$AAPL diagonal spread

Have been away from this blog for far too long but now with more leisure time at work can jump back into it

Diagonal spreads have long been a favorite strategy for me. Consider them a Stock Covered Call replacement. instead of being long 100shares of Apple for $23500 and selling shorter dated upside calls against it for income, you can instead use the same 23k buying power to buy multiple longer dated (LEAPS) calls at a lower strike AND THEN sell upside calls against those long calls. 

every situation is different of course but I look for a lower strike with a delta of at least 75. which means that of the common stock goes up a dollar the call option goes up 75cents. so for this trade I added the Jan2021 200strike calls at 76 delta. those are about $5000 at the time of this posting. so you could really buy 7 of these calls with the same buying power as 100shares.

selling upside calls is the same strategy as selling covered calls with stock. take in some premium, be able to participate in some upside, lower your cost basis of the 2021 long option. with diagonal spreads if you are buying multiple LEAPS with that same buying power you can increase the premium you are taking in. ie you could be selling 7 short calls , taking in 7x the premium vs a standard covered call. sold last weeks 240call for 95cents and closed it out at .01 on Friday, resold the Oct25 240 short calls for $1.05 on Friday as well, delta 29.  for the moment im sticking to weekly short calls or possibly 2weeks out. delta target for the short call is 25-35. 

Earnings are the week after this short call opex so will relook at levels the day prior since there will be minimal decay up until earnings. will either be upside short calls or possibly a ratio spread (buy 1 upside/sell 2 higher calls) for every long DITM call. 

if the stock blows thru the short call strike you can roll the short call out or out and up or just close out the entire position for a profit.