Attractive Options on Three Pricey Stocks

It’s often said that when it comes to quality, you get what you pay for. That rule generally pertains to the equity markets, and that’s why some of the very best companies out there come complete with some pretty hefty price tags. Fortunately options trading can offer an alternative to these lofty prices.

Generally speaking, the stronger the company—i.e., the greater the earnings, the bigger the market share, the better the management team—the higher the share price. This phenomenon isn’t hard to figure out, but unfortunately, many investors mistakenly think this “get-what-you-pay-for” principle doesn’t apply to stocks.

This error in judgment often results in the avoidance of high-priced stocks in favor of so-called bargain stocks, which can turn out to be anything but a good deal. The same is true for options on the stocks of these high-priced companies. In an effort to scan the options landscape for bargains, many investors shun the very best options plays around.

So, which stocks have big price tags, as well as attractive options? Let’s take a look at three representative examples.

Apple Inc. (NASDAQ: AAPL). By now the whole world knows that this company is the revolutionary leader in personal technology. It’s also one of the most profitable companies in history. Even with its iconic leader Steve Jobs battling health issues, AAPL shares continue pushing higher. Over the last 12 months, the stock is up over 70%. In the past five years, Apple shareholders have seen their investment jump nearly 390%. Investors might take advantage of this continued push higher with the AAPL May 370 Call which closed yesterday at $13.40.

Google, Inc. (NASDAQ: GOOG). The Internet search giant reported stellar fourth-quarter earnings in January that trounced analysts’ expectations. The company also announced a management shakeup, with co-founder Larry Page taking charge of daily operations as CEO, while co-founder Sergey Brin will devote his energy to strategic projects. Consistently strong earnings and the willingness to adapt with the changing tech environment have helped this stock rise nearly 80% over the past couple of years. Google bulls may just find a winning options play by searching for the GOOG Apr 630 Call.

Priceline.com (NASDAQ: PCLN). The online travel site just logged a 71% profit in the fourth quarter due chiefly to a surge in international bookings and hotel bookings. The company has clearly been the winner in the online travel space, as its business model has sent competition like Expedia (NASDAQ: EXPE) and Orbitz (NYSE: OWW) to the woodshed. During the past year high-priced PCLN shares are up 105%, and over the last five years shareholders have booked a 1,824% gain. Booking a profitable options flight on PCLN can likely be done with the PCLN Apr 470 Call which closed yesterday at $14.10.

At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2011/03/attractive-options-on-three-high-priced-stocks-aapl-pcln-goog/.

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