Apple Covered Call Revisited: Same Share Price At $95, But I’m Up $600

On Oct. 26, 2008, I posted on the Apple Covered Call Options Play I entered into. At the time, Apple (AAPL) shares were trading at 94.6. Monday, they closed at about the same value. To demonstrate the efficacy of entering into credit spread plays at a time of extreme market volatility, consider that the underlying share trade is a net wash, yet my option position is up close to $600. As highlighted previously, concurrent with my purchase of 100 shares of Apple, I also sold a Call Option as outlined below:

Bought 100 shares APPLE (AAPL) at 94.6 = $9460 Outflow

I sold a Call with April09 Expiry 110 strike for 11.30 = $1130 Inflow

Today, same option worth $535 = Net gain of ~$600 if position closed

Given the recent announcement on Steve Jobs’ health no longer being such a concern, I anticipate Apple shares will at least tread water with the market and if that means up, so be it. If that means down, shares can drop to as low as $83, a 12% move from here, and I will still have broken even. I’ll probably just ride out this option and let it expire worthless and then roll into a new spread for more income. In the event shares exceed 110 prior to April, I can always buy it back (while holding the underlying shares of course, as collateral) and then sell a higher strike option for say, June.

Make sure to stay tuned!

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