Friday, June 18, 2010

Continuation Transaction -- Apple Inc.

Today is options expiration Friday for Jun2010. The sales momentum for the iPad is terrific and this product is only now beginning to be introduced outside the U.S. Pre-orders for the iPhone 4 have also been terrific. Apple is now hitting on all cylinders and the Covered Calls Advisor remains bullish on its ongoing stock appreciation potential. So, the decision was made to retain the existing 100 shares of Apple Inc. (AAPL) and to roll-up-and-out to the Jul2010 expiration. The transactions history as well as some possible results for this investment are detailed below:

1. Apple Inc. (AAPL) -- Continuation Transaction
Today, with Apple Inc. stock priced at $273.88, the existing Jun2010 $260.00 covered calls were deep-in-the-money and the time value remaining in the $260.00 covered calls at only $.02 [$13.90-($273.88-$260.00)], a roll-up-and-out debit spread transaction was executed as follows:
6/18/2010 Buy-to-Close (BTC) 1 AAPL Jun2010 $260.00 @ $13.90
6/18/2010 Sell-to-Open (STO) 1 AAPL Jul2010 $280.00 @ $7.50
Note: Net Debit Spread upon Roll-Up-and-Out was $6.40 ($13.90 - $7.50)

The transactions history to date for Apple Inc.(AAPL) is as follows:
02/24/2010 Bought 100 AAPL @ $198.677
02/24/2010 Sold 1 AAPL Mar2010 $210.00 Call @ $1.57
Roll-Up-and-Out Transaction:
03/19/2010 Buy-to-Close (BTC) 1 AAPL Mar2010 $210.00 @ $12.20
03/19/2010 Sell-to-Open (STO) 1 AAPL Apr2010 $230.00s @ $3.40
Note: The price of AAPL was $222.18 today when this debit-spread was transacted.
04/16/2010 Buy-to-Close (BTC) 1 AAPL Apr2010 $230.00 @ $19.00
04/16/2010 Sell-to-Open (STO) 1 AAPL May2010 $250.00 @ $9.40
Note: The price of AAPL was $248.90 today when this debit-spread was transacted.
5/22/2010 May2010 Options Expired
Note: The closing price of AAPL was $242.32 on expiration Friday
6/01/2010 Sold 1 AAPL Jun2010 $260.00 @ $9.50
Note: The price of AAPL was approximately $261.35 when this option was sold.
6/18/2010 Buy-to-Close (BTC) 1 AAPL Jun2010 $260.00 @ $13.90
6/18/2010 Sell-to-Open (STO) 1 AAPL Jul2010 $280.00 @ $7.50
Note: The price of AAPL was $273.88 today when this debit-spread was transacted.

A possible overall performance result(including commissions) for the Apple Inc. (AAPL) transactions would be as follows:
Stock Purchase Cost: $19,876.65
= ($198.677*100+$8.95 commission)

Net Profit:
(a) Options Income: -$1,421.50
= (100*($1.57-$12.20+$3.40-$19.00+$9.40+$9.50-$13.90+$7.50) - 5*$9.70 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $273.88): +$7,511.35
= ($273.88-$198.677)*100 - $8.95 commissions
(c) Capital Appreciation (If stock called away at $280.00): +$8,123.35
= ($280.00-$198.677)*100 - $8.95 commissions

Total Net Profit(If stock price unchanged at $273.88): +$6,089.85
= (-$1,421.50 +$0.00 +$7,511.35)
Total Net Profit(If stock price exercised at $280.00): +$6,701.85
= (-$1,421.50 +$0.00 +$8,123.35)

Absolute Return (If Stock unchanged at $273.88): +30.6%
= +$6,089.85/$19,876.65
Annualized Return If Exercised (ARIE) +78.2%
= (+$6,089.85/$19,876.65)*(365/143 days)

Absolute Return (If Stock exercised at $280.00): +33.7%
= +$6,701.85/$19,876.65
Annualized Return If Exercised (ARIE) +86.1%
= (+$6,701.85/$19,876.65)*(365/143 days)

No comments:

Post a Comment