What's with Apple today? Up $18/share

[KTP]

I've bought 550 call Feb 22 option two days ago. Now wondering what to do. Should I hold it past earnings call? Risky, but can be lucrative. I think that quarter will be strong. How people will feel about it, that's another matter.

Of course, Verizon and Att will be reporting few days before Apple and that will give us good clues. But that goes for everyone else.

I assume you bought them for around $17 or so? Today they are trading for $24

What if you were to sell Feb 7 $570 weeklies for $13? You would then only have $4 at risk and the potential to make $16 profit. That would be a profit of 400%.

If Apple stayed below $570 you could write another weekly and collect more money, or just sell the $550 Feb 22 calls.

[Nika]

KTP, you are a pro at this.

I am just a simple girl with low risk tolerance.

So I just sold it for $2,463. Bought it two days ago (and on margin, no less!) for $1,613.
Money just got to the account and it was just settled, and I got out. $834 after commission. ($500 after taxes)

but, 50% profit in 2 days is not bad.

And, if AAPL goes up further, I will comfort myself because we own stock.

And I'm off the roller coaster. Same rush as if I had gone to a casino.

[KTP]

Excellent Nika! I think you made a great move.

50% profit in 2 days is an annualized return of


6545914595081094863806234431582%

I maybe be off by a few %, but that is what I get when I put 1.5^175

[Nika]

I got back in today and bought a $560 call. Am I crazy???!!!

Is it greed or is it taking a reasonable chance on an earnings call that comes once a year? I mean the Christmas quarter.
I think Apple products were still on the "desirable gift" list.

[KTP]

I got back in today and bought a $560 call. Am I crazy???!!!

Is it greed or is it taking a reasonable chance on an earnings call that comes once a year? I mean the Christmas quarter.
I think Apple products were still on the "desirable gift" list.

I think you are crazy....like a fox!

560 is a little risky, but if we don't get a total market meltdown and Apple gives good guidance (it is already a given they made more money than several small countries GDP this past year).

Anyway you reloaded pretty cheap I would guess? $13 or so for the 560?

I profit as long as Apple doesn't drop below around $480, but my reward is not as much.

[Nika]

I'm still debating my strategy. Should I hold it past 27 Jan, for big risk/big payoff? Should I wuss out and sell if it is up due to pre-announcement excitement/volatility?

Yep, close to 13. -- paid 12.6

[KTP]

Well, Monday the market is closed right? Maybe see how things go next week...if Apple goes back to the 555 560 area before earnings then your call will probably be worth $19 ($1900) and you paid $1300, so that would be another $600 profit. I would take that, even though there is a teeny chance Apple will just blow out the quarter and go to $570 to $590. The option premiums collapse though after earnings, so a $560 call might only be worth $25 to $30 after earnings.

Bird in the hand and all that

Think of it this way, for every $600 you make, you can just buy 1 real Apple share at zero cost. Eventually you will have quite the stash and be collecting fat dividends!

[Nika]

Well, Monday the market is closed right? Maybe see how things go next week...if Apple goes back to the 555 560 area before earnings then your call will probably be worth $19 ($1900) and you paid $1300, so that would be another $600 profit. I would take that, even though there is a teeny chance Apple will just blow out the quarter and go to $570 to $590. The option premiums collapse though after earnings, so a $560 call might only be worth $25 to $30 after earnings.

Bird in the hand and all that

Think of it this way, for every $600 you make, you can just buy 1 real Apple share at zero cost. Eventually you will have quite the stash and be collecting fat dividends!

You are right, o Wise One! If I got to 600 profit I would definitely sell!
Excessive greed leads to bad things when it comes to options.


I won't continue doing this. Or at least such short term options with this much risk. I will go for longer term and aim for very tiny profit - safer that way.

After this, I think I will try out selling calls. I bought some FWM stock and want to sell a call on them every month. If they expire, I will make a tiny profit for nothing(just enough to pay for the liquor ). If they get exercised, at the strike I set I will make 15% in one month, which should be good enough to console me. I'm not sure though -- will the commission that I get charged when I sell be my only fee, or is there something else that I have to pay as a seller when it expires or gets exercised? Since I have the stock, will they automatically take the stock out of my account, or I will have to do some additional steps? I never sold calls before (I mean I never originated, I only sold calls I bought), it just looks like a good strategy in theory.

