Apple ahead of WWDC

Apple is trading in the $438-440 range right now, and bouncing right above the 50 DMA.  AAPL got down to $420 in mid-May, and next week is the much talked about Apple Worldwide Developer Conference in San Francisco.  There are many rumors out there about what they could announce at this event from a low-cost phone, updated iPhone, and new Macbooks.  

We don't expect much downside movement between now and the June options expiration date of 6/21, barring a macro economic issue.  Speaking of macro economic issues, we also don't like going long the stock just yet with the recent volatility in the market.  We think AAPL is trading at cheap levels, but wouldn't want to start a long position just yet.  

To gain some long exposure and take advantage of a short term opportunity, we are selling June $405 Puts on AAPL for $1.25.  

This trade pays us $125 per contract, and we will likely ride these through expiration if it's tracking to expire worthless.  If the stock drops below $403.75 before 6/21/13 we will likely get put and have to buy 100 shares at $405 for each contract that we're short.  That is a better entry point for the stock than $440.  If the stock stays above $403.75, these puts will expire worhless, and we'll get to keep $125 for each put that we're short.  

As long as AAPL trades above $435, there should be about .10-.14 cents of decay on these puts every trading day until expiration.  Which is money in our pocket!

Update on 6/24:  These puts expired worthless this past Friday on 6/21 for a 100% gain on the short $405 Puts.  AAPL is now trading around $403, and we will likely write out of the money puts again soon.