AAPL Options Strategy

  • Posted: 18 March 2012 09:39 PM

    I’ve got some spreads I’d like to buy back the short legs on at the open, due to tomorrow’s call.  Anyone planning on doing that?

    [ Edited: 08 September 2012 12:01 AM by lovemyipad ]      
  • Posted: 18 March 2012 11:53 PM #1

    I am still trying to wrap my head around the effect of a new dividend announcement on options.

    Take for example the Oct 550 call, currently priced near $78, then consider for argument sake that they offer a $5 quarterly dividend and this will be paid out twice before Oct OE.  I would think the Oct call would immediately be worth $10 less, all other things considered equal because we “know” this much will be taken out of the company.

    Is it not a unique situation because this a “new” announcement vice a known div payment that would already be priced in?

    In truth i think the stock price appreciation will outweigh the div payout but I not comfortable with my understanding of how this will impact option pricing.

         
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    Posted: 19 March 2012 12:09 AM #2

    Hard to come up with a strategy until the announcement is made.  Until then, let our heads spin with excitement…..  I’m dizzy already

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    Because Longer is better…....

         
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    Posted: 19 March 2012 12:11 AM #3

    Excitement, great.

    But we should keep discipline throughout.  I mean yeah, I’ll probably throw in a pre-market order to sell my trading shares for $650 or something LOL but aside from that, the deliberate approach is best.  Even when it must be done at warp speed. LOL

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 19 March 2012 11:13 PM #4

    I bought throwaway bull call spreads: MAY’12 690/700 @1.30 and 1.25 (different accounts).

    Throwaway = I’m okay with eating a full loss if it comes to that. smile

    [ Edited: 19 March 2012 11:16 PM by lovemyipad ]      
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    Posted: 19 March 2012 11:40 PM #5

    Intriguing!

    Looking at some “short-term gain reduction raspberry / jackpot” plays myself.  Nothing that’d set me up for huge losses in absolute terms of course.  Keep me posted!

    Signature

    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
    Thanks, Steve.

         
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    Posted: 20 March 2012 12:06 AM #6

    Mav, the plan is to sell 1/2 on a double and let the rest ride (free).  Or, of course, eat a full loss. smile

         
  • Posted: 20 March 2012 04:17 PM #7

    There was some talk on here about market orders vs. limit orders. Like most, I was a big proponent of limit orders after getting shafted once, but after a comment by Gregg regarding using market orders for big lots, I’ve begun to experiment over the last week (I’ve made about four buys and two sells this way).

    After a few fairly successful trades using market orders, I’m likely going to stick to them under the following conditions:
    - The stock price has been fairly steady within over the last hour.
    - The contract price is over $20.
    - I intend to hold for more than a month.

    In the case of a big lot, I will split the lot into two or more lots, just to make sure there is nothing evil lurking.

    The biggest benefit of this is that the order gets filled FAST. You may pay a bit more than the ask, but the speed of the fill can be a huge benefit. Often times I’ve been waiting 20 minutes for a limit order to fill, and the stock begins to move during that time, and I’m stuck chasing it. Because you might be paying a bit more though, you wouldn’t want to be day intra-day trading this way.

    Anyway, that’s just my experience so far… not advice in any way.

         
  • Posted: 20 March 2012 04:31 PM #8

    CanApple - 19 March 2012 02:53 AM

    I am still trying to wrap my head around the effect of a new dividend announcement on options.

    Take for example the Oct 550 call, currently priced near $78, then consider for argument sake that they offer a $5 quarterly dividend and this will be paid out twice before Oct OE.  I would think the Oct call would immediately be worth $10 less, all other things considered equal because we “know” this much will be taken out of the company.

    Is it not a unique situation because this a “new” announcement vice a known div payment that would already be priced in?

    In truth i think the stock price appreciation will outweigh the div payout but I not comfortable with my understanding of how this will impact option pricing.

    The OCC issued this yesterday:

    http://www.optionsclearing.com/webapps/infomemos?number=30380&date=201203&ei=bNpoT7mBDuOriQKVj7XrBg&usg=AFQjCNEi2OW457eAN6NMdM5zf0D0fTCaUQ

    ...
    Pursuant to Article VI, Section 11A of OCC?s By-laws, a panel of OCC?s Securities Committee has determined that AAPL/2AAPL OPTIONS WILL NOT BE ADJUSTED FOR THE $2.65 QUARTERLY DIVIDEND. The AAPL/2AAPL adjustment panel has determined that AAPL quarterly cash dividends as described in AAPL Press Release dated March 19, 2012 are ordinary dividends as defined in the OCC By- Laws for which no adjustment should be made.
    ...

