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July 22, 2012 / redman59

Sometimes This Is Worse Than Booking A Loss – $AAPL

It pains me to even write about this but it needs to be done. Sometimes it is easy to study the losses to show what you did wrong or even right in that maybe you cut a loss that when on to create bigger a bigger loss. One loss that I also like to look is on the opposite side and “how much did I leave on the table?” This is a case in when you took profits but that stock went on to run even further. A recent case in point for me was AAPL. Below you can see my trade history.

My idea going into this trade was that it would trade sideways or down and then take off from there for the much anticipated earnings run, which it has seen so far as of 7/5/2012. Below you can see a screen shot of an hourly chart with trades.

Below are the trades in order with thought process:

1) Enter 590 Call Calendar

  • Wanted to leg into an upside move for AAPL as it recently dropped from 590. Did bot want to go in with just a single option but wanted to reduce the price by created a Calendar that would also benefit nicely on a move up and would exit this position if AAPL made a move above 585 by weeks end, creating at minimum +25% gain.

2) Enter 580 Call Calendar

  • Added another calendar and rolled down strike price from 590 to 580, looking to exit the 590 Calendar on a move up.

3) Sold 590 Call Calendar & later added 565 Weekly Put

  • Made the move up I was looking for and exited the 590 Calendar and at close added the 565 Weekly Put to hedge against any drop, creating a nice profit as AAPL is still in downtrend on hourly. Overall market sentiment is bad and this positive day may be seen as another shorting opportunity much like 2 days ago, last 4 days SPX has dropped near -3.4%.

4) Sold Weekly Put

  • AAPL breaks out of down trending hourly channel so exited the Put to avoid the rapid time decay as seen in the weekly options. Possible big reversal to the upside could be seen in AAPL if the market turns at all and a bottom is believed to be in.

5) Sold 580 Call Calendar

  • Overnight news out of Europe created a gap in the morning that has not looked back, AAPL seems to want to the 580 strike created a full profit on this trade. Late in the day the market did not pull back at all and continued to squeeze. I decided to exit the position all together.

Last Friday was huge, no doubt about it. I could have left the AAPL July Call on for a run or hedged by selling another option, either there way are a lot of scenarios that could have taken place and at this point I wanted to keep it simple. Also with the market making their best gains of the year on Friday and being the weekend and quarter-end, a pullback on Monday or for the week was reasonable; or maybe the news got sold off of over the weekend and markets got hit on Monday. Either way there were a lot of unknowns and I decided to shed the position all together for a meager gain of +$30 per unit. I went into the weekend and holiday relaxed without this position to think about.

So where is that position today? With all of the losses from the trades within AAPL my cost basis on the July 580 Call was 14.30, today trading at a mark of 32.475 for a profit of +$1817.50 (+127.10%). Nice profit if I were in the damn thing.

Today I did add some DO July Calls and a PXD July Puts for quick trades.

Current Account:

Cash – 86.0%
Long – 9.6% (PPO 4.7%, DO 4.9%)
Short – 4.4% (PXD 4.4%)

 

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