Sunday, July 12, 2015

AAPL Update #18

Jul 12

Analysis

Weekend Update. AAPL surged on Friday, closing @123.26 with an opening gap up off the previous day's close. (This was out of a technical larger time frame demand zone, but that's another entire blog series).

The hedges on in place now were five points from the last stock purchase at around 120. The short call is at 125 and the long put at 115. Volatility in AAPL is rising due to upcoming earnings event in just over a week.

The net risk graph on the position is below:



From the graph, it is known that the position is net theta positive and that the maximum profit unadjusted is 6000. (There curve is not flat at either ends because of the +74 unhedged shares). Maximum profit is just 1.75 higher and 21 days to expiration.

The strategy for now is to watch time decay on the options prices and possibly look at an adjustment around the earnings date. After earnings, there will be an overall volatility crush driving premiums down, which is favorable if the stock price remains in this area.

I am also expecting the stock price volatility to drop quite a bit in the next few days as AAPL gets quiet going into earnings.

No comments :