Bookmark and Share Weekly Apple (AAPL) Trade May 21

If you followed last week's AAPL covered calls you ended up not being called out because AAPL finished below the lowest suggested strike of 540. You ended up owning AAPL at one of these net debits (stock price minus call premium received):

On May 14 you bought AAPL at 563.50 and wrote one of these:

Strike Call Bid Net Debit
540 24.90 538.60
545 20.50 543.00
550 16.40 547.10

Those all expired out of the money and over the weekend we amended last week's trade to suggest you wait for AAPL to bounce back a bit and then write new options for this week. Well, this morning we have that bounce and it's time to write new options.

Annualized Return Of 52% to 79%

As we write this (during market hours), AAPL is at 547.77, up 17.39 for the day. If you write the same strike as you did last week, that will leave you at one of these adjusted net debits (which is your old net debit minus the new call premium received):

Strike Call Bid Adjusted
Net Debit
Annualized Return
for 12 day trade
540 12.30 526.30 79%
545 9.10 533.90 63%
550 6.35 540.75 52%

If AAPL stays above the strike you choose by this Friday then your stock will be called away and you make the Annualized Return shown over a 12 day period.

If you are not assigned on Friday (i.e. AAPL is below the strike you choose) then you own AAPL at the adjusted net debit shown and can write another option for the next cycle. Your adjusted cost basis (i.e. break even point) is the Adjusted Net Debit.

winning tradeMay 25, 2012: Post-expiration followup... AAPL closed at 562.29 on the last day of trading for the above options. All 3 strikes shown finished in the money, were called, and the Annualized Returns shown above were realized.

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

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