Friday, January 29, 2016

AAPL 2016 Update #70

AAPL rallied on Friday very strongly - along with the entire market! It trading in the 96.50 area, over 2.50pts higher. The short calls I have are now increasing in delta. While the rally is overall good for the position, it is not for the short calls.

With these calls now starting to get very deep in the money (around 80 delta) and with just one week to expiration, I need to adjust the short strikes.

I also need to be aware that the the stock will be doing ex-dividend during the Feb 4 expiration. With a 0.52/shr dividend, any time value in the short calls less than this amount could result in the short calls being assigned and the stock taken. Moving the calls out further will prevent this.

Ideally, I want to the adjust the short strikes both out in time (selling more time value) and upwards in strike capturing a higher strike and therefore more profit.

For this position, each 1pt higher move is now carrying +$850.

Looking at the option chain I will be doing the following trade:


Part 1 - Roll up the short call out in time.
+8c Feb 5' 93 @ 3.25
-8c Feb 26' 94.5 @ 3.25
Net debit 0.0/c

While this does not move the short strike near current price (I would have to go out further in time for that), it does a few things:

- roll for a net debit of 0 dollars (no cash needs to be added)
- roll up 1.5pts more profit
- within the 30d window for time decay
- remove risk of early assignment due to dividend

At the 94.5 strike, the position is maximumly profitable for just over +3020

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