Friday, June 05, 2015

AAPL Update #8 (Expiration)

Jun 5

Analysis

Expiration day! With 1 hour left in the trading day, AAPL and the markets are down, but the 128 short call strike is still in the money by 0.90.  AAPL is trading at 128.89.

I have waited until expiration for all the time premium to decay to elminiating paying for any time decay.

The overall market is looking weak and may still take further decline in the coming weeks as usually happens after memorial day going into the summer months.

Trades

+Jun 5 128 Calls for 0.89
 -Jun 19 129 Calls for 1.92
+Jun 19 126 Puts for 0.96

Net credit +0.07 / contract

We are now synthetically long the 126 - 129 vertical spread for 0.07 credit. From where the stock is trading today, I have less than 0.50 upside by expiration.

I also have the 119 Put and 127 Put expiring worthless (0)

I spent 0.35 buying the 127 puts for protection, which is added to the original cost of the Jun 5 119 - 128 hedge.

AAPL closed at 128.65. I have on a tight 3 point collar that will be at maximum profit if the stock can close above 129 by Jun 19. If the stock declines significantly and quickly toward 126 strike, we have a chance to sell the collar and purchase more stock.

Net value after today's adjustment:

Position value is 82721 + 582 - 1098 = 82 205

Long 643 shares of AAPL at 128.65 = 82721.95
Short 6 contracts of the Jun 19' 129 Call = 6 X -1.83 =  -1098
Long 6 contract of the Jun 19' 126 Put = 6 X 0.97 = 582

Remember our starting position of 600 shrs on Feb 26 was worth 78,252 at a price of 130.16, 2 pts higher than today's close. Without the dynamic hedging, the position would be actually worth 600 X 128.65 = 77 190, which is a 1000 loss, not including the dividend payment from the March quarter. Instead we are up just under 4 000.








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