Bookmark and Share Jan 2, 2013 Weekly Apple (AAPL) Trade January 2

On December 5, 2012, we initiated a covered call on AAPL. The in-the-money weekly options we sold expired out of the money. We then sold 2 more weeklys on the same stock position, both of which expired out of the money. Today AAPL is up 3% along with the broader market (due to passage of the cliff-avoidance bill), and it's time to sell another weekly on our position.

Here is a recap of what we've done to date (see prior blog articles). We purchased AAPL at 551.57 on Dec 5. There were 2 strikes suggested, a 535 and 540, so we have to track two separate trades.

If you wrote the 535s on Dec 5, this is where you are today:

Date Action Stock Option
Dec 5 Buy 100 AAPL 55157
Dec 5 Sell 1 Dec 7 535 call 1950
Dec 11 Sell 1 Dec 14 535 call 1300
Dec 17 Sell 1 Dec 22 525 call 610
Jan 2 Adjusted cost basis 51297

If you wrote the 540s on Dec 5, this is where you are today:

Date Action Stock Option
Dec 5 Buy 100 AAPL 55157
Dec 5 Sell 1 Dec 7 540 call 1560
Dec 11 Sell 1 Dec 14 540 call 1015
Dec 17 Sell 1 Dec 22 530 call 445
Jan 2 Adjusted cost basis 52137

This morning AAPL is 552.68 and your adjusted cost basis is either 512.97 (if you started with 535s) or 521.37 (if you started with 540s). You could just sell the stock today and book your profits, or you could continue the trade with another 3-day in-the-money covered call.

If you choose to write another call, we suggest these 2 as a good compromise between protecting existing profits and getting a little extra premium over the next 3 days, with a goal of having the stock called away this Friday. The 540 strike would be for people who started on Dec 5 with the 535s, and the 545 strike for those who started on Dec 5 with the 540s:

Strike Call Bid Adjusted
Net Debit
Annualized Return
for 30 day trade
540 15.15 497.82 103%
545 11.55 509.82 84%

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 30 day period (Dec 5 to Jan 4).

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.

Like this post? Click the +1 button to recommend it. Thanks!

Free Trial | Covered Call Newsletter | Covered Call Blog | Bookmark and Share