Friday, June 1, 2012

$AAPL diagonals vs Covered Calls Paper trade

3 Aug - rolled the weekly short 600 calls to the Sep610 short call for $600+ credit per lot, as you can see in the spreadsheet using the same amount of capital, the diagonal spread model is starting to pull away from the straight stock covered call model.. covered call being up $6000 vs the Leap covered calls up $10000


27 july - similar to the other AAPL model, bought back the weekly short 600 calls for huge profit after the earnings selloff.. now on late friday i sold the Aug3 weekly 600 short calls not wanting to commit to the Aug monthly short calls yet.. not alot of premium buy the Leap model will be picking up 4x the premium..see the comparisons in this google docs spreadsheet .. the comparisons are at the bottom of that spreadsheet


20july - this strategy worked almost perfect this month... positions initiated with stock at 567.. stock moved all the way up to the short strikes closing at 604 on opex day, which was unexpected but ok.. so i bought back the short 600calls and rolled them to the weekly 600short calls since it is earnings week.. the roll was for $1300 credit each.. look at the spreadsheet.. the stock covered call trade is up $4500 in 6 weeks vs the diagonal spreads (Leap covered calls) position is up $7800.. not too shabby. so you can see the diagonals will outperform the basic covered calls since you are generating 4times the premium. both models are positioned for earnings now with short calls slightly in the money. see the google docs spreadsheet of this position

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1june - heres your scenario.. you have come into some money.. either took profits to raise cash..father in-law gave you money to manage, inheritance, 401K conversion to IRA.. and you have $60000 to put to work.. you have been chomping at the bit to buy some AAPL because you see Cramer mention it everyday. lets compare a covered call with my diagonal spreads and adjust going forward:

Covered Call using this mornings prices:

Buy 100shares of stock at $567 = $56700
Sell the July600 call at $14.50   = $1450credit
net outlay = $55250

Using that same $60000 for diagonal spreads:

Buy four Jan2014 500strike calls for $143 each = $57200
Sell four July2012 600strike calls for $14.50 each = $5800credit
net outlay = $51400

will be tracking and adjusting this trade montly in the paper trade spreadsheet

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