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Apple (AAPL): The Market’s Got It Wrong

Whether you own AAPL shares or not, I've got trades to profit from the stock


If you have been reading anything I have written the past few centuries – the market can make one feel old – I am an Apple (NASDAQ:AAPL) bull.  Big time.

I believe the stock is trading for less than half its real value, which I peg north of $1,200. I know most of the people reading this are traders but many of you also own shares in this or that, and if some of those shares happen to be Apple, and you happen to own at least 100 shares, keep reading.

The market has shown $520 is strong technical support for the stock and $540 is working as a preliminary bottom with the stock trading down below $540 for no more than a couple of days at a time.  If you want to buy in, you have pretty solid downside protection short and long term. Then again, with Moe, Larry and Curly negotiating the fiscal cliff, many are sitting the market out.

If you own or buy in, AAPL January calls, which conveniently expire the Friday before Apple’s earnings are announced Jan. 24, have great premiums. If you own or buy AAPL at $540 and sell (short, or also called writing an option) the AAPL Jan $560 call, you generate instant cash of $1,640, or $16.40 a share, more than enough money to subscribe to one of my services and assist in my ongoing efforts to pay for twin boys to attend those expensive liberal arts colleges you keep reading about as having little value. That is an instant return of 3%, an annualized return of 30% and that is without any stock appreciation. If you are called out, these returns increase to 6.7% and 67%.  No kidding.

If you prefer selling a put,  the AAPL Jan $520 put is what to look at. These provide around $16.80 in premium, or $1,680 per contract, a 3.1% return, or 31% on an annualized basis. You can always roll these if the stock drops or, if you accept the stock at $520, you simply turn around and sell calls. The short sale of weekly or monthly calls can generate returns north of 20% if done properly.

Why am I a bull in AAPL?  They produce the best computers for individuals, best laptops for anyone, best smart phones for anyone, best tablets for anyone. Plus, they have the best music store, the best app store, the best retail support, the best technical support … shall I go on? In addition to being the best, Apple’s market share in most hardware categories other than tablets is tiny. Not small, tiny.

Check out past articles or keep coming back here. I will be writing about the world’s greatest value stock and the world’s greatest growth stock all rolled into one with some frequency as long as the market keeps getting it wrong.

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