Damage control

  • Posted: 25 July 2012 12:46 PM #46

    rickag - 25 July 2012 01:36 PM

    I have 3 Jan 13 BCSs: 

    610/640 paid $8.76 bought May 21st AAPL @ $538
    655/660 paid $1.63 bought May 23rd AAPL @ $568
    635/640 paid $1.93 bought July 23rd AAPL @ $588-$590

    Plugging in yesterday’s EPS 9.32, FQ4 EPS estimate based on yesterday’s @ 8.21 and FQ1 13 of 14 the TTM for Jan 13 will be $43.83.  Using this I get the following AAPL PPS @ P/Es of:

    P/E 12 = $526
    P/E 12.5 = $548
    P/E 13 = $5570
    P/E 13.5 = $592
    P/E 14 = $614
    P/E 14.5 = $636
    P/E 15 = $657

    I bought these believing they were very conservative investments, now I am questioning whether AAPL will be at or above the short prices.  I wouldn’t take a big hit on any of them currently, but am torn between believing AAPL will be above $660 @ expiration.

    I am looking at:
    rolling down or out or
    rolling down and out.
    selling for what I can get and re-enter with any expected decline in AAPL between now and October.

    Any other options or comments would be greatly appreciated.

    What makes you think Q1 2013 will only be $14? Q1 2012 was $13.87.. So you think we only get 13 cents increase YoY? I’m modeling for around $20 in EPS for that Q1 of 2013. iPhone 5 demand will be RED HOT. And China Mobile will likely be added as a carrier of the iPhone. That being said, I think it’s better to be in the April ‘13s than the January ‘13s.

    In my opinion, after January, the TTM will be around $52. This means you can play April spreads with the short strike at $600 and be fairly comfortable.

         
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    Posted: 25 July 2012 12:56 PM #47

    rickag - 25 July 2012 01:36 PM

    I have 3 Jan 13 BCSs: 

    610/640 paid $8.76 bought May 21st AAPL @ $538
    655/660 paid $1.63 bought May 23rd AAPL @ $568
    635/640 paid $1.93 bought July 23rd AAPL @ $588-$590

    I wouldn’t touch any of these right now.  Keep them.  JAN’13 spreads are currently undervalued.

         
  • Posted: 25 July 2012 01:30 PM #48

    IMO, it would be wise to keep spreads for January at or under $600. This is because the earnings release will come out after options and you never know what can happen.

    We can be pretty confident that the Jan ER will be a blowout, as will the April ER. For this reason, Apr ‘13 is sort of the sweet spot, if you will, for playing the iPhone 5 sales.

    My highest Apr ‘13 spreads are 630/650s, which I may even switch into 600/620s just to be extra safe and insure that they expire fully in the money.

         
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    Posted: 25 July 2012 01:46 PM #49

    I ended up swapping all my Jan 13 600 calls for April 600 calls. 

    Edit:  I also dumped the Oct 600s in the AM and am holding proceeds.  If we drop further, I will likely gradually add to April 600s.

    [ Edited: 25 July 2012 05:38 PM by DavidCV100 ]      
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    Posted: 25 July 2012 01:49 PM #50

    aapl_trader9891 / lovemyipad

    Thank you for the responses.

    aapl_trader9891

    Your insight is very helpful and your estimates are quite reasonable, the recent earnings report has me being very cautious.

    I was being very very conservative in my estimates for future earnings, I am new at options and estimating. 

    Using $20 earnings for FQ1 13 that would leave FQ 4 12 @ about $10.  This would be great.  AAPL would be @ about $671 with a P/E of 13, I’m guessing with these earnings, the P/E would be significantly higher around earnings.

    Going back to my conservative estimate for FQ 4 12 of 8.21 and plugging in a 25% earnings increase for FQ1 13 @ $17 AAPL would be @ $655 with a P/E of 14.  Getting borderline, but manageable.

    lovemyipad

    I’m leaning toward doing this with both your and aapl_trader9891’s responses.  What really spooked me was Apple’s guidance of only 7.65….. Yikes.  After calming down somewhat, even if AAPL doesn’t get to > $660 at expiration, I should be able to sell during any run up before earnings, whether in November or December.

    By the way I sold 10 of my remaining AAPL shares in my options trading account to raise money for any buying opportunities.  I really suspect AAPL could decline to $530 to $550 sometime this quarter.  Gives me a little ammunition.

    AAPL is anything but boring smile

    Signature

    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 July 2012 02:04 PM #51

    Yes I agree with your conservative thinking. Conservative and safe is the name of the game from now on, at least for me anyways.

    It’s much better to make 50% and sleep well at night than make 150% and constantly in fear of losing a big portion of your account.

    I also agree that we will see lower prices sometime in the next 4 weeks. I’m thinking between $530 to $550, at which point I will begin buying more Jan spreads (strikes lower than 580) and April spreads (strikes lower than 620).

         
  • Posted: 25 July 2012 05:03 PM #52

    I am keeping my Jan 2013 $550’s and my Jan 2014 $600’s.

    I sold some divvy positions yesterday, and have several more go ex-div over the couple of weeks that I will sell in order to add to those two positions, more in the 2014 than the 2013.

    The sale could last for a couple of months.

    I am sitting on my best year ever, and I expect it to end quite a bit better than it was at the close today

    [ Edited: 25 July 2012 05:15 PM by roni ]      
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    Posted: 25 July 2012 05:13 PM #53

    Dumped my longs near the high today. Got short for a retest of the lows (possibly tomorrow).

    Will get long again once that’s done. Will look to ride it up to an obvious resistance or overbought state, then flip short once more for another retest of the lows, then get long for a much longer ride up.

    We’re in post earnings chop with some reasonable swings, so may as well pick up a few bucks while we ride it out.

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    Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. ? Jesse Livermore

         
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    Posted: 25 July 2012 05:33 PM #54

    Raised cash from Jan 13 calls.

    This market won’t resolve itself in a few days.  I’m in study mode, trying to pick out the best opportunities within my limited ability to spot them.

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

         
  • Posted: 25 July 2012 08:10 PM #55

    In looking back over the year, I guess I did my major damage control when rolling a lot of positions out to the Jan 2014 $600 position.  That happened in February, March and April.

    It is not, perhaps, the strategy most in favor in this land of spreads, but buying lots of time and having most of my AAPL options money way out at strike prices that almost insure a good gain based on an analysis/projection of intrinsic value by time of expiration has worked pretty well for this old dude.