Call Options Or Put Options On Apple (AAPL)?

| October 30, 2013 | 0 Comments

AAPL OptionsApple (AAPL), the world’s most valuable company, just released earnings this week.  As usual, analysts and investors are poring over the results, trying to decide which way the stock may be headed.

AAPL shares are trading at $524.77.  The stock’s up 38% from the 52-week low of $380.06 and is 11% below the 52-week high of $588.97.

Is this an opportunity to buy call options on AAPL due to the company’s overall strong earnings results?  Or should you buy put options on AAPL because of lower gross margin and iPad sales?

The bulls make a convincing argument…

Overall, Apple’s fiscal fourth quarter results were well above expectations.  The company’s revenue came in at $37.5 billion and profits hit $8.26 per share.  Analysts had projected $36.8 billion and $7.93 respectively. 

The gains were driven by better than expected sales of iPhones.  Consensus estimates were for 32 million units to be sold during the quarter.  The company actually sold close to 34 million.  That’s a ton of iPhones – with most sales being of the more expensive 5S model.

As long as Apple keeps selling iPhones like crazy, the company will keep growing.  And next quarter, the new iPad models will be included in the results.

But the bears have a compelling case as well… 

Despite overall strong earnings, there were some red flags in AAPL’s earnings report.  First off, gross margin is down from last year.  Margins hit 37% compared to 40% in last year’s quarter.  The cheaper iPhone 5C model could hurt the company’s margins moving forward.

What’s more, iPad sales came in lower than expected.  Analysts projected 14.5 million units sold, but only 14.1 million units were actually moved.

The lower than expected results could be a sign the new iPad products won’t sell as well – especially since the new iPad mini is actually more expensive than its predecessor.

So is AAPL’s overall solid quarter a reason to bet on the stock going higher, or are investors going to be disappointed in the negative aspects of the report?

If you think the bulls are right, take a look at buying the AAPL November $555 calls for around $2.00.

If you think the bears are right, take a look at buying the AAPL November $495 puts for around $2.50.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.