Weekly Trade With Apple Covered Calls

May.22.12 | About: Apple Inc. (AAPL)

If you followed last week's Apple (NASDAQ:AAPL) covered calls you ended up not being called out because Apple finished below the lowest suggested strike of 540. You ended up owning AAPL at one of these net debits (stock price minus call premium received):

On May 14 you bought AAPL at 563.50 and wrote one of these:

Strike Call Bid Net Debit
540 24.90 538.60
545 20.50 543.00
550 16.40 547.10
Click to enlarge

Those all expired out of the money and over the weekend we amended last week's trade to suggest you wait for AAPL to bounce back a bit and then write new options for this week. Well, this morning we have that bounce and it's time to write new options.

Annualized Return Of 52% to 79%

As we write this (during market hours), AAPL is at 547.77, up 17.39 for the day. If you write the same strike as you did last week, that will leave you at one of these adjusted net debits (which is your old net debit minus the new call premium received):

Strike Call Bid Adjusted
Net Debit
Annualized Return
for 12 day trade
540 12.30 526.30 79%
545 9.10 533.90 63%
550 6.35 540.75 52%
Click to enlarge

If AAPL stays above the strike you choose by this Friday then your stock will be called away and you make the Annualized Return shown over a 12 day period.

If you are not assigned on Friday (i.e. AAPL is below the strike you choose) then you own AAPL at the adjusted net debit shown and can write another option for the next cycle. Your adjusted cost basis (i.e. break even point) is the Adjusted Net Debit.

Disclosure: I am long AAPL.