[KTP]

I have only had shares called away a few times, and that was at optionshouse where they only charge a small amount for assigning options and delivering shares ($5 I think?) At Etrade I have a couple of times bought back the calls and sold the underlying stock a little before expiration (like a day), mostly because it was within a penny of what I would make if I waited to let Etrade auto assign the calls and take my shares. Etrade is much more expensive...about $20 at the cheapest...I am just too lazy to move my other IRA there to Optionshouse

[kv968]

I gotta agree with KTP on selling before earnings especially if the price moves up a little over the next week. Like you said, you could swing for the fences, but I personally don't like to hold options (especially at that kind of premium) through earnings.

As far as your covered calls on FWM, if you already own 100 shares, it sounds like a good idea to me. You could probably get about $0.50 (that'll get ya a bottle ) for the Feb 15 and that's about 16.6% above Friday's closing price so even if it got called away it would still be good.

As far as assignments, Optionshouse charges $5 like KTP said and if the stock is a penny in the money you may get assigned.

[KTP]

I am keeping an eye on your feb 22 $560 call

It is currently $14.60 with Apple up $8 today (in a down market).

You are up about $200...perhaps not tempting enough to take profits unless you are with Optionshouse like me (I keep pimping them, but you can't beat $5 trades on options!).

[Nika]

I am keeping an eye on your feb 22 $560 call

It is currently $14.60 with Apple up $8 today (in a down market).

You are up about $200...perhaps not tempting enough to take profits unless you are with Optionshouse like me (I keep pimping them, but you can't beat $5 trades on options!).

I missed that short term option high. Rest if the day it was only up $80-$160. I did not sell
I should have sold and re-bought October option. That I could hold past the earnings call.

[kv968]

I should have sold and re-bought October option. That I could hold past the earnings call.

If you do want to buy something that far out I'd strongly suggest selling shorter month OTM calls to finance it. A 560 call in Oct would set you back ~$4300. You could bring that down substantially (around at least half I'd say "safely" with some call selling). Although I wouldn't be selling anything until after earnings.

[KTP]

If you do want to buy something that far out I'd strongly suggest selling shorter month OTM calls to finance it. A 560 call in Oct would set you back ~$4300. You could bring that down substantially (around at least half I'd say "safely" with some call selling). Although I wouldn't be selling anything until after earnings.

I agree with KV. I would suggest buying a in the money call, like a Jan 2015 $450 for $112 and selling a OTM call closer in like the July 2014 $550 for $39. The July option is all time value and the Jan option you only pay $12 of time value. The spread would cost you $73 and would make you $27 of profit if Apple stays at $550 or goes higher. You would not even start to lose money until Apple falls below $523 and even then the Jan option will start to have a more significant time value. If Apple were $500 in July 2014 the Jan 2015 $450 call would still be worth very close to the $73 you paid for the spread and you could exit or write a OTM October call to get back some money and try again. In October if it is still below that call you could write a Jan 2015 OTM call and get back even more money.

If Apple goes sky high in the next couple of months the spread is going to climb from $73 to about $90 and you could exit early for a nice profit or just hold until July for the full $100.

Profit in July at Apple $550+ is at a minimum $27/$73 = 37% or about 85% annualized.


edit: But maybe stick to what you know. Apple seems to be headed to $555 today and you could sell your Feb $560 you bought at $12.60 for $17 or $18 today. My plan gets you 37% in 6 months while your plan gets you that amount in 6 days :-)

[Nika]

Hi guys, just a quick update. I sold it at 15. It went as high as 16.9 after, but alas...
I've been looking at the October 600 call, but wanted it to dip to 28. I missed that window and it is close to 30 now.

Your suggestions are no doubt brilliant, but have never done a spread and obviously don't know enough yet, so they leave me confused. I would like to learn, so that some day it can be clear as day to me too. :

How do you check the time value of an option? Is there a specific tool in optionshouse that displays that info? Or is this a guess based on looking at the difference?

What is the point to selling the 550 call for July (besides financing the 112?) because it looks like increased risk if the stock really shoots up past 590. Closing my position in that scenario would be expensive.

Why do you chose a $450 OTM rather than say a $600 ITM call for Jan? Is it more than just the initial price I pay now and potential profit?