Monday, April 25, 2016

AAPL 2016 Update #85 (Stock Purchase)

AAPL continued to pull back last Thursday and Friday, falling just over a 1pt (1$ each day).

To hedge this price decline, the short calls have gained in value (by decreasing in price).  The delta factor of the short call has been roughly 50-55 delta. That means for every 1pt decline in the stock, the calls make up 0.50pts of that loss.

Earning is also coming up for AAPL on Apr 29th.

On each day I have rolled the calls down and purchased more stock.  Here are the trades:

Thursday

Part 1 - Roll down calls
+7c May W1 107 Calls @ 2.30
-7c May W1 106 Calls @ 2.77
Net Debit: -0.47/c (credit)

Part 2 - Purchase stock:
+3 shrs AAPL @ 105.97

This allows me to sell another option contract, for a total of 8, and purchase more stock

-1c May W1 106 Calls @ 2.77
+3 shrs AAPL @ 105.999

The position now is -8c May W1 106 Calls and 805 shrs AAPL

Friday

Part 1 - Roll down calls again
+8c May W1 106 Calls @ 2.30
-8c May W1 105 Calls @ 2.77
Net Debit: -0.47/c (credit)

Part 2 - Purchase stock:
+3 shrs AAPL @ 105.06

The position is hedged (approximately 50 delta) at 105 with 808 shrs AAPL. Earnings will be released on Tuesday Apr 26 after market close.

The risk graph going into this event looks like the following, expiration in May 6.

105 Strike Covered Call

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