Housekeeping: Apple (AAPL)

We have April 230/240 call spread.  As I suggested on Friday, see AAPL Adjustment, it is prudent to convert the call spread into April/May $240 calendar by rolling April $230 calls to May $240 calls.  This will require Apple to move above $235.  However, the time decay is running faster against the trade.  Also, May IV is slowly inching up due to up coming earnings which means the longer we wait, the higher the cost of rollover is going to be.  Therefore, on a second thought, I am willing to pay up a little as Apple is trading at $233.30.


- Sell to close April $230 calls for $7.50 credit
- Buy to open May $240 calls for $8.40 debit


Just filled the order $0.90 net debit.  Now we own April/May $240 calendar.  If the stock makes a move above $240 by April expiration, we'll just close the entire trade.  If it doesn't, April $240 calls will expire worthless and then we will sell May $250 calls to convert it into May 240/250 call spread. 


For those, who would like to understand how much P&L all these adjustments have produced since we started with March/April $230 calendar, here is the breakdown (before commissions):


- Bought March/April $230 calendar for $2.85 debit
- Rolled March $230 calls to April $240 calls for $1.80 credit
- Rolled April $230 calls to May $240 calls for $0.90 debit


When you mix them all, we paid $1.95 debit for current position April/May $240 calendar, which is currently going for $5.45.  That's 180% profit and there is more to come as IV goes up in May due to earnings and time decay accelerates for April $240 calls.  


Booyah!