Sold AAPL Covered Calls

When I opened my Apple (AAPL) position 10 days ago with January 90 naked puts I remarked it was because Steve Jobs was supposed to be moving to the healthier side.  After the market closed yesterday the reverse happened.  Apple announced that Jobs was taking a leave of absence because it is more complicated than they though.  Just like when it moved to the upside in a big swing before on the better news, the slide down started a few hours before it was public information.  It’s still fishy to me, but I decided to cut my losses on AAPL now that my reasoning is gone.  Well, not completely.  I still think AAPL is a good stock, but fear (and the recession) might keep their good numbers from keeping the stock up.

While AAPL was trading at $81.30 I sold two February 85 covered calls (QAABQ) for $5.40 each and received $1,068.50 after commissions.  I’m calling these covered calls because I’m expecing my naked puts to be assigned tomorrow.  My goal is to cut my losses, but not so deep that I remove the opportunity to make a profit on a stock that is still fundamentally the same as it was yesterday.  Support held in November around $79.  I expect that to hold again for now.  The issue is that last year I didn’t make trades like this soon enough and lost more money before I had a better chance.  I took in $448.50 from the trade the first leg of the trade.  Combining that with the revenue received from this trade I’ve taken in $1517.00 from the options I sold.  That’s a $7.58 cushion per share I have from where I’ll be buying AAPL tomorrow at $90.00 when options expire.  I’m sitting on a paper loss for now, but with my cost just above $82.40, I’m not hurting too bad on it.  If AAPL does come back before February expiration, I’ll just walk away with a profit of $500 ($1,500 premium gain minus 1,000 stock loss) in a month and a half of trading.  If AAPL continues to fall, I can only hope that it falls slowly and I can continue to sell calls along the way.