Apple: A Nice Cash Generator

by JDH on December 16, 2017

I continue to hold a number of gold stocks, but this week something different: AAPL – Apple.

As you can see, the chart of Apple is a nice long uptrend (year to date).

From under $120 at the start of the year to almost $175 now, it’s in a nice uptrend.  But of course just buying a stock and holding is too boring, so I own it, but do covered writes each week.

I bought some shares on November 22 for $173.50 (which is about where it is today).   So I’ve held for almost a month, with nothing to show for it, right?

Nope.  On November 29 I averaged down and bought more at $168.95, so my cost base is around $171.25, but that’s not the best part.

On November 30 I did a covered write, selling out of the money options that expired the next day for 33 cents per share.  They expired worthless, so my cost basis just dropped by 33 cents.

On December 11 I did it again, selling out of the money call options (the December 15 expiry, strike $172.50) for $1.19.  Alas, Apple went up this week, so on Friday afternoon, just before the close, I bought back those options, which were now in the money, for 97 cents.  So, I made 22 cents on the deal, but the stock is worth $2 more than it was when I did the covered write, so I’m happy, because the stock is worth more.

So, in two weeks, I lowered my cost basis by 33 cents plus 22 cents = 55 cents, and I have a stock that is up a few dollars since I bought it.

Win win.

Friday was a nice up day, since the entire market was up, so it’s likely that on Monday or Tuesday, if we have another up day, I’ll do it again.  A covered write, pocked some premiums, and keep on going.

I lose some of the upside, but have some protection on the downside (since my cost basis keeps going down).

I suspect I will only do this one or two more times, because it appears to me that gold is getting very close to a nice buy level, in which case I will redeploy the Apple funds back into gold, but for now, it’s a nice way to pick up a few pennies.

(If Apple crashes on Monday, please disregard this strategy, since obviously it was crazy……).

That’s the update.  More next week.