Tuesday, September 01, 2015

AAPL Update #28 (Stock Purchase)

Sep 1

Analysis

The market sold off this morning and dropped more than 400+ pts by end of the day. The market is retesting the drop from last week. Volatility is rising again.

With this drop, I am going to sell out the puts on the current position. This recaptures the value rolled into them last week. From this sale I am going to purchase more stock.

This will leave the position unhedged (short call only) until the end of the week. I am thinking that the position will bounce again this week as this is the second round of selling after last week's panic drop. With IV now high again, its time to buy.

However, I could be wrong and position will continue to drop. I will not roll into new hedges until expiry as the 112 calls are rapidly dropping in value. I will roll on Friday expiration. Normally, I would automatically re-hedge, but with volatility high again and the stock down over 5pts today, I am getting bullish again.

The roll and sale of new calls on Friday, will also give more funds to purchase puts again. With volatility still high, the strikes will once again need to be very wide. I will look to buy and sell around the 20 delta again with a short expiration.

Trades

Part 1 - Close Put Hedge
+7c Sep 4' 104 Put @ 0.68

Part 2 - Purchase Stock
+4 shrs AAPL @ 108.19

I now have a total of 717 shares of AAPL and the remaining hedge expiring in three days. With volatility spiking again, I am taking a contrarian view and getting bullish. The breakeven on the position is 109.16, 31pts below the opening price on Feb 26.

-End

No comments :