AAPL Analysis

Apple Inc. (AAPL)

Update 6/2/2017: I entered AAPL as the price began a steady sideways move in order to take advantage of time decay. The position did not disappoint. I exited at 25.1% of maximum potential profit, a bit above my target price.

Shares showed a net decline of 0.2% over 11 days, or a -8% annual rate. The options produced a 33.4% yield on debit for a +1,109% annual rate.

AAPL has sufficiently high implied volatility for consideration as a volatility play.

I shall use the series of monthly options that trade for the last time 25 days hence, on June 16.

Implied volatility stands at 19%, which is 1.7 times the VIX, a measure of the volatility of the S&P 500 index.

AAPLs IV stands in the 47th percentile of its annual range and the 64th percentile of its most recent broad movement.

The price used for analysis was $153.86.

Premium: $4.91 Expire OTM  
AAPL-iron fly Strike Odds Delta
Long 165.00 93.0% 8
Break-even 159.91
Short 155.00 57.9% 44
Short 155.00 41.6% 57
Break-even 148.91
Long 144.00 88.3% 11

The premium is 47% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered an order on AAPL as described above. I initially tried using the weekly options expiring June 2, but was unable to get a sufficiently close risk/reward ratio. So I went with June monthlys instead. The stock at the time of entry was priced at $153.76.

By Tim Bovee, Portland, Oregon, May 22, 2017

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