By Jon "DRJ" Najarian of OptionMonster
I decided to use a put spread, as that carries much less risk than shorting the stock. So I bought the October 100 puts for $1.40 and sold the October 95 puts for 40 cents.
That trade paid off quickly, as Apple shares fell from just shy of $103 to $97.72 in the next 24 hours.
I took profits on 50% of the position at that time, turning that $1 spread investment into $2 for a 100% profit. (The reason I took profits was my normal discipline of taking money off the table whenever a spread doubles).
The spread shrank back to $1.20 as shares rallied back up to $101.50, but I continued to hold it.
As I said on CNBC Wednesday, my reasons for this position included supply and software issues, as well as the bending problem with the iPhone 6 Plus. And if hedge funds face redemptions and need to raise money, then Apple may be serve as their piggy bank -- and that could bring further pressure in the short term.
On Wednesday, Apple dropped back below $100, down 1.56% to close at $99.18. Our October 100/95 put spread is once again very profitable, trading actively for $1.70, as our long 100 puts are going for $2.30 and our short 95 puts for 60 cents.
We still have 16 days until the October options expire, and the market hasn't shown much reason to be bullish, so I will hold this short position with a stop at my $1 entry cost.
A version of this post appeared on InsideOptions Pro Wednesday.