Hey 5-Star Trader,
“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.
For “Tuesday Trade” this week, I want to outline my trade in Apple (AAPL).
The market is composed of three different types of companies which can be categorized as either small, medium, or large-cap stocks. This is determined by how much the market capitalization can be attributed to any said company. And of all the large-cap companies, Apple is among the biggest. For that reason, I like to trade Apple whenever possible, because typically, the larger the company, the less volatile they are to trade.
At the end of last month, Apple caught my eye and I went in — BUY +2 BUTTERFLY AAPL 100 (Weeklys) 31 DEC 21 172.5/180/187.5 CALL @2.33 limit order (LMT). Usually, I like to set my days until expiration (DTE) for at least 21 days, but because I was preparing for the Santa Rally I chose to make this a short-dated trade. My target was $180, and due to the quick turnaround, I limited my risk to 1.5%.
A few days later and the market was looking pretty quiet. We were seeing low volume, but my trade in AAPL was still doing okay. On December 30, my return on Apple was around $5.70, but that was still below my maximum profit potential of $7.50. So, in this case, I decided to scale out and close one of my contracts — BUTTERFLY AAPL 100 (Weeklys) 31 DEC 21 172.5/180/187.5 CALL @5.69 LMT.
This allowed me to take profits while extending the trade for possibly more profit.
The next day, my remaining contract was expiring. I waited until the last hour of the market to see if I could close out AAPL near my maximum profit, but unfortunately, I couldn’t quite get there. Instead, I closed out my last position for a profit slightly less than the day before — SELL -1 BUTTERFLY AAPL 100 (Weeklys) 31 DEC 21 172.5/180/187.5 CALL @5.17 LMT.
Overall, a nice result in a large-cap setup.