‘Don’t Put All Your Eggs in One Basket
Unless They’re Apple Eggs’
It’s true — you’d do pretty darn well just pushing your chips into the middle of the table and just holding onto AAPL these days.
At the time I write this, Apple is at $426 per share. Thirty days ago it was trading at $382. That’s when I bought it. That’s a $44 move, for an 11.5% gain in the stock.
Why did it move like this so predictably and on cue? From Dec. 18 to Jan. 18? The plain answer is because Apple is getting ready to announce its earnings on Jan 24.
The Most Important 30 Days of the Year
Because of how many devices this company sells … the lines people wait in for the newest, latest and greatest things it makes … and the curiosity of the sheer volume of money it CAN make — this is what drives the stock price up in anticipation of the earnings date.
It did this last December, and the December before that, and the December before that. And in fact, it does this almost in every 30-day period leading up to ALL of its earnings announcements!
(September to October 2011 it moved 40 bucks … June to July 2011 it moved 70 bucks … you get the idea!)
But you could simply focus on the December to January period – of any year. That’s because Apple is loaded with future news dates and events.
For one, there’s the Consumer Electronics Show in Las Vegas that takes place in early January. Then there’s the annual MacWorld/iWorld show that takes place in later January. Not to mention their earnings announcement wedged in there.
A Tip for When Q2 Comes Around…
What I like to do is enter Apple approximately 30 days before the earnings event. I like to buy in on a scared day in the market. I like to buy in when nobody’s talking about Apple. And I like to buy a simple call option with a strike price that’s near where the stock is trading at the time.
But wait a minute … didn’t I say I was making 100% returns in these 30 days?! Yes I did. And how you achieve this is with leverage, specifically using a tool called a call option (limited, fixed downside risk, with unlimited upside to gain).
Buying a strategic call option about 30 days before Apple announces earnings costs 1/20th what the stock costs, yet pays off over 10 times the move of the stock.
The best part is it’s perfectly legal and no one knows or cares that you line your pockets with profits!
As I like to remind people, a 100% gain in 30 days’ time like this allows you to do stupid stuff as an investor, even for many months, and still come out way ahead!
FYI, a rule of thumb with a call option is this: An approximate move of 10% in the stock can equal a doubling of the value of the call option.
Finally, You Have a Trading Advantage over the ‘Big Boys’!
So there you have it. A killer, compelling and stress-free trade you can do in the market right now. Go ahead … check out a one-year chart of AAPL. Go back the last four to five years – and watch how the stock responds in the 30-day period before every single earnings announcement.
Remember this too: YOU can trade like this … but mutual funds, hedge funds and the other bloated, big-money institutions can’t touch it with a 10-foot pole. They just can’t — it ain’t possible for them to move enough money around to make it worth their while.
In closing … there’s some other really fun things you can do alongside your call option. One solid thing is what I call a “Money Press,” where you utilize weekly traded options and do a mini calendar spread, selling premium every single week and putting it in your pocket.
You can make plenty enough with this to purchase the call option, enhancing your 100% return even more. (Meaning, when you don’t even pay for the call option with your own money!)
The biggest problem you’ll have with what I just laid out is the boredom in between these trades. But I have an answer for that too. You see, there’s one other thing out there that’s AS EXCITING as what I just shared here.
It’s an almost-magic, little-known piece of news, and every time it’s announced, the stock goes up 86% of the time over the next three to six months … and it’s NOT an earnings announcement.
You can trade this little known piece of news with a call option, just like in this Apple example, it’s that compelling of a driver of the stock.
I hope this installment finds you well today.
— Preston James
P.S. Very important – the idea is to sell out BEFORE the actual earnings date. This isn’t about guessing which way the stock will go after the announcement – this is all about capturing the upside as the weeks unfold leading into the compelling announcement date!
P.P.S. I told you I’d tell you about bi-planes and marching bands. That was the visual when Krispy Kreme (NYSE:KKD) was back in its heyday, opening stores left and right. That was a mob scene – and for 3 ½ years, can you guess how I made money on KKD? If you guessed the 30-day period before earnings with a simple call option, you’d be guessing right!