Iron Condor....that sure sounds "wild and crazy" but basically it is a belief that Apple will trade relatively flat (within a $55 or 13% range) over the next few weeks (or less).
In general an iron condor is the combination of a put and call spread. The specific transactions in this case are:
Sell Jan $375 Put Sell Jan $430 Call
Buy Jan $370 Put Buy Jan $435 Call
Apple is trading around $405.
These options were sold for a credit of $164
If held to expiration (which is unlikely)
- Worse case the stock hits new highs over $435 or pulls back below $370 in the next two weeks. In this case, the portfolio will lose $336 per contract.
- Best case the stock stays anywhere between $375 and $430, and the portfolio gains $164. CCI thinks this is probably because there are enough Apple bulls to prevent the stock from falling too far before Jan earnings. Conversely, many competitors are now shooting at Apple, they have unfortunately lost their leader, and at some point the momentum money may stop moving towards Apple.
- Realistic Case - If Apple bounces around the $400 mark for a shorter period of time this trade will gain money daily and can be taken off for less gain but well before expiration.