Wednesday, June 24, 2015

AAPL Update #12

Jun 25

Analysis

The AAPL collar is expiring Jun 26. The stock rallied and dropped back yesterday, closing at 128.11. The synthetic 124-128 vertical is at full value. I need to roll the position by Friday or the stock will get called away.

As the stock is trading right at the short strike, I am looking to roll a day early and re-establish the hedge 1 dollar higher.  I do not want to risk too much a move to upside which will cause a deeper in the money roll and be more expensive.

I also still want to keep the hedge tight particularly if the market gets volatile, I want to be in a position to trade the long puts. IVR is particularly low for AAPL.

I am also going to keep make the duration of this hedge short expiring on Jul 17' or earlier if possible.

Trade

Roll the current short call up and out in time and purchase a new put 1 strike higher.

+6/c Jun 26' 128 Call (+0.94)
-6/c Jul 10' 129 Call (-1.54)
+6/c Jul 10' 125 Put (+0.53)

Net : +0.94 - 1.54 + 0.53 = -0.07 credit/c

I am now long the Jul 10' 125-129 synthetic vertical spread with stock trading about 128.50. I can capture another 1 dollar in gains from last month or look to sell the collar should volatility pick up and there is a quick move down.

Maximum value of the position at Jul 10' expiry is at least:

+600 shrs X 129 = 77 400
+54 shrs X 129+ = 6 966
Total: 84 366

Stock closed end of day at 127.50

-End




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