Apple - again...
Apple - again...
Been kind of quiet since... ever.
Apple. Again. I own Apple since I got put in the first week of March. So my basis is $425 and I have worked the weekly Covered Calls since being put to the stock. Goal - get paid a minimum wage each week in premiums so I don't have to go an flip burgers for snots half my age... so somewhere north of $330 a week. Very reasonable and easily accomplished.
I held off last week because of the golden rule: Don't write across earnings! B u t... I am writing a covered call, which means I want to sell my stock, so I watched and set my limits. All the talk was that Apple would disappoint the analysts (why are there stock analysts? someone has to make weathermen look good.) except on Monday (22nd) where a few, three I believe, hit the press with BUY ratings as they reasoned the stock had already been punished by the market last week.
I looked at the options and because of the earnings, the premiums were obnoxious. I could write one call for $10 at my basis strike price! However, Apple is a dividend payer (~3%) and if I'm going to walk away from a dividend, I'm going to be paid. There was all kinds of talk about Apple increasing the dividend too. I decided I was willing to stick around to see what they were willing to pay. Therefore I wrote a OTM call that would pay me for the call AND if I get exercised, pay me for the expected dividend too.
23 APR 13 STO 1x AAPL 440.00 C @ 2.85 (this was .50 above the Ask when I placed the order)
I went for this strike price because I am a novice - if I had better experience, I would have set a lower price and higher premium, but my goal was to take a little out of the middle and leave the elephant hunting to others. I was comfortable with the risk of being taken out at 440 (collect $1500 in appreciation, and the premium). I'm already in a valuation hole, so my downside risk that Apple would stop making product and liquidating has already had the edge taken off. Frankly, I could ride Apple down another 20% from here and still be comfortable owning the stock based on fundamental consensus. They make a LOT of money and have a LOT of money to make more.
I went about my chores and tuned back into the market near the close to watch the spectacle (lunch time in PST). My order had hit - it was the high of the day, which means I'm an expert or foolishly lucky - do not ask my wife. The market was wetting itself with expectation and the news was met with rote behavior - talking heads reading the earnings release with little comprehension and more than a little drama. As expected - a miss. But the interesting catch was the $50,000,000,000.00 buy back of shares and dividend for 2013 and 2014 for a total of $100,000,000,000.00 return to investors - the largest in all of human history. Isn't the whole economy of Greece, Portugal, Spain, and the -onia's less than $100 Billion? Perhaps not, but dang me that's a lot of money. The news frankly bored me after the first reading and I went back to watering the yard and watching the birds bath in the sprinklers.
Today, my $285 option is worth $13. I still own my Apple, at a paper valuation loss of $2,400+/-, but I'll be collecting a $300+ dividend while I consider my next call. I will continue to work my weekly options to generate my minimum wage goal and be amused. It is coming into April and the "Sell in May and Go Away" mind set is forming. I expect to be a paper loss in Apple until maybe August or September... and I don't care. I can only "take" the loss when I sell the stock. Just keep writing out my dividend calls until I want to move on.
Still pissed I don't get free stuff as a shareholder, but as I've pulled enough money out to buy five iPads since January, I'll get over it.
Hope everyone is thawing out - brisk and cool Spring here in the West - and that everyone is enjoying success in conservative option trading.
Now if the Starters for the Giants would just get their game back, perfecto.