Tuesday, May 8, 2012

Update to - $AAPL diagonal spread paper trade

3 Aug - stock up about 25bucks since selling the short call from last week.. ex-div date coming up on 9th so rolled the weekly 600short call to the Sep610 short call for $600+ credit. not going to mess around with a weekly this time with that ex-div date out there.. so gained $10 in strike plus $600 in cash to roll.. the "loss" from the weekly short call gets added back to the cost basis of the Leap.. position is now back to a diagonal and is still up nicely since inception.. about $3800.. see this paper trade model in this google docs spreadsheet
Long the Jan2014 500 call
Short the Sep2012 610 call


27july - as tweeted this week, i closed out the weekly 590short call for a huge profit on it after the selloff after earnings, so it worked as intended, that being a huge downside hedge. Sold it for $26+ and bought it back for 75cents.. on late friday i sold the Aug3 weekly 600short call for $1.50.. admittedly its chump change but just did not want to commit to that Aug monthly 600 short call just yet with the late day +$10 move..so position is back to a diagonal spread, here is the position currently in a google docs spreadsheet:
Long the Jan2014 500 call
Short the Aug3,2012 600 call

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20 july - today being opex day and earnings on tuesday, im rolling the july 580 to the next weeks 590 for zero.. thats an excellant deal..getting $1000 in added short premium for zero cost.. if you look at the spreadsheet you will see that the july short 580 call actually made $990 as AAPL pulled back from where i put it on...so that gets subtracted from cost basis. This "position" is up about $2500 since inception in may
this position in a google docs spreadsheet  so now back to a Diagonal spread with the short call being a bit in the money. relook after earnings

5july - was going to happen at one point.. a move thru the short strike..so this provides an example of how i manage thru it. had the weekly short 580calls at 4.30 when stock was $25 lower.. that weekly short call now has a delta of 98ish.. that gets into the territory of possibly having that short call get excercised on me overnight..probably would not happen but id rather not have to deal with that if it does happen, meaning im going to roll that short call today instead of holding overnight hoping for some huge turnaround, also there is barely any time premium left in it. i always would like to roll short calls that are ITM for a credit, the preferred being to roll up and out to a higher strike. no sure fire rule but based on how stock is moving, how far away it is from ATM and how far out you want to roll..sometimes i can roll to the next week, sometimes have to do it to the monthly option as is the case today..
Buying back the weekly 580short call
Selling to open the June2012 580short call for a $240 credit

This july580 has about $300 of time premium in it left, plus the $240 credit from the roll and im gaining near $500 by rolling..earlier in the day i was looking at rolling the short call from 580 to the monthly 585, was almost able to do that for zero..that would have been the ideal move but stock took off 8bucks higher. if you look at the spreadsheet, at first glance you think that the weekly short call was a huge loser, which if you look at it by itself it is (the loss on short call you now ADD back into the cost basis of Leap)...but you will notice the amount you took in from the new short call is more than the loss from this weeks short call..so its still a gainer..plus your LEAP is gaining in value as stock moves up..now im set up to profit via the short call if stock starts pulling back a bit. will look to do another roll, ideally up to 585 or higher near july opex. here is the trade in a google docs spreadsheet

30 jun - another week as gone buy and the stock is near where it was last week end so if you just check the quotes once a week you would think not much has happened. during that time i was able to take profits on last weeks short call and sell another one for next week.. netting about $200, if youve followed from the start about 7weeks ago this one $15000 position is up about $3400.. still along way to go till 2014 opex. heres the trade in a google docs spreadsheet.. not too late to get into this same trade..just go to 2014 on your Leap..2015 Leaps come on the boards in Sept i think.

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29jun - 10+ pop on EU news gives me the opportunity to sell another short call to get back into a diagonal spread with the existing LEAP. with short trading week next week im assuming EU news will wear off and will be flat, if it goes up will roll to highter strike
Sell the July6 weekly 580 short call at $4.50
 25jun - quick in and out on this short call, got a +$10 down move in AAPL today so the short call decreased nicely with only $75bucks left in it:
Buy to close the Jun29weekly 590 short call at .75, put on friday for 2.75 for quick $200 profit on the short call.. not making newtrade just yet. so just long the 2014 leap.
22jun - friday afternoon per a tweet i added a weekly short call to the position:

Sell the jun29 weekly 590 short call for $2.75

get position back to a diagonal spread with the jan2014 leap. see the AAPL paper trades in a google docs spreadsheet

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21 Jun - on todays selloff, made the following change to the portfolio, had the Jun22 weekly 585short call at 3.40, bought that back for .73 for a profit of $267 on the short call.  subtract that profit from the cost basis of the Leap now. will hold off on initiating new short call or ratio, so just holding the 2014 leap. if you look at the "position" results in AAPL spreadsheet , the "position" is profitable by $3100.


15 Jun - this ratio spread really worked out great to close this options cycle. closed the June560/580 ratio spread at $14.10 with about 10min to go today..thats a $1410 profit on a trade that cost zero to put on.so looking at what i did for June cycle..started by selling a short call for $10...took profits on that and put on a ratio spread..add both together and those profits are almost $2100 which is way more than just the short call would have giving you if you held the whole month..so you can sometimes make tactical trades while still holding the LEAP. now take the profit from the ratio spread and reduce the cost basis of the LEAP for "position" PNL reference. so if you look at the spreadsheet  this "position" is up $2800ish. not bad for one month. the second part is i added the following weekly short call:

Sold the Jun22 weekly 585 call at $3.40
May 16 - making a couple moves with the paper trade position for Apple.

1. buying back the Jun600 short call for $3.40--getting about $660 profit on that short call
2. now will add a June 560/580 call ratio spread for no cost(buy 1 560/ sell 2 580's) .. no added margin /buying power needed..just this ratio spread profits from 560-600..max at 580pin..double upside leverage to 580..free trade. hold the 2014 long call still

google docs spreadsheet on this trade --->> spreadsheet

may 7, i keep mentioning how much i like diagonal spreads so lets just keep track of one to see how we do, here was the original posting --->>>original post

Buy the Jan2014 500strike call for about $134 ($13400)
Sell the June2012 600 strike call for about $10 ($1000)

total cost about $12400

google docs spreadsheet of this trade --->>> google docs spreadsheet