The next possible trade I want to look at is a little more speculative so you need to figure out if this risk is appropriate for your portfolio and trading style. Do note I'm writing this before employment so the entire scenario could change. There's a lot of short term conditionals I'm waiting on for this play.
AAPL could have put in a potential double bottom, and looking at the strength in big cap tech, this should be a bullish play provided market strength continues into the week. The moving averages are also starting to cross and point up, and there could be a substantial move in the stock.
In the intermediate term it's coming into some resistance at its current price level so we could see a pullback, but I don't want to see it go below 92. If it dips below that level, then the technical thesis is proven wrong. What we really want to see is a breakout above 97 on good volume.
So there's a couple ways to play this. Personally given the choppiness of this market, I'm going to be waiting for the breakout and then the potential pullback into that shaded area. I'm fairly certain that's how the price action is going to play out. You could anticipate the breakout, but I don't think the market conditions are suited for that.
Using a combination of fibonacci exttensions and previous price action, I think that the estimated move from here would be to around 110. From there it would be prudent to take profits or move into a smaller delta position.
So let's look at some option plays we could use. Let's assume for now that price broke out and pulled back, so the current option prices will be similar to the ones we will have in that situation.
My guess is that if AAPL goes up, so will the market and the VIX will most likely go down. So it would make sense here to sell some puts.
Sell AAPL Feb 95 Put 2.70 or Better
This position will take advantage of the price movement (delta), the time decay (theta), and the potential volatility drop (vega). Your overall return on basis is about 3%, which isn't bad for 2 weeks worth.
In terms of risk management, I'd want to keep this one on a tight leash. We don't know how long any rally will last and if the technical thesis is proven wrong, then we ought to get out of the position. I'd say a break below 94 after a breakout has occured would be a good place for a stop. That's about 100 risk to 270 reward, which is 2.7R. I think for this particular play this has good risk-reward characteristics.
Notice that I did think the price could move back up to around 110, so if you wanted to get a little more speculative, you could go with this play:
Buy AAPL Apr 110 Call 270 or better
Do note that for this play we wouldn't want to hold it until expiration; we would most certainly lose all value. This is more of a short term trade. The current delta is 27 for each position but as the play goes further in our favor the delta will continue to increase (gamma).
I think taking profits at 103 for this play would be prudent. Also what you could do is pick up sets of 4 contracts and when it gets to that 103 area, sell half and cover 1 with a Mar 110 call sale. That way it becomes nearly risk free and if there's a pullback, you can buy the front month call back and get bullish again.