Advisable to do a calendar spread with AAPL?

Discussion in 'Options' started by yalag, May 31, 2012.

  1. yalag


    I'm bullish on AAPL and willing to risk a little over the next 6-9 months. I'm about to execute a AAPL calendar spread with call options. Thinking maybe Jan 2013 580 strike and then sell a Jun 2012 600. I will probably repeatedly write some calls each month depending on the price of that month.

    Would you guys advise on this strategy? I'm only writing call to cover the lost volatility. The main objective here is to capture the upside (that I believe) will happen in the coming year.
  2. yalag


    No one has any opinion on AAPL options?
  3. I don't know how you can expect to spend/risk "a little"
    doing much of anything with AAPL

    unless you buy some far out of the money [cheap] Calls

  4. yalag


    So what would you suggest? Buy 700 AAPL Jan 2013? And how would you minimize the volatility eroding?
  5. I guess I was thinking -
    how do you "risk a little" with any stock over $500?

  6. I would look at the Sep/Jan 620 call spread at 22 or so. Write additional 620C after Sep goes off. I wouldn't diagonal it.
  7. can you expand on reasoning not to diagonalize?
  8. The diagonal looks ok, but the long SEP/JAN 570/600 call spread is >37. The problem on the face of it is that you're paying a premium over strikes ($7-8) for a fairly long tenor. The opportunities for rolling aren't great if the shares drop $20+.

    The SEP/JAN 620 call spread at $22 keeps the debit reasonable and you're long roughly =delta if you trade it 2:1 over the diagonal (2x620s vs. 1x570/600 diag), but less headroom to roll as you'll likely be shorting strikes <620 which I would never do.

    I like the diagonal better within one-dev on share price, but the $37 debit is substantial. You have more opps to roll an OTM with the diagonal, but you pay $37 for the privilege.

    Generally, I don't like to buy bull-calendars as you're fighting the index-strip. I'd much rather be in a fly. The 400/600/800 fly is ~$85 for Jan13 expiration... rather be in that than look for rolling in Sep. Vols will drop through three expiration cycles. I doubt $485 will be touched in 2012, let alone 2013. You trade Jan outright and you are tax-deferred.
  9. yalag


    Whats wrong with diagonals? Can you please educate us?
  10. OK, so you ignored my last. You're long (a lot) of vol and delta in that diagonal. If you're right on price you will likely lose on the volatility component as inde vol, and AAPL vol (by extension/coeff) will drop. The fly is a better bull-trade, IMO.
    #10     Jun 6, 2012