         
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    Posted: 20 March 2012 04:42 PM #9

    I got some 525/535 bull put spreads way out of the money earlier today for about a $1.40 net credit.  Lookin good so far.  I’m not necessarily sure which way we’ll go over the next 2-3 weeks, so I went with about a 10% drop cushion for a safe 10-15% gain for now.

         
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    Posted: 21 March 2012 01:57 PM #10

    Hope this is the right thread to post this in and not sure how to begin, but here I go.

    My wife and I have a comfortable retirement account built up between us.  The vast bulk is in IRAs, 401K and profit sharing.

    I have 40 shares of AAPL in a regular account, (not an IRA or 401k), the remaining AAPL shares are in an IRA.  I just bought an additional 40 shares in the IRA account @ about $605.

    My plan is to sell the 40 shares in my regular account, pay the capital gains tax and fund an account for buying options (hoping for a run up to earnings to help cover the tax man before selling).  By doing this I maintain my overall # of shares of AAPL smile .  This should give me about $20,000 in the account.  I’m looking at Tradeking which seems to have the lowest fees.

    Would anyone be willing to share their expertise regarding which option strategy I might use considering a conservative approach.  I do not have the time to monitor daily, so weeklies are out and am leaning toward options several months out and leaps.

    With such a small amount available, I would think deep in the money optons would also be difficult?  Also, I do not want to trade on margins.

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
  • Posted: 21 March 2012 02:08 PM #11

    rickag - 21 March 2012 04:57 PM

    Would anyone be willing to share their expertise regarding which option strategy I might use considering a conservative approach.  I do not have the time to monitor daily, so weeklies are out and am leaning toward options several months out and leaps.

    With such a small amount available, I would think deep in the money optons would also be difficult?  Also, I do not want to trade on margins.

    Hi Rickag, try reading this thread to see if Call Spreads seem right for you:

    http://www.macobserver.com/tmo/forums/viewthread/81423/

         
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    Posted: 21 March 2012 02:14 PM #12

    rickag - 21 March 2012 04:57 PM

    I’m looking at Tradeking which seems to have the lowest fees.

    FYI, I tried out TradeKing recently, and didn’t like them very much. Their new interface never worked on my browser, and order execution and cancellation sucked. If I ever wanted to cancel or modify an order, there was always this lengthy lag of about 30-60 seconds. Plus, they also jacked up their rates on options recently. I ended up moving all my money away from them.

         
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    Posted: 21 March 2012 02:36 PM #13

    A question for lovemyipad or other options savants…

    I bought some Jan ‘13 400 LEAPS last summer that are now up about 500% (!!!)

    ipad, I remember in the past you have talked about converting in the money LEAPS to spreads to raise cash in the interim, so I can start buying 2014 LEAPs. Is there a particular strategy I should use when deciding how to do this? Do I match them up with ITM or OTM 2013 calls? Do I sell nearer-term calls to create a calendar spread?

    I’m just looking for a way to use this huge run to my advantage, build up some cash and place more long term trades without using margin. This is all in a taxable account so I don’t want to sell my existing LEAPS yet due to their current short term tax status.

    Can someone point me in the right direction? Much appreciated!

         
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    Posted: 21 March 2012 02:37 PM #14

    calvinav
    Thank you, I added a bookmark. 

    I also have read the recommended books thread and will be buying some of the recommended books.

    nkmho
    Thank you for the heads up,  which service did you change to if you’re willing to let me know?


    For anyone else willing to give information, I am thick skinned and all criticism is welcome.


    Edit spelling

    [ Edited: 21 March 2012 02:41 PM by rickag ]

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 21 March 2012 03:26 PM #15

    rickag - 21 March 2012 05:37 PM

    Thank you for the heads up,  which service did you change to if you’re willing to let me know?

    I switched to OptionsHouse, where I already had most of my funds, but TradeMonster is a good choice for an options beginner. TM’s rates are a bit higher, but I think you’ll realize soon enough that the slight difference in contract costs don’t matter too much in the end.