I’ve refined and revised the chart accompanying the December 30 Apple tout to come up with a rally target somewhat higher than the one at 341.29 given here earlier.  Two new factors obtain:  1) use of the visually obvious point ‘A’ rather than the one-off.  This was done because we should use the maximum projectable swing high, not a potential interim high; and 2) a new point ‘C’ low that is visible only on a 24-hour chart.  The new target is 344.61, so let’s try to get short by buying two February 310 puts if and when the stock gets there, stop 345.01.  I calculate the puts to be worth about 3.05 with AAPL trading near the target, but their volatility could plump up quite a bit as the stock rises, and the puts might actually be trading for as much as 3.30-3.50 if volatility expands promiscuously, as it well may.  In any event, the best way to get the best price is to closely monitor the bid/asked spread on the options as 344.61 is approached.  Do that for 10-15 minutes before it’s time to buy and you’ll be sufficiently “expert” on the Feb 310 puts to buy them with confidence.

If you have to exit the puts on the stop, you should have to give up no more than 0.15-0.20 or so apiece, since they will be trading with a delta value of about 15.  That means that for every dollar the stock rises, the February 310 puts should fall by about 15 cents.  Some final notes:  1) If the target is hit before the start of the regular session, short a round lot of stock instead of buying puts; 2) an alternative target lies at 341.84 if you use the one-off ‘A’ with the new, night-session ‘C’; and 3) if you’ve been long since the rally target was first disseminated with Apple trading around 323, take scale-out profits and implement a “dynamic trailing stop” as detailed on the Rick’s Picks “Education Page”. ______ UPDATE: I’d have preferred to see the little monster hit our 344.61 target yesterday in the throes of its $7 rally, but we’ll stick with our game plan nonetheless, even if it implies a piddling head-fake top rather than a blowoff.  _______ FURTHER UPDATE (January 11, 1:54 p.m. ET): We bought two February 310 puts for 2.85, a price reported in the chat room.  This trade illustrates once again why the options game is so very hard to beat (even though, using every trick in the book, we’ve done so consistently enough to come out well ahead). The rally target did its job, since it may have caught the top of a $21 surge within 35 cents. However, the puts picked up huge “juice” on the rally, and although they “should have” been trading for 2.32, the lowest price you could have bought them for was 2.77.  Even more vexatious is that although the stock has dropped $4.35 from today’s peak, our put options have gone no higher than 3.08. If they were trading with the same volatility we paid for them, they’d have hit 3.47 when the stock was making its so far correction low at 340.64.  For now, set a break-even stop-loss, exiting the puts if they trade back down to 2.85.  Our eventual goal will be to short puts of a lower strike against the ones we own if AAPL continues to correct. If we do so for 2.85 or better, we’ll own two vertical bear put spreads for free.