Thursday, March 24, 2016

AAPL Update 2016 #77

It has been awhile since my last post. I have been in the process of transferring brokers and moving this position over to the new broker has been quite an ordeal to say the least.

From rejected transfers, to repeated calls with customer service on with both the sending and receiving brokers, it has been a long and at times frustrating process.

However, late last week the new account is now active with all the necessary positions and permissions in the account needed to trade stock and options.

Moving to the new broker will be worth it over the long run. A single trade that involved buying and selling 16 total contracts (8 to open, 8 to close) drops from $30/trade to $13/trade, a 56% decrease in cost. Each option leg can bought/sold for about 0.75/c or less with no ticket fee.

Typical stock purchases will drop from $10 per transaction to just a $1, a 90% decrease in cost.

This is significant savings and if the number of trades over the course of the year will be similar to last, the savings will be roughly $1.5K - enough to make a significant difference in the overall P/L of the account.

With this significant ORDEAL of changing brokers now complete (nearly a month since this was initiated in which I could not trade), I can now get back to managing the position.

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AAPL has continued to trade higher in the meantime along with the overall market. So what has happened to the position?

The 850 shares of stock are trading for around 105.50 as of today's market. That is the good news.

The short calls are however, very deep in the money. The calls are so deep in the money that their effective deltas are exactly offsetting any gains in the stock (-100 delta).

As was discussed in the previous post, rolling calls up and out when the delta is this far is not possible unless one is willing to roll out very far in time (greater than 60d) or pay for the difference.

This is a possibility for a trader, but doing so will mean the position will just sit waiting for time decay to happen. It also makes adjusting harder as the options don't react very much the further out in the time they are to any price movements.

The stock + short call position is a covered call that is profitable to +4589.

The time value in the options are nearly 0 (because it is so far in the money) even though there is still a couple of weeks to expiration.

Because I want to get back to trading this position more frequently, I am going to make an adjustment and have the stock get called away at this week's expiration. My net profit will be around +4589 and I will be able to re-establish a new position after expiration.

Trades
Roll in the calls to this expiration week

+8 Apr W1 94 Calls @ 12.79
- 8 Mar W5 94 Calls @ 12.74
Net debit 0.05/c


Commission on 16 contracts

This trade will cost $40 (8 X $5), but allow the position to expire profitably today on Mar 24. 800 shares of stock will be sold for 94/share at market close and the short options will expire off the books for 0.


Position Update

Shares
+800 shrs AAPL X 94 = 75 200 (cash value of shares sold by the short options)
+ 50 shrs AAPL X 105.50 = 5 275 (current value)

Cash from previous trades
+1781
-40 (from the roll above)

Total
+76 941 (cash)
+5 275 (stock)
--------------------------
+82 256 (cash + stock)

On Monday morning, when the market next opens (Good Friday is a holiday, hence expiration is today), I will be purchasing stock again and setting up another covered call and/or collar position.

A further update and analysis will be coming later today.

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