Apple (AAPL) is one of our largest holdings due to its remarkable performance – despite my modest initial investment in the largest of the big tech companies. Actually, now that I consider our kids’ education fund, we’ve held AAPL for almost a decade.
On Friday, I wrote three put option contracts, one each, on Disney, NextEra Energy, and AAPL. On the risk-off end to the week, AAPL closed at $131.96 after finishing Thursday’s trading session around $137. On down days I have taken advantage of volatility to sell insurance in the form of put option contracts. The APPL put contract (strike: $115; expiration 19MAR2021) sold for $297.30.
After markets rebound to start this new week, our AAPL put was just $10 above our initial limit order. Instead of waiting to see if our order would be filled later in the day, I cut bait and paid the extra ten dollars to close our position just two partial trading days after we opened it. Our return was 1.2% on the $11,500 required for collateral; 144.5% on an annualized basis.
With the three positions opened Friday, our available cash balance fell just below 10%. After closing our AAPL put contract our cash balance is much more comfortable above 11%. I plan to trim at least one of our high-flying tech investments but our cash will be constrained until either our covered-calls assign our shares or we see hit the anniversary date magically converts our short-term unrealized capital gain into a long-term unrealized capital gain.
This was not the first time I quickly opened and closed a put option contract on AAPL and I doubt it will be the last. I very much admire Apple’s business and plan to follow the business for many years. If we have an opportunity to make a quick return on its short-term price fluctuation.
Source: MarketWatch.com