Sunday, October 23, 2016

AAPL-2 Hedged Trade #9 (Closing)

AAPL is reporting earnings on Oct 25 after the market closes.

AAPL had a strong 4-day move in Sep and the stock is stubbornly sitting around 117. This is far away from the Oct 28th expiration 106 short call strike.  This short call is now deep in the money.

There is no way to roll the short call up to capture more profit without looking at a far out in time option well in to 2017.

Anticipating another move in the stock at some point, I want to be the position to trade the hedge -- not just wait out more time decay and capping further potential profit with the short call.

With that in mind, I am making an adjustment for the Oct 21 Friday expiration cycle. I will be buying back the short 106 call for Oct 28th, and rolling it BACK to Oct 21 causing the stock position to be assigned on market close on Friday.

This is going to incur a very slight debit, but one I will hope to get back once the collar is re-established on the Monday morning.


+7 Oct 28 106 Call @ 10.98
-7 Oct 21 106 Call @ 10.80
Net Debit: 0.18/c

This trade gives up about $120 in profits ($18 X 7) for the chance to reset the hedge on Monday BEFORE earnings comes on the 25th.

Because I have waited until 14d to expiration for the original option, these deep in the money options have nearly no time value.

At the close on Friday, 700 shares of stock will be sold at 106/share.

-700 AAPL @ 106  ($74,200)

The net profit on this trade is $2996

The account is left long 10 shares of AAPL with a net profit of just under $3K. I will have $74,200 in cash to purchase more stock and either construct a married put position or a full collar.

Notice part of the position is sitting with a credit of $1830 -- much of this value is the 10 shares purchased from trading the hedge earlier in Aug/Sep.

The 10 shares were bought in two parts 5 @ 106.18 and 5 @ 103.61  (Average price: 10 @ 104.90)

I am going to mark this trade closed and will reopen a new trade on Monday, carrying forward the shares and cash balance in a new position.

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