Friday, October 23, 2015

AAPL Update #38

Oct 23

Analysis

AAPL reports earnings on the coming Tuesday. Other technology stocks AMZN, GOOGL have reported earnings and are up hugely after reporting.

The markets on the whole are bullish with SPY regaining nearly the 208 price.

The ATM straddle (85%) expiring Oct 30' is trading for 5.05 indicating that at current prices AAPL has a price range between 110 and 120 for earnings. Earnings will be reported on Tuesday after the close.

The expected move (EM) for the next 7 days also indicates about the same (109.65 - 121.29). Volatility is actually coming down for AAPL indicating the stock will either 1) not move significantly or 2) continue its bullish move

This is 4pts higher than the short call expiring next week.

As of today, the short call is just slightly in the money from this weeks earlier roll. Because volatility in this expiration cycle is skewed, rolling even out one strike for even money or a credit is difficult unless I move 2-3 weeks out in the option chain.

I am keeping a slight credit in the bank and considering what to do. I could buy puts but I think I will wait until at least Monday or Tuesday morning to take advantage of more time decay. I could also buy upside calls to try and capture a move outside of the short call strike.

Alternatively, I could sit and do nothing and wait for the event to pass knowing that volatility will crush and look at rolling up and out at that point. I may not be able to roll up to an ATM strike, but I should be able to advance the calls by one or two strikes.

I am going to wait until end of day and see where the stock settles. Its already a strong run this week and is probably going to reverse soon.

In the event the stock gets called away at the 116 strike, the maximum profit on the position will be 7460. The stock is still 14pts lower than where the collar was started 9 months ago. This is a 14.23% annualized return.