Due to its size, liquidity and past rocket ship ascent through the market, Apple (AAPL) is a favorite of traders. And then it was hated by traders who lost as the stock fell from north of $700 to below $400. Since traders read a lot, eager to gain the latest insight to help them, for the most part, they lose money in this stock because everyone writes about Apple. Even my cockapoo Sumo is starting a website to guide people who trade this stock, and people who do so deserve his insight – and no more.
Last night I held a webinar for my subscribers, replete with great questions and tactics – we sell options to generate income rather than buy options to generate losses – and the question of Apple came up. Here is what I said, to both traders and investors.
AAPL for Traders
Apple needs to push past the $490-$510 level for five to ten trading days to put in place a base for the next leg up. This being August, with light trading the norm, putting this level in before the return of traders after Labor Day is important. If this happens, you can expect, barring a market meltdown, a move up prior to the anticipated iPhone announcement on September 10, six trading days after Labor Day. The stock could touch $550-$565 if everyone comes back from the beach afraid of missing out on a run in the shares.
AAPL for Investors
Buy now and go to the beach after Labor Day when rates go down, Before you do, sell some calls. The stock is currently selling between $505 and $510. Buy it here, sell some September $510 calls and you will net around $16 a share. If you are called out, you will be mad at me for missing the run – but you will also have netted $3.7% in a month, and with Sumo doing the multiplication, that is an annualized return of 45%.
Why would you want to own Apple if you do not already? It is the cheapest terrific company on the planet, it has plenty of room to grow in the real world with new products, it has more cash than the combined central banks of Africa and it is picking up market share in smart phones. Yes, rumors of its demise are greatly exaggerated; it is picking up share. Almost all catalysts are on the upside: new products, a deal with China Mobile, better earnings.
And if you are not called out, and the stock never moves, you will generate more than 30% a year in income from selling calls at current prices.
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