Tuesday, August 04, 2015

AAPL - Update #21 (Stock Purchase)

Aug 4

Analysis

AAPL fell hard right out of the gate during the morning trade, at one point down over 4.50pts near 113.25. The weekly options expiring this week exploded to the downside. This was another opportunity to close the hedges and purchase more stock.

The 115 puts were trading for as much as 3.00+ during the morning.  I sold the puts a bit too early as I could have captured more than double the shares, but that is trading. If I had waited until today to sell the puts from last Friday, I could have had captured even more stock.

As the premium is rapidly expiring this week there is not much left to sell. IV has picked up considerably on the put side as protection becomes expensive. After closing this week's hedges, I have elected to reset the hedges for Aug 14' expiration, one more week out.

I also did not re-hedge immediately. Instead I waited for the price to bounce slightly, thinking that this move is part of a capitulation move in the stock and its quite possible that a sharp rebound will happen in the next few days. This is one reason I want to keep a short expiration and wider strikes.

Trades

Part 1 - Close hedge

+6/c Aug 7' 119 Call @ 0.41
- 6/c Aug 7' 115 Put @ 1.27
Net Profit: (0.87 - 0.41) + (1.27 - 0.73) = 1.00/c

Buy Shares
+4 shrs AAPL @ 116.219

Total position shares 689

Part 2 - New hedge

-6/c Aug 14' 119 Call @ 0.87
+6c Aug 14' 108 Put @ 0.88
Net debit: 0.01/c

-End

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