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Hi Advanced Traders!

If you have some AAPL covered calls with strikes of around $170, you can consider pairing them with a bear call spread, just in case the markets continue to be shaky for the next couple of weeks. If you have LEAPS contracts where you entered AAPL at around $170, you can also consider selling a call option against it to temporarily convert your trade into a PMCC.

Remember that if you are going to execute these trades, it's recommended that you are long-term bullish on the stock and willing to cover your second leg.

Pairing Your Covered Calls With Bear Call Spreads

Looking at the technicals, AAPL has not yet hit a new all-time high above $183. If you started your wheel and sold your covered call at around the $170 strike, you can sell a shorter-dated call option around the $185 strike. However, be mindful that earnings are coming up, which means that there may be volatile price fluctuations.

Expiration Date: May 6, 2022

Step 1: Buy 1 $200 call option (delta 0.03) for $18.

Step 2: Sell 1 $185 call option (delta 0.21) for $88

Step 3: Set up a buy-stop order of 100 shares for $184 per share

Credit: $88 - $18 = $70

The goal is to have AAPL stay below $184 from now until May 6. If it does, both legs will expire worthless and you will be able to keep $70.

If AAPL rallies up to $185, you will buy 100 shares for $184 each, convert your bear call spread into a covered call, and sell your first leg. You will also most likely sell your first 100 shares for $170 each from your first covered call trade. Selling your initial shares to purchase a new round of shares will help you not have so much capital in AAPL at once.

Remember that I am long-term bullish on AAPL, but short-term neutral. Again, if you want to set up a BCS on AAPL, you want to be willing to purchase the shares to cover for your second leg.

PMCC Conversion

Similarly, if you have a LEAPS option and want to lower its cost basis, you can also sell a call against your contract.

Expiration Date: May 6, 2022

Step 1: Already own a DITM 2024 LEAPS

Step 2: Sell 1 $185 call option (delta 0.21) for $88

Step 3: Set up a buy-stop order of 100 shares for $184 per share

Credit: $88

If AAPL stays below $184 from now until expiration, your second leg will expire worthless and you'll be able to lock in the $88 of premium.

If AAPL rallies up towards $185, you will buy 100 shares for $184 each, convert your PMCC into a covered call, and sell your LEAPS (most likely for a profit).

Do Nothing

If you don't want to execute any trades and would rather be an observer, that's totally okay! You can keep track of some of the legs mentioned above and see how their price fluctuates over time. If AAPL doesn't move too much, most likely, you will see the second leg depreciate in value right after earnings. This is due to IV crush where IV will most likely drop after earnings and dramatically decrease the extrinsic value of the option contract.

In the end, feel free to tweak the numbers to your own risk-tolerance.

Also as a quick note, due to a couple of you asking me to show you other options trades and ideas, I am thinking of introducing bull put spreads in my Livestream this Thursday. I don't necessarily use them as much or teach it due to the complexity of multi-legged trades for everyday people. But, if you have a curiosity itch that you really want to scratch, feel free to join and you can ask me your live questions!

Hang in their folks! You got this!😀

Steve and the Call to Leap Team

Have a wonderful weekend! You got this!😀

-Steve and the Call to Leap Team

The following article is strictly the opinion of the author and is to not be considered financial/investment advice. Call to Leap LLC and the author of this article does not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.