Covered Call: Apple, after opening gap down

Working through a covered call example

I document a covered call trade I’d make (in real time).  It requires $34K, and that would be too much of my portfolio to risk at once.  But it illustrates a great opportunity.

Tuesday January 18, 2011

1:53PM: BUY 100 AAPL @ $342.90, SELL Jan 11 345 CALL @ $6.75

4:00PM: AAPL closes @ $340.65, option closes @ $5.40. Overall position down slightly.  Hope that a big pop in the AM will help us close this position at a nice profit.

Expiration is this Friday.  Maximum yield is 2.6%

Wednesday

1:19PM: We made 1% on this deal in 1 day, time to get out.  BUY Jan 11 345 CALL @ $2.09, SELL AAPL @ 342.54

Net proceeds are +$466.00 on the call – $36.00 on AAPL = $430.00 or 1.25%