Apple Inc (AAPL)

[PaperProfit1]

RISK

As I said in my previous post, should AAPL trade sideways to down, my september short would tend to expire worthless, while the Jan05 will barely budge. Eventually, month after month of shorting the front month (if the stock goes sideways), I will have paid for my long call. However, if I felt that AAPL will begin to rally, all i have to do is cover my short, and let the long call appreciate.

My worst-case scenario (maximum risk) would be if AAPL rallied to $40 with the next 30 days. Anything could happen, I suppose. Here is an expanded view of the risk graph I posted recently, so you can see where the breakeven points are in relation to my maximum risk:



If AAPL was to drop 30% over night, my maximum risk is about $700. If AAPL was to go UP 30% overnight, my risk would be abou $1000. If AAPL slowly and progressively drifts down, I could short lower and lower calls every month, this would be the best case scenario for me. I could leave the Jan 25 call as a forgotten lottery ticket all paid for.

What I see in the charts suggests that AAPL is going sideways for a while, here are some charts to support that:

First, my original Elliott Wave analysis, which seems to have been prophetic:




Other, up-to-date charts which suggests sideways to slow down movement to come: