Ice101781

they report earnings aug 7

good point Kim -- thanks sam!

I looked at a structure like this myself just today. Also, consider your portfolio allocation for this trade. The net debit would be $3415.00 + commissions for just one spread. Assuming a 10k portfolio, that's over 1/3 allocation for just one trade. And, as you and Kim both mentioned, an IV drop would do some damage at that allocation. Question: how did you produce the second graph in TOS where IV drops 10% hypothetically?

another thing to consider is that AAPL will be paying a dividend sometime in mid-August. the stock saw a nice run-up leading up to the ex-dividend date last cycle. these calls might be worth holding onto for a while, barring a strong correction in the overall markets. consider also that IV for these calls is still ~27%...at this point, there does not seem to be a high risk for a vol crush after earnings are reported.

I bought back the calls a bit earlier

I agree, but I think your last sentence says it all. it seems the market believes this AAPL rally won't last. the analyst upgrade(s) gave us a nice bump though. here's to a bit of luck.

One issue is that AAPL stock may move in lockstep with the overall market. If that happens, a move up for AAPL means our July VIX fly continues to crater. I think it's going to be important to roll the fly to August as Kim suggested.

I'll most likely be holding until July expiration. There's a couple of possible scenarios at this point. The ideal is that AAPL stock continues its uptrend regardless of the overall markets' moves, and IV increases significantly leading up to earnings. With a bit of luck, we might actually have a small gain.

stock's in a nice uptrend -- now, if only the IV of the August options would kick into high gear...

ah, okay - makes sense, thanks Kim.

Kim, how did you calculate that a 5% move in IV would shift the BE price to 420?

I understand all of your points, but still no guidance on a stop-loss target? lol.

okay, enough ranting about what's past. in all seriousness, what is our stop-loss here? the calendar is down over ~40-45% currently...are you looking to close out down 50%? 60%? with two back-to-back up days in the markets, and the increased volatility all-around, tomorrow could be painful for this trade. it seems the options are 1) continue to wait 2) close the trade and cut our losses 3) close the 410 put calendar and open the 400 put calendar - though I'd really hate to throw any more good money after bad, and the P/L graph doesn't look favorable anyway. so it seems the logical thing to do would be to close the trade now, or at least have a maximum loss target in mind.

This trade is becoming toxic - I envy the guys that got out at 6.10!

Okay, that's what I figured, but I just wanted to confirm. Thanks.

Kim, this trade is currently down over 25%. What type of stop-loss do you have in mind?

with AAPL down ~$430, one of our break-even points at expiry, what's our play with this calendar?

forget it, answered my own question --- just realized the trade is vega positive. confusing the calendar with a short straddle/strangle ---