For now, forget about covering the four September 615 puts we shorted for 6.20, since Apple’s powerful leap yesterday past the 671.68 midpoint resistance shown (see inset) implies the rally is likely to achieve a minimum 695.24. If that number is indeed reached it’s going to somewhat reduce the value of the eight Dec-Oct 620 puts spreads we hold for 14.00. However, we can withstand a little adversity because profits on any September 615 puts eventually covered for near-zero would effectively reduce the cost basis of our spreads to around 11.00.
Since we are now expecting a further $25 of upside, let’s try to increase the range of our hedge by buying two October-September 700 call spreads for 10.00. This spread could widen to as much as 26.00-28.00 with Apple at 700, which would effectively reduce the cost basis of our Dec-Oct 620 put spreads by another $4 per, to $7. You should reduce your spread bid to 9.40 if the stock is trading below 673.00. Note as well that If Apple were to fall from here, our call-spread exposure would be at least somewhat offset by an increase in the value of our put calendar spreads. However, the decline would have to be pretty severe to cause the October 700 calls to be worth less than the $10 we’re bidding for the Oct-Sep call 700 spread. Please let me know in the chat-room or via e-mail if you fill, since I don’t want to track a position that no one was able to actually buy. _______ UPDATE (August 29, 1:59 a.m. EDT): A fill at 9.90 was reported in the chat room. Any others? _______ UPDATE (August 31, 12:59 a.m. EDT): I’m still waiting to hear from a couple more traders before I establish a cost basis for the spread. In the meantime, yesterday’s weakness fell a tad shy of creating a bearish impuse leg on the hourly chart. That would require a print today at 661.40. The stock looked heavy on the close, but we’ll have to wait for the actual print before we draw any bearish inferences. ______ UPDATE (September 4, 1:14 a.m. EDT): The highest price paid for the spread was $10, based on chat-room feedback, so that will be our cost basis. For now, do nothing further.