Madoff's fantasy "split strike conversions" were simply synthetic bull verticals. Unbelievable that more ppl didn't catch on that Madoff made money in the mid 2000s when 100% of his bull verticals would have expired worthless.
Dude, I appreciate you as much as anyone on this site, but... c'mon. To most people, even the basics of finance are magic. Add a little slick verbiage, and they go right into zombie mode. Hell, there's a ton of "options gurus" out there that make a living off people who think they're traders and have (at least theoretically) read up on this stuff.
Why I made this trade. I look at Apple almost like a utility at this time...Like a Microsoft. During a recession Apple will lose SOME market share. But it won't be much. It's funny my wife and I were going back and forth about Alibaba (BABA). I wanted to pull the trigger, but she feels in her gut that it isn't a good move. I am willing to hold Apple through a recession. It should hold value for years to come. Their ear buds are coming out. Keep thinking of Warren Buffett and Coke (KO). Every time a buying opportunity comes for Coke...He adds to it!! For 20 years he has been doing this...WHY!! Because it holds and retains market share. As an investor I almost feel naked without having some Apple...Almost like not having QQQ in my portfolio. Just me. If I hold it and gain 3+ percent over the next year, I am fine with that. I still own 100 shares of Apple with an "implied" lower cost basis. It's no sin to be a long term investor. The only thing I might have done different was to buy below $125...Say $124.95. I then would have done a covered call for the June 22 $125. Just grab the premium and let it get called away. I have done that trade before 3 times...About a 6-7% return. But, I've hated myself when they would get called away. The first was Apple about 10 years ago. Bought for whatever and optioned a year out just out of the money. In late March 2020 during the shut down I bought Boeing at $179.?? and optioned the Jan 21 $180. Also did the same thing with BABA. They all got called away, but I picked up the premium and walked... For me it's patience Grasshopper...
If you are a long term holder and are happy to sell AAPL at 164,then you should be fine... With that said,you sold really really cheap 1 year vol..It off 20 handles from its high at 48% and at the very low end of the range(28%).. In terms of actual dollars,had you sold mid vol at 38,the option would have been worth 9 dollars..400 basis pt differential in return on strike,4 percent less protection.
What... losing money as compared to the broad market? Taking on risk for a fraction of the normal price? Earning not much more than a bank would give you? I don't think so. Covered calls - when entered with good criteria and an understanding of the risks they entail - yeah, maybe. But without those things, it's a crappy, dangerous, losing strategy. See the P&L curve below. Notice the part on the left - the one that goes below zero... and keeps going.
Damn, I love being here sometimes. Seriously. Thank you, @taowave and @destriero both... there are still people in this world who a) know their shit and b) are willing to keep saying it until at least some of us get it. Really, really grateful to you guys.