Monday, July 06, 2015

AAPL Update #15 (Stock Purchase)

JUL 6

Analysis

AAPL dropped on the open, but started to rebound. The stock is behaving strongly and although the chart indicates a downward trend (lower lows), it is an orderly decline with buyers at each level. Today AAPL traded in a range from 124.85 to 126.23, and closed at 126.00.

With less than 5 DTE to expiration, I have chosen to close the collar, take some profit, and purchase a few more shares. While its possible that a further downward move may happen, the time value in the options are quickly running out. Unless a very sharp downward moves happens, both options will likely expire worthless.

In hindsight, the optimal time to close the hedges was a week ago Monday when there was considerably move time value and volatility, and both option legs were profitable.

I have elected to place a new collar for a credit to offset the commissions, but in keeping a little more upside while keeping a put strike still within the EM move for this duration. The EM for this period is 120.5 - 131. 

Earnings is during the week of expiration, and historically AAPL tends to bottom out before beginning a move higher into the fall.

The greeks and risk graph for today's rolled position:





Trades

Closing
+1/c Jul 10' 128 Call 0.29
-1/c Jul 10' 125 Put 0.80 (a week ago on Jun 29 ago this was trading for 1.84!)

From the proceeds of this collar, I am able to purchase:
+3/shrs AAPL @ 125.69

New Hedges Opening
-1/c Jul 24' 129 Call 1.83
+1/c Jul 24' 122 Put 1.68

Net Credit +0.15/c


In the last 5 months, the stock is trading approximately 4.5pts below the opening position on Feb 26. In spite of the price decline, hedging has increased the position by +57 shares, which at today's closing price of 126 represents a value of 82 782, or a +4530 gain. In terms of a yearly rate of return, this is +17.1%, despite the stock price being lower by -3.4%

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