Tuesday, April 12, 2016

AAPL 2016 Update #81 (Stock Purchase)

AAPL touched a high of 112 and has been backing off ever since. 

Volatility continues to rise as earnings approaches. With the stock declining slowly and now off of the 110 mark, I am going to be rolling down the calls to collect some premium and offset the loss from the stock price.

If you remember, the position is essentially a 102 - 110 vertical spread with the maximum profit being made at the 110 strike. If the price drops below 110, the position makes less money as there is a loss from the stock position.

If the price hover just below the 110 strike at expiration, both the calls and puts will expire worthless and the maximum profit is realized.

If AAPL is pulling back a little, I want to capture some of that pullback by rolling down the calls. With the stock now near 109, a roll of the calls down can capture nearly 0.50 of that 1.00 loss.

If AAPL continues to move down, I will continue to squeeze the collar. The stock has run up quite a bit since the low to mid 90s and may be due for a more significant pullback, especially near or on earnings.

If AAPL blows through the short strike on earnings, the trade will automatically close at maximum profit on Friday expiration and be reset on the following Monday.


Trade 1 - Roll down calls:

+7c Apr 29' 110 Calls @ 2.76
- 7c Apr 29' 109 Calls @ 3.24
Net Credit: -0.48/c

(+0.10/c credit from the placing the original collar)

Trade 2 - Purchase stock
+4 shrs AAPL @ 108.82

Total number of shares is back up to 790.

Note: Commissions for both trades total 11.40 USD, and a savings of $30USD from the older broker. These two trades alone would have a commission of around $40.

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