Wednesday, January 06, 2016

AAPL 2016 Update #59

AAPL dropped further today. The markets on the whole are going through a period of selling. News events (oil dropping) and China markets are putting constant daily pressure on world markets.

The VIX is above 20 and rising, but not spiking as yet.

AAPL first price target (testing demand zone of 92) seems to be well underway. AAPL briefly went under 100/share today.

My strategy at this point to keep the hedge as tight as possible. I am going to put the hedge back into a conversion (call and put at the same strike) which perfectly hedges the stock.  Because of the extra 85 shares in the account, I am still actually slightly long +85 delta.  I will not be able to fully hedge this until the share count reaches 800 (enough to sell another call / purchase put).

I fine tuned the hedge today by wanting to roll down the 104.29 call to the 103. This puts the conversion back in place.


+7c Jan 15' 104.29 Call @ 0.59
-7c Jan 15' 103 Call @ 0.92
Net Credit 0.33/c

This brings some extra cash (33 X 7 = 231). I am not going to purchase shares at this point, but wait until more cash gets accumulated.

The position is now locked at 103/share.

This 0.33 credit is added to the previous credit of 1.37 for a total +1.70pts.  This 1.70 credit offsets the roll of the hedge from 105 to 103 (-2.00pts)

In total even though the stock dropped 2.00pts, I only lost 0.30 due to the hedge (plus the 85 X 2 -- from the unhedged shares)

Rolling down this position is called a box and theoretically can be done for the value of the width of the strikes, in this case 2.00pts

The position is still just over $3K profitable despite AAPL stock being down 30pts from the entry (technically this is a bear market now). Only a small gain, but much better than being unhedged. Without hedging the position would be -18K.

No comments :