Update – Apple (AAPL) Rolls

by CC June 14, 2018 1:43 pm • Trade Updates

Into Apple’s annual WWDC we detailed a mildly bullish trade idea that looked to fade the event itself and position for greater upside over the next few months. Here was the original trade idea, from May 31st:

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 next day, before the WWDC the stock was up 3.00 to the 190 strike so we detailed two ways to roll to give more breathing room into the event (which was the correct move with the stock now higher). In both case it involved a roll of the June strike, and with expiration tomorrow I wanted to check back in on the trade ideas for management purposes. The first roll involved simply selling the June 190 call and rolling it to a sale of the 192.5 call, creating a diagonal call calendar which allows the stock to be higher into June expiration. From June 1st:

New Position: AAPL ($190) Long June 192.50 / Sept 190 call diagonal for $6

With the stock now 191.20 this diagonal calendar is now worth about 8.50, that saved about a dollar in lost profits had that strike not been rolled from the original. As far as trade management, it makes sense to roll the 192.50 call before it expires tomorrow. Right now the July 195 calls are about 2.40, which would mean taking about 2.00 in risk off the table on that roll.

The second roll from June 1st was rolling both strikes higher:

Or You could roll the position up to the $195 strike…

Trade Idea: AAPL ($190) Buy June / Sept 195 Call Calendar for $5.50

-Sell to open 1 June 195 call at 80 cents

-Buy to open 1 Sept 195 call for 6.30

This position, which is basically just the Sept 195 calls now is worth about 6.40, so a profit, but not as nice as the diagonal. As far as management the 195 calls expiring tomorrow can be closed (or let expire if the stock doesn’t go higher before tomorrow’s close) and rolled to those same July 195 calls, recreating the calendar but taking 2.40 or risk off the table.

Both are good trades right now and will benefit from a slow move higher in the stock over the next after rolling the short strike to July. Calendar’s are nice in a stock like AAPL with increased optionality to keep the position going while reducing risk. Both of the rolls reduce risk but do not book current profits. There is still risk to lose money on both if the stock goes lower.