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February 12, 2013 / redman59

Trade Adjustment – AAPL

AAPL saw another decent gain yesterday making it 5 days in a row of higher highs, higher lows and positive closes.  The best action on a trending basis that we have seen since its selling off the high of 705.07 set back in September.  From a trading standpoint I believe the push above 460 on Feb 7th was big.  We came below that level during the day and closed above it and the 10EMA on volume 17% above its 50SMA of volume.  Today saw us run into the long-term trendline from the September highs.  Some of Mondays gains may be attributed to the news of the iWatch or the anticipation of Tim Cook’s presentation at the Goldman Sachs technology conference at 10:15 EST.  Below is a current chart of AAPL with notes:


I have stated with reason in a previous post that I am currently long AAPL via options, specifically a March Broken Wing Call Butterfly of the 460-480-490 strikes for a 4.25 debit.  With today’s unknown words of Tim Cook and the recent move we have seen (8.5% in last 5 days), I am expecting some stalling or slight retracement.  But like we have seen in the past, selling can ensue.  I do believe we have seen a low at least until next earnings but I also respect the fact that we are below that trendline and declining long-term moving averages.  While I anticipate we will break above these negative technicals, today I adjusted my trade to allow for some selling while still being happy with current gains (+72.4% before adjustment).

The trade adjustment was adding the Feb/Feb4 460 Put Calendar for a 1.60 debit.  I liked this trade in that it was cheap and it took full advantage of that 460 level mentioned above.  Below is a 30min chart which does not look bearish at all to me.  I still have those yellow trendlines on there from the daily but look at the highlighted blue boxes.  These intraday breakouts are supported with volume.


Below is my order entry and the new risk profile set for AAPL:



While this adjustment changes the characteristics of some of my Vega (going from negative to positive) I am happy with the more neutral delta (8.65 to 0.71) and increased theta (3.27 to 17.14).  Also this is more of a play on direction than greeks, which are important when playing delta neutral or income strategies.

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