The Next Apple at a Fraction of the Price?

by Ken Trester | August 24, 2012 8:17 am

With Apple (NASDAQ:AAPL[1]) reaching all-time highs[2] and trading steadily in the $650s, investors are clamoring for the next big tech mover that doesn’t have such a hefty price tag.

My extensive scans yielded networker Riverbed Technologies (NASDAQ:RVBD[3]) as a name with a near-term bullish bent … at a cost 25 times lower than AAPL.

With RVBD in the $20 range, its price is appealing to investors with any sized account. Ideal entry is around $20.10, and my upside target for RVBD is $23.60. Best of all, you shouldn’t have to wait long for profit, as I expect RVBD’s run to play out before the end of the year.

But if you’re looking for more bang for your buck, a call option in RVBD is the way to go. A call option gets you upside exposure without risking all of the capital.

I’ve identified the RVBD Dec 25 Call options as a good buy at $1.40 or lower. My initial profit target for the calls is $2.70.

However, be sure to use a stop-loss for protection[4] from this back-and-forth market. Because options are naturally much more volatile than stocks, I prefer to set my stop-loss on the underlying stock’s price. So, close the call if RVBD’s stock price closes below $19.30, at which point the option should be trading around $1.

Getting in now means you’ll be positioned to profit when RVBD announces its next quarterly earnings on Oct. 24 — and you can have this tech win all wrapped up before Christmas!

Bonus Trade

Even with AAPL fresh off of its all-time highs, and RVBD poised to climb, investors are all too aware that not every stock in the tech sector is on the fast track up.

In my Maximum Options service, I personally always play a mix of bullish calls and bearish puts to take advantage of both sides of this market. I urge you to do the same. To get started balancing your portfolio, here’s a bonus put trade:

Buy the Check Point Software (NASDAQ:CHKP[5]) Oct 45 Put for 95 cents or less. As CHKP declines in value, I expect the put option to appreciate to my profit target of $2.40. Set your stop-loss to exit the trade if CHKP closes above $52.80.

Endnotes:
  1. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  2. reaching all-time highs: http://investorplace.com/2012/08/apple-bests-13-years-of-market-cap-leaders-aapl-msft-ge-xom-intc-wmt-csco/
  3. RVBD: http://studio-5.financialcontent.com/investplace/quote?Symbol=RVBD
  4. use a stop-loss for protection: http://investorplace.com/2012/01/stop-losses-dont-buy-stocks-without-them/
  5. CHKP: http://studio-5.financialcontent.com/investplace/quote?Symbol=CHKP

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