Thursday, August 27, 2015

AAPL Update #27 (6 month)

Aug 27

Analysis

The market exploded to the upside this week after crashing over 1000pts on Monday. Volatility also exploded higher but is now coming down. As anticipated, AAPL has rallied significantly closing at 112.94 today. This is the second time AAPL has rallied to this level this week.

The market is volatile but now appears to be rebounding hard. Taking advantage of a slight dip today, I have rolled out the 110 calls expiring tomorrow out 1 week in time and up 2 strikes. I expect AAPL to continue to rally but also have some pull backs as it regains its prior range.

The put hedge is expiring worthless tomorrow.  As I have rolled out to another short expiration, I am collecting a credit which adds to the cash position. I can use this credit to look a purchasing another put for next week, purchasing stock, or just keeping the cash.

I will be monitoring the expiration day to see what the stock does. My plan is to roll out the short call, collecting time premium and increasing the profit range until this move is exhausted.

Trade

Trade 1 - Roll the hedges

+7c Aug 28' 110 Calls @ 1.45
-7c Sep 4' 112 Call @ 1.95
Net Credit 0.50/c

This roll brings in 350 cash.


Trade 2 - New put purchase limit order

Waiting until expiration day (Aug 28) allows me to purchase the next weeks put.
+7c Sep 4' 104 Put @ 0.46 (GTC)

I am long 713 shares of AAPL and short calls at the 112 strike and now hedged at the 104 strike. The maximum value of this position at Sep 4' expiration is:

700 X 112 + 13 X 112+ = 79 856

This represents a +4.15% yearly return on the starting balance of 78 252 from Feb 26. The stock is also -18pts lower from the entry point. Without hedging this position would only be worth 600 X 112.84 = 67 704, or down -10 200.

The risk graph for the position (short call only) is shown:






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