EDITOR’S NOTE: Sam Collins will return on Feb. 21.
Fanboys rejoice! Order has once again been restored to the Wall Street hierarchy. Apple Inc. (NASDAQ:AAPL) has finally joined the ranks of market leaders resting at all-time highs. At $133.29, yesterday’s final print was good enough to register a new record closing high for AAPL stock.
The ascent bested its previous record notched in 2015 by a few pennies. With the king of all i-Things now appropriately perched at new heights, the question plaguing spectators is whether or not now is the time to take a bite.
The answer, in short, is no.
As exciting as milestones like new record highs can be, the reality is Apple stock is extremely extended. Such lofty levels leave much to be desired on the risk/reward front. While the new highs may indeed spark renewed interest in the stock, its overbought status is simply too big of a negative to ignore.
Remember, traders should focus less on what action they think may generate profits this time and more on what action they think will create profits most of the time.
And let’s be honest — most of the time, chasing a stock already perched in the nosebleeds is a money loser.
Sell AAPL Puts for Profit
Stock investors should be praying to the market gods for an Apple stock dip in the coming days. Or, better yet, sell out-of-the-money puts to create a potential win-win scenario. Right now you can sell the Mar $130 put option for $1.08. The short put obligates you to buy 100 shares of AAPL if the stock falls below $130 by expiration. Since you received $1.08 up front, your effective purchase price will drop to $128.92 which is a modest 3.3% discount to Monday’s closing price.
And if AAPL stock remains above $130, you can simply keep the $1.08 and then consider selling another put for April.
At the time of this writing, Tyler Craig had no positions in any of the aforementioned securities.
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