Tuesday, May 15, 2012

the $AAPL put spread collar explained

now that i have collared my AAPL leaps it guarantees that the stock will rebound higher so you can all thank me. To go with some 2014 DITM Leaps:

Sold the June 585 calls
bought the June 560/535 put spreads for zero cost.

Since i will be holding the Leaps long term im trading around the position with either short calls for monthly income, ratio spreads to get a double upside, or collars for protection

what i do different than some collar trades you see on optionsaction is that i pick strikes where i start to profit (from the puts) right away, instead of lets say a Jun 545/495 spread..where i would need a pullback to 545 to start profiting..granted it costs the same and can make more...if stock drops 15points from here at opex i want my spread to actually give me some protection. also i still benefit from a $25 up move to $585

so the chart shows the profit box for just this collar. if stock moves up to 585 (the short call strike), the collar is a wash but the Leaps gain. i profit on the collar from 560 down to 535..max profit at 535 or lower.

if stock moves above 585 at opex, i will roll that short call to July, strike TBD. will see where we stand near June opex and put on a trade for July at that point.