Friday, March 9, 2012

$AAPL trade from hell and how I am dealing with it

Let me start by saying: you can't argue with stupid. I don't mean that aapl's price is stupid; it's the recent "all at once" grab for it that is sheep-like behavior (moutons de panurge).
* Set up: I had MAR $AAPL iron condor 440/470 just before the AAPL boom.
Needless to say it got in trouble fast so I quickly reset it higher and increased lots.
So upper leg was 505/10 credit call spread.
Then drunken grab for appl took off and soon enough the 505/10 was deep ITM (the wrong way).
Usually I would roll out into Apr condor but since LT AAPL is winning stock and I don't want to be betting against it for that long, i decided to this risky move:
Move #2: I sprawled the DITM upper 505/10 leg into a new MAR iron condor that is $20 wide (4times my usual $5) like this:
490/510 credit put spread AND 570/590 credit call spread.
The point here was to still have a chance at managing the position to expire it in mar.
The drawback is that it takes $20 (14x) way more margin and much higher dollars at risk.
This is NOT recommended especially in such volatile markets, but this is what i did.
Move #3: On 3/8 I decided that there is too much at risk so I took advantage of the fact that it only cost $1.1 to close the whole condor. So i did it.
Still insisting on killing this trade in Mar so I reopened another MAR condor BUT only 1wide ($5 instead of the $20 that i had before).
Good thing: smaller risk $5 vs. $20
Bad thing: strikes are much closer to current price. 525/560
Move #4: after this crazy run up i finally gave up on trying to expire it in Mar so I punted the position into Apr.

LESSON: This was way too complicated in hind sight it would have been better to punt earlier. Still, I  made a move knowing the risk and I live with the consequences. I still have no losses from this trade...yet. I will continue managing it through April and update here. AAPL $SPX $NDX $RUT $C $GS

I hope this helps. let me know if you have questions. @racernic