Tuesday, March 10, 2015

Another Bite of AAPL

With the funds from my GM trade in hand after the 400 shares were called away on the ex-dividend date yesterday, I wanted to get a new trade going right away.  I have a list of five potential trades that I’ve been keeping an eye on since I have so many in-the-money covered calls expiring this month, but instead of these I went back to AAPL, a stock I’ve done well with before.

Also, AAPL is in the news for another reason these days, beyond its constant innovation and design:  it’s slated to replace T on the Dow Jones Industrial Average (full disclosure: I also have a positon in T).  While this in and of itself wouldn’t put it on my list, it is likely that there will be increased buying and selling during the transition period, as various money managers adjust their portfolios to include AAPL now that this is happening.

I bought 100 shares at around $127.60 and sold a May covered call at the strike price of $130.  This bridges an ex-dividend date, and also should carry me through the DJIA incorporation phase – in short, there are a lot of reasons for the shares to be called away, and for me to take a nice gain on a relatively short-term trade, two months in duration. If the trade goes as planned, I’ll pick up around 6.41% for the 65 day holding period, which works out to a hypothetical annualized return of 36%!

Here is the position plans for the new AAPL position, with results reported net of commissions and fees:



Bought 100 shares at average share price $127.58 (total $12,757.99)
Sold 1 $130 May 2015 covered call

Net Profit:

1) Options Income:  = $546.74
2) Dividend Income (May ex-dividend, if collected): $47.00
3) Capital Appreciation if assigned at $130.00:  $224.01

Total Net Profit if assigned on the ex-dividend date:  $817.75
Absolute Return on Investment: ($817.75/$12,757.99) = 6.41%
Annualized Return if Assigned and Dividend Collected (65 days):  6.41%*(365/65) = 35.99%


  1. Jim - just stumbled upon your blog. Very well done, love the record keeping. I am also starting to dabble a bit in covered calls. So it helps me to read where others have gone.

  2. Thanks - I've been very happy with the approach these last 3+ years. It's a system, and you have to keep at it. But I'm happy with the results.