Enis touched on what’s going on with AAPL stock in his Chart of the Day. From his post:
The stock’s 7 month basing process was essentially a transfer of AAPL stock out of weak hands (likely more focused on earnings growth) and into strong hands (likely more focused on value). Those strong hands are more likely to be patient given their good entry on the investment.
With that in mind, let’s check up on our current position and how we feel about it. Here’s the trade:
Trade; AAPL ($467.50) Bought Oct/ Nov 500 Call Spread for 5.30
- Sold 1 Oct18th 500 Call at 5.80
- Bought 1 Nov 500 Call for 11.10
Right now the trade is worth about 8 with the stock hanging out near its 50 day moving average of 480. There’s only a little more than 3 dollars left in the October calls left to decay.That decay will accelerate as we get closer to Oct 19th. As it stands right now those calls decay about 27c a day while the Novs decay about 20c, for a net decay on the position of about 7c today, or 15 or so cents this weekend. Again, that increases every day for the next two weeks.
As October decays this becomes more of a long delta position. Right now, it’s about 12 long deltas, that will grow as we approach expiration as the Oct calls will lose deltas at a faster rate than Nov. (with stock and vol unchanged)
So what we’re looking for is the stock to hold this 50 day moving average and start to work higher towards our strike. Anything towards 500 in the next few weeks and this goes from a small winner to a big one. Obviously a breakdown the stock from here means it could turn into a loser.
The other big factor on this trade is Vega. With November catching AAPL’s next earnings report, Nov should continue to stay bid while October could continue to see sellers if the stock stays rangebound.
So we’re optimistic with the structure, and like this play in the name until the stock breaks one way or the other from its current range.