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No Cost AAPL Shares
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My 4 year goal is to acquire 32,000 shares worth $90 million. I would have to take a lot of risk to build an account like that investing strictly in options. I am now 65 yo, and I’m getting tired of the rat race. These are supposed to be my golden years, I want to spend them on cruises, wild women, fine liquors, vintage automobiles and a sundry other activities. I do not want to spend the rest of my life in front of a computer. Shares provide that, options are the means to accomplish the goal.
Gregg,if you do indeed have “cruises, wild women, fine liquors, vintage automobiles and a sundry other activities” trust me, you still have options…options galore! And I do love dem kind of options!
While you are doing the math on shares, it is fun to play with possible numbers on a future AAPL dividend. That alone got my attention and persuaded me that I should strive for shares. Talk about a baseball bat moment…
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Jan13 $600 or BUST! LEAP Spread Trial: Bought Jan13 590/600 BCS @1.45 on 9-21-2011
Max Profit: 689% Current Price: 4.50 +210% as of 5-2-2012 - Woohoo! Finally Green! -
I’m intrigued. Can u use actual numbers as of friday And illustrate this trade.?
I get the concept, but the actual numbers are not as attractive, at least based on the quotes I see now. The $595 calls are closer to $6.00 and the spreads are over $2.00. So that would work out to $10.6k+ per 100 shares, if the spreads were just $2.00.
Every time you win, the spreads make you $65,000. After exercising you have $5500 left over.
Every time you lose, you are down $10,600.
Assume your target price is met half the time, and the experiment is run 10 times.
5 times you lose $10,600 for a total of $53,000
5 times you win $5,500 for a total of $27,500
So you end up spending $25,500 to get 500 shares. Average price $51.00 per share.
Anyone see a problem with this math? This tells me that you don’t need that great of a crystal ball for this strategy to work out well. This needs to be adjusted somewhat to account for taxes though.
You said the numbers aren’t as attractive based on current quotes, but then you end saying that even with a 50/50 win ratio, you get shares for $51. That seem pretty dang attractive to me!
Also I think Gregg’s intent is to add enough contracts on the BCS so you have enough profit to pay taxes, pay for the exercise and recoup your original investment to allow you to rinse and repeat. It may take a 55:1 ratio depending on the BCS and the current quotes.
Ya my wording was odd. What I mean is that even with a 50% win rate, and spending more than Gregg shows, you end up doing very nicely.
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I don’t mean to be a wet blanket, but I don’t understand the enthusiasm. It’s a BCS. And if you net the proceeds of this magnitude, you’d be better off rolling into another BCS vs. owning the shares.
Correct.And you can do more BCSs because you’re not buying unhedged “acquisition” calls.
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I’m intrigued. Can u use actual numbers as of friday And illustrate this trade.?
I get the concept, but the actual numbers are not as attractive, at least based on the quotes I see now. The $595 calls are closer to $6.00 and the spreads are over $2.00. So that would work out to $10.6k+ per 100 shares, if the spreads were just $2.00.
Every time you win, the spreads make you $65,000. After exercising you have $5500 left over.
Every time you lose, you are down $10,600.
Assume your target price is met half the time, and the experiment is run 10 times.
5 times you lose $10,600 for a total of $53,000
5 times you win $5,500 for a total of $27,500
So you end up spending $25,500 to get 500 shares. Average price $51.00 per share.
Anyone see a problem with this math? This tells me that you don’t need that great of a crystal ball for this strategy to work out well. This needs to be adjusted somewhat to account for taxes though.
Dude,
The 10 experiments cost (600 x 10 experiments + 200 X 50 X 10 experiments) = 106000
You lost net 25500 if you win half the time so your cost is now 131500
But you financed 500 shares of AAPL at a cost basis of 595 a share = 297500 or a 166000/125% gain (although your unrealized gain after 10 experiments would likely be higher). Basically a double and a quarter.
I would likely take 2 years or more to do 10 experiments.
Now look at just the $2.00 “finance” spreads. Say you only bought the spreads with your initial cash. $10,600 nets you $68000 in just one successful experiment. This is a 550% gain!! Doing these spreads alone correctly just 2 times is nearly the same as getting the whole mess correct 5 times. -
I don’t answer guys who call me Dude.
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Dude, that’s just not fair!
Keep it civil everyone, except for Gregg it’s just thought exercises.
Full disclosure: Generally speaking I would not be a fan of the approach. It’s kind of a moon shot each time. Could AAPL do this, yes. But is it also very risky to have an OTM bull call spread, also yes. You must have the market and/or AAPL going the right way to win.
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The Summer of AAPL is here. Enjoy it (responsibly) while it lasts.
AFB Night Owl Team™
Thanks, Steve. -
Since I have a decent amount of Apple shares already it is not for me either. Still a very interesting idea though. My current experiment with options is to see whether or not I can generate reliable income with it. If it works, I can tell everyone whoever called me “Dude” to get lost.
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Dude. :(
But are we still cool? Dude?
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The Summer of AAPL is here. Enjoy it (responsibly) while it lasts.
AFB Night Owl Team™
Thanks, Steve. -
Or, it won’t bother you in the least. You may call me Dudette. :D
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Dude. :(
But are we still cool? Dude?
Yep.
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Dude! :D
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The Summer of AAPL is here. Enjoy it (responsibly) while it lasts.
AFB Night Owl Team™
Thanks, Steve. -
Gregg Thurman
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Generally speaking I would not be a fan of the approach. It’s kind of a moon shot each time. Could AAPL do this, yes. But is it also very risky to have an OTM bull call spread, also yes. You must have the market and/or AAPL going the right way to win.
Investing in general is risky. Without risk there is no gain.
Today AAPL hit an intraday high of $583.97. With 60+ days to go ‘til May expiry (and April earnings in between now and then) I think AAPL will exceed the $600 price required to make my share acquisition strategy successful (wish I had been more aggressive and bought further out).
That’s the power of fundamentals forecasting.
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You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.
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That’s the power of fundamentals forecasting.
When forecasting works, those who favor forecasting feel supreme. Otherwise, those who favor trade what you see would feel supreme.
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Stay Hungry. Stay Foolish. - Steve Jobs
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That’s the power of fundamentals forecasting.
When forecasting works, those who favor forecasting feel supreme. Otherwise, those who favor trade what you see would feel supreme.
This approach just worked for me. I just tried it less than a month ago and as of today I just made enough to acquire 100 shares and have enough left over to pay tax, pay off a buch of margin and do it again.
Thanks Gregg for your thoughtful analysis and for sharing your ideas with us so freely. For some of us who apply your knowledge it has the potential to truly change our future. I appreciate it.
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Gregg Thurman
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This approach just worked for me. I just tried it less than a month ago and as of today I just made enough to acquire 100 shares and have enough left over to pay tax, pay off a buch of margin and do it again.
Thanks Gregg for your thoughtful analysis and for sharing your ideas with us so freely. For some of us who apply your knowledge it has the potential to truly change our future. I appreciate it.
Glad to hear the strategy paid off for you. My first one matures in May. Wish I had set up more.
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You can’t do more, make more, be more, than the next guy, if you think like the next guy. Think different.
