Sunday, May 10, 2015

AAPL Collar Update #3 - #4 (Stock Purchase)

May 4

Analysis

Stock closed at $127 on Friday. Both May 1 hedges expired worthless. The was a brief opportunity to roll puts for around 1.20 a day before expiration but not quite enough to recover the cost of the roll of the puts up to the 126 stirke.

Being so close to expiration as the price rallied the next day, the option premium evaporated.

The price action of the stock after earnings indicate a decline may further occur. The stock topped out around 134 (inside the EM) and proceeded to have several large down days in a row. This has certainly created a large amount of overhead supply. There will need to be several tests of this supply zone before it can break through.

AAPL will be trading ex-div on May 7, payable 0.52/shr on May 14.

Trades
1. Purchase new hedges
June 5 134 C - sold for 1.90
June 5 125 P - buy for 1.97

This creates the long the 125 - 134 synthetic call spread for 0.07 X 6 (63) debit, protecting net long 625 shares.

Value

+625 AAPL shares X 127 = 79 375
+0.52 div/shr payable after May 7 = 352
+6c Jun 5 125 Put X 1.97 = 1182
- 6c Jun 5 134 Call X 1.90 = -1140

-End



AAPL Collar Update #4

May 6

Analysis

Stock has been dropping quickly over the last few days hitting a low of 123.36 and closing today at 125.01  The hedges were closed, stock purchased, and new hedges put on.

Trades
1. Close the hedges
June 5 125 P - sold for 4.65
June 5 134 C - buy for 0.72

Net credit collected
Puts (4.65-1.90) + Calls (1.97-0.72) * 6 = 2400

2. Purchase stock
18 AAPL shrs * 124.04 = 2232.72

3. Re-hedge
June 5 128 C - sold for 1.97
June 5 119 P - buy for 2.02
Net debit 0.05 X 6 contracts (30)

Long the 119 - 128 synthetic vertical spread, long 643 shares

Value
+ Share value 643 X 125.01 = 80 375
+ Cash value 167.28
+ Option value remaining
Div payment of 0.52 X 643 shrs = 334

Approximate value of 80 876

Compare this position value to the opening statement from Feb 26 of 78,252, 600 shrs at 130.42

The stock is currently down $5, but the position is up +2600 and with 43 more AAPL shares.

The collar has a potential 3 dollar gain (128 - 125) remaining by Jun 5 expiration, representing a total of $1929 more gain.

-End