$10,000 Income Portfolio

[humble_pie]

yes, this was the other way to interpret your posts. Just wanted to make sure.

du tonnerre !

[GOB]

Sep 6

Bought to Close: 1 AAPL 07SEP12 $670.00 P @ $2.55: -$256.06 (Total profit +$828.30)
Sold: 1 AAPL 14SEP12 $670.00 P @ $10.20: +$1019.34

[humble_pie]

hmmmn i'm wondering if the short put rule might get proven if the aapl option experiment were to last a reasonable trial period, say one year. So far, trial period has only run 7 or 8 weeks. During this period, AAPL shares soared from 600 to 675. This short-term trial result has knocked the short put rule askew.

what we might be seeing now is re-emergence of the validity of the short put rule:

short put = (long stock - short call)

[Lephturn]

hmmmn i'm wondering if the short put rule might get proven if the aapl option experiment were to last a reasonable trial period, say one year. So far, trial period has only run 7 or 8 weeks. During this period, AAPL shares soared from 600 to 675. This short-term trial result has knocked the short put rule askew.

what we might be seeing now is re-emergence of the validity of the short put rule:

short put = (long stock - short call)

I think you are seeing the variations in results based on where implied volatility is and how it moves. Nice premiums right now as we run up to the Sep 12th announcement - then the vol comes out for a while and the premiums may shrink appreciably.

Me - I'm looking at doing a reverse iron condor tomorrow. I'm going to price it tonight - the idea being to see if I can find something nice to buy late tomorrow after the vol has been sold off for the weekend so I don't pay for that theta but I have more time for news that could move it. This would only be a three day trade betting on the vol to pop more. I have to look at the vol surface and the skew tonight - I might be too late or it might not work in weeklies.

Me'h - maybe I'm over complicating this and I should just buy a call vertical.

[humble_pie]

Nice premiums right now as we run up to the Sep 12th announcement - then the vol comes out for a while and the premiums may shrink appreciably.

exactly, that's why i was thinking a trial period of at least a full year is really necessary.

lepht whatever you do, i wish you huge success.

[GOB]

hmmmn i'm wondering if the short put rule might get proven if the aapl option experiment were to last a reasonable trial period, say one year. So far, trial period has only run 7 or 8 weeks. During this period, AAPL shares soared from 600 to 675. This short-term trial result has knocked the short put rule askew.

what we might be seeing now is re-emergence of the validity of the short put rule:

short put = (long stock - short call)

Interesting theory. We may end up seeing my actions follow the rule, or we may not. As we have already seen, when the stock rockets up my strategy is less effective than simply holding long shares. However, when the stock is stagnant my strategy outperforms. For this reason alone one cannot assume my portfolio will track the equation all that well. Apple has potential to be rangebound for six months, which I am counting on happening sometime next year. I hope such an occurrence would be advantageous to my strategy.

I started this journal a couple of months ago, but I only really started dealing with the big-money AAPL puts in mid-August. So yes, it is extremely early to be analyzing data. Keep the discussion going though, it's great.

[avrex]

Sep 6
Sold: 1 AAPL 14SEP12 $670.00 P @ $10.20: +$1019.34

wow, the weeklies are fascinating, aren't they. Look how fast this loses extrinsic value.

[GOB]

They really are amazing - floating profit of $424 already. I think selling is the way to go for weeklies.

[Lephturn]

They really are amazing - floating profit of $424 already. I think selling is the way to go for weeklies.

The problem is that with the risk/reward ratio - it works until it doesn't, and when it doesn't it REALLY doesn't and can wipe out many profitable trades.

[GOB]

The problem is that with the risk/reward ratio - it works until it doesn't, and when it doesn't it REALLY doesn't and can wipe out many profitable trades.

It could happen, but as long as I have the margin to support a large unrealized loss on the shares, I'm confident AAPL will be much higher in the future. That's the premise I'm trading on. Of course, during that time my income stream from the portfolio will drastically reduce but the idea is I won't have to take a loss unless there's a catastrophic event of some kind, even if I'm stuck deep in the red for a few months. In that sort of scenario I plan to get into some long term LEAPS and spreads which will be dirt cheap and have a good chance of paying out for some multibagger gains.

As soon as I think AAPL is fairly valued or their growth and performance is more uncertain, I will either be much more careful or find a new stock to repeat the cycle. It will be incredibly difficult to find such a stock that is undervalued, growing so rapidly, and has such liquidity with excellent premiums, but who knows what the future has in store.

I'm hoping AAPL continues to trade largely reactionary to trailing earnings, with next to nothing attributed to future growth. If this is the case I expect to be able to do this for 2-3 years longer, which can amount to quite a large sum of money. A 16 P/E for one of the most powerful and fastest growing non-startups in the world is still an incredible deal, after all. Not to mention the $120B in the bank as a nice safety net.

I'm anxious to see where we'll open tomorrow and how the week is going to play out. A lot of people are calling for $700+ next week but I think that may be a bit overzealous. I'm definitely not going to trade like it will hit $700 because that would be too risky. Ideally the stock will sell off slightly after the announcement and close around my $670 strike price. It should be a volatile week.