How ironic is it that just yesterday I commented about how my AAPL position didn’t make me nervous? Well, that changed today when the stock dropped more than 3.5% in the morning. It’s possible that AAPL could move higher into the weekend as it bounces off of its trend line of lower highs, but it’s still within its trading channel that’s moving south and that’s not a good thing for me. Instead of dumping the whole position, I decided to nibble on it some first. While AAPL was trading at $561.98, I closed my long put spread position by selling my two AAPL November $610 puts for $48.89 and buying my two AAPL November $605 puts for $44.21. I sold the spread for $4.68 per combination and received $933.85 after commissions. That gave me a realized gain of $511.83 on the long spread. I don’t think AAPL will rally above $605 by next Friday, but I would’ve only gained another $66.15 by waiting. Now that I think about it, I might not have done so bad to have let it expire for the full $1,000 (minus commission) sale. Basically, I just gave away that low risk time value to someone.
The short spread was my main focus with the dollars at risk being much greater. I wanted to let it wait for another day, but the other side of me wanted to cut my losses from increasing. So, I split the difference and closed half of the contracts. While AAPL was trading at $561.89, I bought five AAPL November $560 puts for $10.74 and sold five AAPL November $555 puts for $8.54. I paid $1,107.81 including commissions to close five put spreads after receiving $410.65 for selling 10. That gives me a realized loss on this side of the trade of $697.16 so far with the expectation for that to go up tomorrow or Friday when I close the rest of it.
While writing this, AAPL made it back up to $563.82 and then fell under $556, down more than 4% for the day. The chart looks a lot like October 19th, when AAPL sank into the close and then popped higher the following day. I’m banking on that to dump my last contracts on any strength. Once I close the rest of this position, I think I’ll stay out of AAPL until I see a real reason to get back in again. I don’t think it’s going to drop another 10%, but I also didn’t think it would drop this last 10%. Eventually, it will turn and I’ll miss the first few days or even the first 8-10% up, but the reversal should be long enough to ride. Trying to pick a bottom isn’t working out for me. This whole series of AAPL trades, including my last run at it, might fall in the category of stupid trades that I was trying to avoid in 2012. I didn’t need to go for such a big gain and I’m paying the price for it.