dividend increase Apple Strategy Updated Dec 30, 2016

by Mike Scanlin

Apple closed at 115.82 on Friday (end of the year), after having closed the previous week at 116.52. All four of our AAPL strategies had out-of-the-money options at expiration so we let them expire and sold our stock to finish the year-long experiments.

In a few days we will post an analysis of how the year-long strategies fared but until then here are the results.

To recap, we tracked 4 covered call strategies on Apple for 2016 (we also tracked a buy-and-hold strategy for comparison):

Strategy Name Source of Income 2016 Return vs. B&H
12%/year goalITM weekly covered calls
+ dividends		 11.0%-4.1%
24%/year goalITM/ATM weekly covered calls
+ dividends		 11.5%-3.6%
ATMATM weekly covered calls
+ dividends		 4.2%-10.9%
2% OTM2% OTM weekly covered calls
+ dividends		 6.3%-8.8%
buy and holddividends 15.1%

In all cases our initial purchase of AAPL was done at $102.57 on Jan 4, 2016, and sold at 115.82 on Dec 30, 2016.

12%/year goal - Apple Strategy #1

Date Action $ out $ in Time Premium
1/4/16 buy 100 shares AAPL 102.57
Q1 13 covered calls 1/4 to 4/1 74.54 70.74 3.13
Q2 13 covered calls 4/1 to 7/1 35.62 49.81 3.87
Q3 13 covered calls 7/1 to 9/30 46.31 31.45 5.29
Q4 13 covered calls 10/1 to 12/31 23.55 26.01 10.53
12/30/16 sell 100 shares AAPL 115.82

A few minutes before the close AAPL was trading at 115.82. We let the 116-strike options expire worthless and sold our stock to end the year-long strategy.

Date Action $ out $ in Time Premium
12/30/16 116-strike expired OTM 0.0
12/30/16 sell 100 shares AAPL 115.82

Here's the final math for the 12%/year strategy:

Item Value Notes
starting capital 102.57 Initial cost of shares
Dec 31 goal for 12% return 114.88 102.57 * 1.12
actual income received -2.01 net call premium + paid divs
final stock price 115.82 at the end of the year
stock price + income received 113.81 115.82 - 2.01
2016 return 11.0% (113.81 - 102.57) / 102.57

24%/year goal - Apple Strategy #2

Date Action $ out $ in Time Premium
1/4/16 buy 100 shares AAPL 102.57
Q1 13 covered calls 1/4 to 4/1 47.36 46.96 6.39
Q2 13 covered calls 4/1 to 7/1 21.21 31.03 8.61
Q3 13 covered calls 7/1 to 9/30 30.41 16.95 11.61
Q4 13 covered calls 10/1 to 12/31 14.82 17.36 14.24
12/30/16 sell 100 shares AAPL 115.82

A few minutes before the close AAPL was trading at 115.82. We let the 116-strike options expire worthless and sold our stock to end the year-long strategy.

Date Action $ out $ in Time Premium
12/30/16 116-strike expired OTM 0.0
12/30/16 sell 100 shares AAPL 115.82

Here's the final math for the 24%/year strategy:

Item Value Notes
starting capital 102.57 Initial cost of shares
Dec 31 goal for 24% return 127.19 102.57 * 1.24
actual income received -1.50 net call premium + paid divs
final stock price 115.82 at the time end of the year
stock price + income received 114.32 115.82 - 1.50
2016 return 11.5% (114.32 - 102.57) / 102.57

ATM (at-the-money) - Apple Strategy #3

Date Action $ out $ in Time Premium
1/4/16 buy 100 shares AAPL 102.57
Q1 13 covered calls 1/4 to 4/1 20.18 19.16 17.40
Q2 13 covered calls 4/1 to 7/1 14.15 16.53 15.10
Q3 13 covered calls 7/1 to 9/30 27.41 15.06 12.72
Q4 13 covered calls 10/1 to 12/31 14.82 16.82 14.70
12/30/16 sell 100 shares AAPL 115.82

A few minutes before the close AAPL was trading at 115.82. We let the 116-strike options expire worthless and sold our stock to end the year-long strategy.

Date Action $ out $ in Time Premium
12/30/16 116-strike expired OTM 0.0
12/30/16 sell 100 shares AAPL 115.82

Here's the final math for the ATM strategy:

Item Value Notes
starting capital 102.57 Initial cost of shares
actual income received -8.99 net call premium + paid divs
final stock price 115.82 at the end of the year
stock price + actual income 106.83 115.82 - 8.99
2016 return 4.2% (106.83 - 102.57) / 102.57

2% OTM (out-of-the-money) - Apple Strategy #4

Date Action $ out $ in Time Premium
1/4/16 buy 100 shares AAPL 102.57
Q1 13 covered calls 1/4 to 4/1 8.74 8.67 8.00
Q2 13 covered calls 4/1 to 7/1 6.42 6.72 6.12
Q3 13 covered calls 7/1 to 9/30 14.97 5.16 4.55
Q4 13 covered calls 10/1 to 12/31 3.65 6.40 5.81
12/30/16 sell 100 shares AAPL 115.82

A few minutes before the close AAPL was trading at 115.82. We let the 118-strike options expire worthless and sold our stock to end the year-long strategy.

Date Action $ out $ in Time Premium
12/30/16 118-strike expired OTM 0.0
12/30/16 sell 100 shares AAPL 115.82

Here's the final math for the 2% OTM strategy:

Item Value Notes
starting capital 102.57 Initial cost of shares
actual income received -6.83 net call premium + paid divs
final stock price 115.82 at the end of the year
stock price + actual income 108.99 115.82 - 6.83
2016 return 6.3% (108.99 - 102.57) / 102.57

Buy and Hold (For Comparison)

Date Action $ out $ in Time Premium
1/4/16 buy 100 shares AAPL 102.57
2/4/16 dividend 0.52
5/5/16 dividend 0.57
8/4/16 dividend 0.57
11/3/16 dividend 0.57
12/30/16 sell 100 shares AAPL 115.82

Here's the final math for the Buy and Hold strategy:

Item Value Notes
starting capital 102.57 Initial cost of shares
actual income received 2.23 paid dividends
final stock price 115.82
stock price + actual income 118.05 115.82 + 2.23
2016 YTD return 15.1% (118.05 - 102.57) / 102.57

Mike Scanlin is the founder of Born To Sell and has been writing covered calls for a long time.

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