Bookmark and Share Dec 11, 2012 Weekly Apple (AAPL) Trade December 11

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 535. You ended up owning AAPL at one of these net debits (stock price minus call premium received):

On Dec 5 you bought AAPL at 551.57 and wrote one of these:

Strike Call Bid Net Debit
535 19.50 532.07
540 15.60 535.97

Those both expired out of the money. But this morning we have a little bounce and it's time to write new options.

Annualized Return Of 98% to 112%

As we write this (during market hours), AAPL is at 542.38, up 12.56 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 10 day trade
535 13.00 519.07 112%
540 10.15 525.82 98%

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 10 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.


Dec 15, 2012: Post-expiration followup... AAPL closed at 509.79 on the last day of trading for the above options. Both strikes shown above finished out of the money, and anyone who took these trades now owns AAPL at the Net Debit shown (519.07 or 525.82).

We continue to believe AAPL is oversold due to tax selling and fiscal cliff uncertainty. We suggest waiting for a bounce and then selling a weekly option, perhaps Monday or Tuesday of this coming week. We will post an update when we feel the time is right.

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