Thursday, February 18, 2016

AAPL 2016 Update #74

AAPL has been rallying this week quite strongly and looks to have bounced out of the $92 price area. On the daily this area looks to be looking like a fresh demand zone.

The short calls out to the Mar 11' expiry (about 3 wks out) are starting to go deep into the money. To main duration on the trade, I am going to be looking to roll the calls up and out, but still keeping the duration short (time decay).

The Mar 24' expiration have the 93.5 strike calls trading for about 5.66pts. To buy back the short 92.5 Mar 11' calls will require 5.83pts at this mornings open.

Looking at the mid-prices, this roll can be done for about a 0.25 debit (or better) to gain an extra $1 in profit -- right in the sweet spot for paying to roll. This also reduces the delta back down to about 65-70.

Normally, I like to roll for even money or a slight credit, but as since the stock has rallied I want to manage my short deltas.

Trade 1
+8c Mar 11' 92.5 Call @ 5.83
-8c Mar 26' 93.5 Call @ 5.66
Net Debit: 0.17/c

Days to expiration is 36.

This reduces some of the credit taken in from the previous trades, and will slightly reduce the amount of stock that can be purchased.

The hedging delta on the position at the end of the day is now back to -64 (64% hedged, 36% unhedged).

The strategy is to keep rolling the short call weekly moving it up and out getting it closer to the -50 delta. I also do not want to roll too far out in time as time decay is not as effective.

Net cash position is now: $1914 - $136 (8 X $17) = $1781

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