AAPL Options Strategy

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    Posted: 23 March 2012 09:10 PM #31

    There’s an article on Market Watch referring to piece on Investor Uprising Investor Uprising Stories of the Week: Apple Dividend and Software Updates

    Investor Uprising apparently wrote that,“While the dividend is a great shareholder bonus, the news about it is already built into the stock and isn’t likely to drive the share price from here. .”

    On one level, I understand, upward pressure as current investors buy to enjoy the benefits.  But, seriously, are they assuming the large Funds that were restricted in fully participating in AAPL have already done so?

    Maybe I’m not thinking this through, but as these Funds look to buy AAPL shouldn’t that provide additional, possibly large upward pressure on AAPL?

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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: 23 March 2012 10:32 PM #32

    redge

    Agreed & I believe there are still a lot of Funds left to buy into AAPL.

    Now I just need to hasten my education of options so I can join everyone here in investing properly.  I began paper trading and it can be overwhelming.

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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: 23 March 2012 10:51 PM #33

    rickag - 24 March 2012 01:32 AM

    redge

    Agreed & I believe there are still a lot of Funds left to buy into AAPL.

    Now I just need to hasten my education of options so I can join everyone here in investing properly.  I began paper trading and it can be overwhelming.

    Options ain’t necessarily proper investing, you know smile

    I will be moving more to shares about the time you are moving to options.

         
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    Posted: 24 March 2012 06:24 AM #34

    terps530 - 23 March 2012 08:14 PM
    lovemyipad - 23 March 2012 12:54 AM

    terps, great job on legging into your iron condor!! smile

    woo thanks- I nailed it.  It was fun to watch at the end, hoping it didn’t breach the 595, but that held and they all just expired worthless for the max gain smile 

    Wasn’t a homerun gain, but I’ll take a solid single any day.

    I’ve also seen how AAPL behaves after market open on Friday, especially on lower volume days, so I decided to try my hand at an IC around 10AM EST.  I wanted to try a butterfly for a pin around $600, but there was almost no margin for error, so decided against that.  IC seemed like a much safer choice.

    When AAPL was around $597, I sold 30 weekly 605/610/590/585 ICs @ 0.20 each, which gave me roughly +/- 1% of buffer on both sides.  Risking about $14.5K, I could make $500, or roughly 3.5%, in less than 6 hours.  Watched it very closely, but except for a slight dip to $594s, in which the IC traded as high as $0.40, AAPL behaved as expected, and the ICs expired worthless.  It was not a big amount for my portfolio, but it’s nice to know how these behave. 

    I may go back and backtest, to see if AAPL ever does move more than 1% on a non-news week, from Friday 10AM to Friday 4PM.  3% for a few hours is not bad, to be honest.

         
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    Posted: 24 March 2012 10:54 AM #35

    redge / roni

    Thank you for your responses, I appreciate all information I gain and warnings about “proper investing”.

    What I have done is sell under performing mutual funds (is there any other kind?) in an IRA to purchase 40 shares of AAPL.  I plan on selling or moving 40 shares of AAPL that is in a regular taxable account to a service like TradeMonster for “improper investing” smile in options.  That will leave me with the same ~ 400 shares of AAPL.

    Part of my thinking is the 40 shares have really appreciated a lot and with capital gains tax going up next year, sell pay the 15% now.  I will not be using margin in any trades.

    The 40 shares is a very small % of my wife’s & my retirement and if I totally screw up, our retirement would not be affected.  But with Apple’s growth continuing into the foreseeable future option leverage should help me increase my total # of shares which is my goal.

    [ Edited: 24 March 2012 12:12 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.

         
  • Posted: 24 March 2012 12:23 PM #36

    rickag - 24 March 2012 01:54 PM

    redge / roni

    Thank you for your responses, I appreciate all information I gain and warnings about “proper investing”.

    What I have done is sell under performing mutual funds (is there any other kind?) in an IRA to purchase 40 shares of AAPL.  I plan on selling or moving 40 shares of AAPL that is in a regular taxable account to a service like TradeMonster for “improper investing” smile in options.  That will leave me with the same ~ 400 shares of AAPL.

    Part of my thinking is the 40 shares have really appreciated a lot and with capital gains tax going up next year, sell pay the 15% now.  I will not be using margin in any trades.

    The 40 shares is a very small % of my wife’s & my retirement and if I totally screw up, our retirement would not be affected.  But with Apple’s growth continuing into the foreseeable future option leverage should help me increase my total # of shares which is my goal.

    My only non-advice is to buy plenty of time.  Our largest position now expires in January 2014.

         
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    Posted: 24 March 2012 01:43 PM #37

    roni

    Thank you for the non advice.  This was my plan for the largest % of any options I would get into.  Especially no weeklies for me.

