Thursday, July 09, 2015

AAPL Update #17 - (Stock Purchase)

Jul 9

Analysis

AAPL opened higher this morning, but during the last hour of trading continued to sell off. AAPL declined to just under 120 on a large spike down in price.

This was a large move down and I elected to close the hedges as price moved into my price target, capture the premium and purchase more stock.

The has declined into what I think will be a demand zone area testing into the 119 area. I rolled the hedges out in time by 1wk to get tighter strike selection (dollar increment strikes).  This hedge is also 1wk after the earnings report.

This has been a significant decline in price. There may be a move back up. When rolling strikes upwards, I am looking pay no more than 0.25 / 1 strike up. So for a five point move from 120 to 125, the roll of the put should not be more than 1.25 - 1.30. To make 5pts, I will only give around 1.30pts.

To help offset that, I will be trying to roll the position up and out in time. I am purposely going to widen the collar to give a little more room to upside.

Trade

Closing Trade
-6/c Jul 24' 120 Puts @ 3.65
+6/c Jul 24' 127 Call @ 1.15

Purchase Stock
+12 AAPL/shrs @ 120.20

Opening Hedge
-6c/ Jul 31' 125 Call @ 2.06
+6c/ Jul 31 115 Put @ 2.05
Net credit 0.01/c

Net hedge delta 0.62

Stock closed 120.25

I am now long 674 shares of stock (capturing +20 shares in the last three days) and re-hedged 5 dollars wide on either side. All transactions paid for by the sale of the calls and puts. No extra funds have been added to the position.

Note: Each option roll of 4 legs costs net 0.70 with my broker. If the roll cannot make that, it does not pay to move strikes.

No comments :