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Look for Puts on a Bruised Apple (AAPL)

AAPL showing weakness


I previously wrote that Apple (AAPL) had disappointed investors at its annual developers’ day because it had not introduced any important new products. I took a lot of flak for that on the message boards, where Apple fans said that I did not understand that improvements to the iOS operating system were revolutionary, and that the new Mac desktops were important new products.

Since then, Apple shares have plunged down from around $450 all the way back to the high $300 level. And now, headhunters say that morale at the company is so low that recruiters for Facebook (FB), Google (GOOG) and other startups are having a field day, picking off disgruntled Apple engineers and sales people. Retailers and wireless carriers are reporting twice the normal levels of iPhone inventory, as the company is selling a lot fewer handsets than expected. One analyst told Bloomberg he estimates Apple is set to build a maximum of 85 million iPhones, down from prior estimates of 110 million units.

I did not recommend buying puts at the time because they are always very expensive, but I will look for a new spot to do so now, as AAPL remains in a world of hurt. It won’t release any new product except for a slightly improved MacBook Air laptop until the fall, which is eons away in the world of technology. Why the company thought it could slap its loyal customers in the face by not releasing a serious update to the phone for an entire year — or in my view, two years — is going to be a case study for MBA programs in years to come.

A key problem for the rest of the market is that Apple remains a large overweight position in the S&P 500, as well as all the tech funds, and thus its bout of stunning incompetence has affected many more investors’ portfolios than you would normally imagine. The stock is most likely headed to the $350 area, and as mentioned, I will look for an opportunity to buy puts, possibly toward the end of this week if there is a rally.

InvestorPlace advisor Jon Markman operates the investment firm Markman Capital Insight. He also writes a daily swing trading newsletter, Trader’s Advantage, which aims to capture profits of 15% to 40% and often as much as 100% to 200% in less than 90 days. 

Professional traders and hedge funds make huge profits off volatility.  Now, Jon’s service CounterPoint Options levels the playing field with the first service geared towards helping individual traders make steady, consistent profits with the VIX.  Get more information on Trader’s Advantage and CounterPoint Options today.

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