Call Options Or Put Options On Apple (AAPL)?

| January 29, 2014 | 0 Comments

AAPL OptionsApple (AAPL) is making waves after releasing earnings this week.  The largest public company in the world is closely watched by a host of market participants.

AAPL shares are trading at $505.13 after dropping 8% today.  The stock’s up 34% from the 52-week low of $377.85 and is 12% below the 52-week high of $575.14.

Is this an opportunity to buy call options on AAPL with the company posting a generally impressive quarter?  Or should you buy put options on AAPL because iPhone sales and revenue outlook are worse than expected?

The bulls make a convincing argument…

Investors may not have been impressed with AAPL’s earnings, but that doesn’t mean the results were unimpressive.  The company has to deal with really high – sometimes unrealistic – expectations from shareholders.

The fact is, AAPL had a killer quarter.  The company sold a record 51 million iPhones and beat expectations on iPad and Mac sales.  Moreover, gross margin came in higher than all of the analysts’ projections.

Meanwhile, the company is looking to expand into the mobile payment space.  That’s a very logical expansion opportunity considering all the mobile payments processed by the company already.

Finally, and perhaps the ultimate sign, billionaire Carl Icahn is looking at AAPL’s share price decline as a buying opportunity.  Icahn just snapped up $500 million more of the stock.

But the bears have a compelling case as well… 

There’s a reason why AAPL shares dropped 8% today.  Frankly, earnings just weren’t as good as what most shareholders were looking for.

iPhone sales came in at 51 million – but expectations were for 55 million units sold.  It could be a sign that either demand is slowing for the flagship product or the China Mobile deal isn’t going to provide as many unit sales as expected.

What’s more, the company is expecting flat revenue growth for this quarter.  That’s a significant amount less than analysts’ projections.  If the company doesn’t introduce a new, popular product in 2014, shareholders could exit in droves for more exciting opportunities.

So is AAPL’s strong overall quarter a reason to be bullish on the stock, or are the lower than expected iPhone sales and flat revenue a reason to go bearish?

If you think the bulls are right, take a look at buying the AAPL March $550 calls for around $4.50.

If you think the bears are right, take a look at buying the AAPL March $460 puts for around $4.00.

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.