Reflecting on my AAPL options strategy and trades. What I did right. What I did wrong. What I am going to do next?
AAPL is the symbol for Apple Inc. It designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), AirPods, and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. Apple also offers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, and more.
Learning to Evaluate AAPL
At the beginning of 2022, I attended a course called Options Millionaire Intensive bootcamp (affiliate link). OMI is a 3-day live bootcamp (virtual when I attended). I learnt some interesting investing concepts and strategies. One of them is a checklist for evaluating whether a company is good.
I know this is not comprehensive analysis but I think it is a good place to start for beginner investors. Baby steps.
- Operating cashflow (OCF) of a good company should be consistently positive. A bonus if it is growing.
- Net profit margin should be positive. 10% and more to be considered good.
- Interest coverage ratio should be positive. The larger the number the better. Nil is also good. It means the company has no loans.
- The current year Price/Earning ratio (PE) should be lower than the 5-yr PE
- The current year Earning Per Share (EPS) should be higher than the 5-yr EPS
- The Value line should be higher than the current share price. This means that the company shares could be trading at a discount.
Applying the OMI Checklist to AAPL
- AAPL’s OCF is positive and growing strong. TTM is 116,426 million.
- Net profit margin is over 20 and TTM is 26.41
- Interest coverage ratio is positive and TTM is 44.72
- The current year Price/Earning ratio is 23.64 while 5-yr PE is 23.50
- The TTM EPS is 6.15 while 5-yr EPS is 3.4
- The Value line is 6.15 x 23.5 = $144.52
AAPL passed 4 out of 6 items. The PE ratio is fair and the value line is also fair.
I thought it is suitable for the Poor Man’s Covered call strategy.
Poor Man’s Covered Calls
25 Mar 2022 – bought 1 call option at strike price $170 at a cost of $3,300 expiring 19 Jan 2024.
AAPL share price was $173.86 when I bought the call. It is now trading lower at $146.
I sold 5 calls between 28 March to 29 April and collected profit of $211.68. I closed the calls between 3 to 7 days when they hit 50% or more of the premiums.
June 2022
The share price of AAPL has dropped since I bought the call. It is a bit challenging finding options opportunity above my strike price. But that is what I am going to keep trying to do.
The data I used for evaluation are sourced from Firstrade.com and Moomoo (affiliate link). I have trading accounts with them and it includes access to relevant company and market information.
