Thursday, September 03, 2015

AAPL Update #29

Sep 3

Analysis

The market appears to be bullish, volatility is coming in and this leads me to expect further gains. AAPL 112 short call is expiring this week (Tomorrow - Sep 4') and the stock is currently trading ATM.

Taking advantage of a small dip to ATM I am going to place an order to roll out the short strike 2 weeks and 3 strikes up for a credit. This is equivalent to synthetic naked put. Two weeks is a slightly longer expiration cycle, but still short enough to capture some vega (expecting it to fall) and short enough for theta.

The funds I have from the roll can either purchase puts in either of the next two expiration cycles. I believe that AAPL will still be moving upwards towards its Sep 9 event. I will be looking to purchase puts around that date depending on how the stock moves.

With volatility still high, puts are expensive so I will be purchasing protection that is quite far out in strikes, but if it rallies I may be able to gain a few strikes.

I also want to have enough room for the stock to run a bit over the next few days.

Trades

Part 1 - Roll call up and out 2 weeks in time

-7c Sep 4' 112 Call @ 1.02
+7c Sep 18' 115 Call @ 1.70
Net credit 0.68/c


Part 2 - Purchase put protection

+7c Sep 18' 100 Put @ 0.63

Stock is trading at 110.68 and hedges are complete for the next two weeks protecting 717 shares of AAPL. Hedges are carrying a -46/c delta and the position is currently theta positive. If volatility picks up again over the next two weeks, I should be able to capture more shares, if the stock continues to rally, I have about $3 in room to the upside before I would need to roll out again.

Maximum profit at expiration is 4228. Breakeven for the position is at 109.14.

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