Tuesday, May 19, 2015

AAPL Collar Update #5

May 19/20

Analysis

AAPL has been in rally mode. The stock closed at 130.07. The stock is trading above the short Jun 5 15' 128 call. The call is exactly 2.07 in the money (ITM).

Looking at the option chain for Jun, the 130 call is trading 3.30 bid x 3.45 ask, and the 119 Put is trading for around 0.12

There is 1.35 time value in the calls and the puts are nearly worthless.

Overall, we are realizing the maximum profit on the 119 - 128 synthetic spread. What we do next determines if we keep roll the collar up, or let it expire selling our stock.

What can be done in the next two weeks?

(1) As of today, the short Jun 5 128 calls can be rolled forward and to the Jun 26 130 strike for roughly even money. This will give 21d more time and move the profit range up another 2 dollars (1200). We would not have downside protection unless we purchase more puts.

(2) The short 128 call can also be rolled up and out to Jul 17 130 call for a 1.00 credit. That credit can then be used to purchase the Jul 17 120 put for protection. This gives a 120 - 130 synthetic vertical.

The downside protection is 10 dollars away and depending on the expected move (EM) may not be reasonable. We would have 0 dollars left of potential gain.

(3) Let the position get called away, if the stock stays above 128 in the next two weeks and reset the collar with a new stock. The Jul 17 2015 125 - 135 collar can be done for even money.

(4) Spend some cash and roll up the puts to 125 or 126 strike. This could be done for a net debit of about 0.26 to 0.47 per contract and provide 6-7 dollars of protection until Jun 5 expiration.

Position Value:

If the stock gets carried away at 128 at expiration the value of our position will be approximately:

600 shrs sold X 128 = 76 800
43 shrs X 128 = 5 504

Total of 82 304

I could then purchase back stock (approx 560 shrs) and restart a 6 lot collar.

The stock would be sold 2 dollars lower than the opening position, but the total position value would be over 4000 greater, all due to the extra shares bought.


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