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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: 25 March 2012 09:56 AM #38

    redge - 25 March 2012 01:24 AM
    rickag - 24 March 2012 04:43 PM

    roni

    Thank you for the non advice.  This was my plan for the largest % of any options I would get into.  Especially no weeklies for me.

    rickag,

    If I read your earlier post correctly, it sounds like you plan to sell 40 Apple shares and, after tax, put about $20,000 into Apple calls.

    With that sum, the least amount of leverage you can buy with a long timeframe is to use 40 shares to control 100 shares via one Jan 13 405 call with a break even of $605 or one Jan 14 430 call with a break even of $630.

    After that, leverage increases but at the cost of a significantly higher break even.

    Sounds like you’re going in with your eyes open, and with money you can afford to lose, but I’d suggest that you run some numbers comparing the premium that you’ll pay for one or more calls compared to buying shares on margin, and you might also consider bull call spreads.

    Good luck.

    Thank you very much for the information.?

    Interestingly, I was just scanning Jan 14 options and saw just how little shares I could control unless I go to high strike pricing.? I was looking @ Call Spreads and trying to figure a plan in which I could buy back the call strikes I sold on dips, gets very dicey.

    Also, I need to compare what just holding the stock as it rises as opposed to potential gains in options.

    I have much to learn.

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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: 25 March 2012 09:25 PM #39

    rickag - 25 March 2012 12:56 PM

    Thank you very much for the information.?

    Interestingly, I was just scanning Jan 14 options and saw just how little shares I could control unless I go to high strike pricing.? I was looking @ Call Spreads and trying to figure a plan in which I could buy back the call strikes I sold on dips, gets very dicey.

    Also, I need to compare what just holding the stock as it rises as opposed to potential gains in options.

    I have much to learn.

    This thread has some good info, not sure if you’ve seen it already: Ode to Spreads.

    Here is a more current example of an options trade that might illustrate the mechanics. A May 12 590/595 call spread cost about $2.65 at Friday close. If you had bought one, and the price of AAPL goes up - or even if it does not change at all - through May options expiration, the spread will be worth $5.00. Very nearly a double.

    [ Edited: 25 March 2012 09:32 PM by Xphilos ]      
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    Posted: 26 March 2012 08:40 AM #40

    Xphilos - 26 March 2012 12:25 AM
    rickag - 25 March 2012 12:56 PM

    Thank you very much for the information.?

    Interestingly, I was just scanning Jan 14 options and saw just how little shares I could control unless I go to high strike pricing.? I was looking @ Call Spreads and trying to figure a plan in which I could buy back the call strikes I sold on dips, gets very dicey.

    Also, I need to compare what just holding the stock as it rises as opposed to potential gains in options.

    I have much to learn.

    This thread has some good info, not sure if you’ve seen it already: Ode to Spreads.

    Here is a more current example of an options trade that might illustrate the mechanics. A May 12 590/595 call spread cost about $2.65 at Friday close. If you had bought one, and the price of AAPL goes up - or even if it does not change at all - through May options expiration, the spread will be worth $5.00. Very nearly a double.

    Thank you Xphilos, for the link.

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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: 26 March 2012 12:24 PM #41

    so someone in the main thread mentioned how there is an open interest wall at 600 this week, thus it may be tough to break that.  Can anyone help explain how that actually works?

    I am looking at almost 9000 contracts in the open interest at 600, 2x more than any other strike price.  I am wondering what that means though, to how the price performs.  Is that just similar to the way there is a wall of stock on the Ask at certain levels and takes some major buying to break through it, or does it mean something else in the options world?

         
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    Posted: 26 March 2012 12:42 PM #42

    terps530 - 26 March 2012 03:24 PM

    so someone in the main thread mentioned how there is an open interest wall at 600 this week, thus it may be tough to break that.  Can anyone help explain how that actually works?

    I am looking at almost 9000 contracts in the open interest at 600, 2x more than any other strike price.  I am wondering what that means though, to how the price performs.  Is that just similar to the way there is a wall of stock on the Ask at certain levels and takes some major buying to break through it, or does it mean something else in the options world?

    terps, go here: AAPL Pain

         
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    Posted: 26 March 2012 03:02 PM #43

    lovemyipad - 26 March 2012 03:42 PM

    terps, go here: AAPL Pain

    awesome thanks

         
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    Posted: 27 March 2012 10:48 AM #44

    i have a bull put spread i got last week 525/535.  odd that the 525 put is actually going up slightly as the price is going up and setting new highs here after the past 15min.  guess the IV is going up?

         
  • Posted: 27 March 2012 11:22 AM #45

    terps530 - 27 March 2012 01:48 PM

    i have a bull put spread i got last week 525/535.  odd that the 525 put is actually going up slightly as the price is going up and setting new highs here after the past 15min.  guess the IV is going up?

    That’s exactly what is happening:
    http://www.cboe.com/DelayedQuote/SimpleQuote.aspx?ticker=VXAPL