So the big story of the day is Apple (AAPL)’s trillion dollar market cap. That’s a pretty amazing feat, and settled the debated on whether it was going to be Amazon or Apple first. So kudos to the Cupertino folks. As far as trading the stock, Dan has a few posts and updates over the past couple of days but now with the stock well above $200 I wanted to check back in on some bullish trades we originally detailed and updated in the beginning of the Summer that looked out to September for this kind of move. To recap, the trade started as a June/Sept 190 call calendar. From from May 31st when the stock was 187.20:
AAPL ($187.20) Buy June / Sept 190 call calendar for $6
-Sell to open 1 June 190 call at 1.50
-Buy to open 1 Sept 190 call for 7.50
The stock quickly got to 190 and we updated (From June 1st) to allow more breathing room with two different ways to do that, one rolling the entire calendar higher and the other creating a diagonal calendar vertical by just rolling the short strike higher. Then with the stock even higher on June 14th we updated again, leaving these potential positions:
July/Sept 195 call calendar for 3.10
July 195 / Sept 190 vertical call calendar for 4.00
In both cases the roll of the short strike to the July 195 calls was the right move, as the stock spent most of the Summer butting up against the 195 level without breaking out above. The July 195 calls expired worthless leaving a Sept 195 and 190 call respectively.
Now with the stock 208.20 these are worth quite a bit. The Sept 190 call is trading $18 and the 195 call $13.75.
So this was an example where we were able to wade into Apple stock with defined risk, and then use the options market to continue to reduce risk as the stock climbed higher. It can be a bit of a pain to have to roll calendars as the stock moves in your direction but especially in a stock like AAPL, it’s can be an ideal way to stay long the stock for moves like this.
As far as management from here it probably makes sense to simply take profits in either scenario and for long term bulls to look to do the same sort of strategy on the first pullback… after the euphoria subsides.