Buy Alert: September 20, 2013

Marcus Haber | September 20, 2013

Buy Alert: September 20, 2013

Trade Details

Buy ZAGG (ZAGG) November $4 Calls for $0.85 or better

Why?

Today is the launch day for Apple’s (AAPL) new iPhones. AAPL’s share price has been falling lately, but demand for the new phones is as strong as ever. I believe the new phones will sell very well and AAPL will rebound. However, AAPL options are too expensive for us to trade (and thus too risky).

Instead, we’re going to make a low-risk trade in ZAGG as a proxy for the iPhone trade. ZAGG is the leading producer of smartphone and tablet cases, screens, keyboards, and other accessories. The company’s sales are often directly tied to the success of new smartphone/tablet launches, especially AAPL products.

What’s more, with iOS 7 now available on the iPhone, ZAGG has a new video game controller attachment which could sell very well. Essentially, there’s nothing else like it on the market right now.

ZAGG is a very cheap stock so we’re going to buy in the money calls (which also significantly lowers our risk). We’ll buy November options in order to give this scenario plenty of time to play out.