Perhaps we’ll have a chance to get short at 23.70 after all. If the stock rallies to within five cents of that number — a promising Hidden Pivot resistance — plan on buying eight January 22.50 puts. I estimate that they’ll be trading for around 0.53 then, but allow for a range of 0.51 to 0.56 (paying no more). I’ve included a snapshot of an option calculator into which I’ve plugged a 22 volatility that yields a theoretically fair price for our puts. According to Tradestation, that’s the actual implied volatility right now for the January 22.50 puts, although far-out-of-the moneys well below that strike are trading at four times that level. What this implies is that we’ll get great leverage by shorting puts of a lower strike against our position if GE falls after hitting the 23.70 target. _______ UPDATE (October 23, 3 a.m. EDT): The stock got sacked for a 4% loss on Friday, but I’ll let the trading recommendation stand for now, since Monday’s commentary raises the prospect of AAPL turning the market around this week. _______ UPDATE (11:31 p.m. EDT): We’ll put aside thoughts of shorting into strength at the moment, since this stock has come down hard with all the others in recent days.
