring in the next four days, and no news, earnings or takeovers on the horizon for the next four days, so I was cool with that.

[4] Worry about how much pain you will be in if you get it wrong.
Using my std dev spreadsheet I calculated that it would take a move of two standard deviations to move me into the red. SO I took the trade. I didn’t get the trade until 1 pm, but I got a good price.

[5] Make the trade.
Execution, execution, execution. I got the price I wanted by watching the market. You don’t always get the price you are trying to get, and maybe those are not the trades you should be making.

Funny thing is AAPL got spanked after the WWDC. It seems like people are looking for a reason go go south on AAPL. Moving down after good news is usually a bear sign.

I will make money on my bear calls anyway. It would take a three standard deviation move to put me out of the money. And when I bought the spread, it was a bear credit spread, NOW it is a debit spread to get in.

Disclaimer: I am long AAPL in my non options account