Call Options Or Put Options On AAPL?

| March 21, 2012 | 0 Comments

Options on Apple (AAPL)Apple (AAPL) can seemingly do no wrong…

The maker of the world’s hottest gadgets has seen its share price soar from $363 per share around Thanksgiving to more than $600 today… an amazing 65% jump in just four months.

Obviously, that’s no small feat for any company.  But it’s even more impressive when you take Apple’s half a trillion dollar market cap into consideration.

Apple’s success has been driven by a string of innovative products.  The iPod, iPhone, and iPad have all been unbelievable success stories.

In fact, they just sold three million new iPads in the first weekend following the launch.  The best selling weekend for an iPad yet!

As a result, the company has delivered better revenue and earnings growth than all but the most bullish Apple ‘fan boys’ could have imagined.  And they’re widely expected to continue growing at a breakneck pace.

They generated massive amounts of cash as products flew off the shelves.  And today, Apple is sitting on a cash hoard of around $100 billion.

Under former CEO Steve Jobs, AAPL chose to hold onto its cash with an iron grip.  They only spent cash to develop new products and further new growth opportunities.

However, just months after Jobs’ death, Apple’s new CEO has made plans to start returning some cash to shareholders.

AAPL will begin paying a $2.65 per share quarterly dividend.  And the company’s going to repurchase $10 billion worth of shares.   All in all, Apple will spend $45 billion over the next three years.

The hasty departure from Apple’s norm under Jobs has certainly divided the investment community.  Some see it as long overdue.  Really, how much cash does a company need?

Still, others see it as a sign innovation may be hitting a brick wall.  That would be an ominous sign for Apple.  Remember, creating innovative products is how they built their mountain of cash in the first place.

The upshot….

AAPL is gearing up for a big move higher or a big move lower.  And you may want to consider buying call or put options to profit from the situation.

If you think AAPL continues to soar over next few months, take a look at buying the AAPL May 19 2012 $700 Calls for around $9.00.

If you think AAPL is ripe for a correction, take a look at buying the AAPL May 19 2012 $525 Puts for around $8.25.

Good Investing,

Corey Williams

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Category: Call Or Put Options?

About the Author ()

A former banking executive, Corey Williams is the Chief Options Strategist and co-editor of our well-known daily newsletter, Options Trading Research. Corey’s extensive experience with options goes all the way back to his days in corporate finance. It was this decade in banking where Corey discovered the most important skill an options trader can have– the ability to analyze a company or sector to determine its likely future direction. And now he’s brought this background, experience and love of options to Options Trading Research, the unique daily e-letter devoted exclusively to helping individual investors profit from the very lucrative options market.