Tuesday, January 26, 2016

AAPL 2016 Update #67 (Stock Purchase)

AAPL release earnings today at the bell. The stock has an estimated move implied by the options between around 93 to 105.

Not knowing which way its going to move, I have positioned a short call at about the 50-55 delta to act as a hedge.

The stock traded down this morning to around the 98.50 mark, so this gives me an opportunity to capture some delta movement and convert that into more stock.  The stock is bouncing around under 100 mark after testing it last week.

The one things that will happen after today is that volatility will be collapsing. The short call is theta positive and vega negative -- this means that each theta gains in value on the position and the negative vega benefits with a DROP in volatility.

The only thing is direction at this point and that will become clearer in the next few days. Remember, however, it might not move at all.  With the expiration out one week, this gives me some more time to make adjustments.

This is an aggressive move selling the ATM call. But since I have removed the put hedge I want to keep capturing as much of the downside moves as possible until earnings is released.

[Update: AAPL release earnings after the bell. Good results and the market dropped only 2.75pts in after hours, well within what the option were predicting. Will see what the trade brings tomorrow. Expecting IV crush on the opening]

Trades
Part 1 - Roll down the short calls
+8c Feb 5' 101 Call @ 2.53
-8c Feb 5' 98.5 Call @ 3.60
Net credit -1.07/c

Part 2 - Purchase stock
+8 shrs AAPL @ 98.94

Total shares in account 832


Part 3 - Waiting to purchase puts ...

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