Call Options Or Put Options On Apple (AAPL)?

| April 24, 2013 | 0 Comments

AAPL OptionsApple (AAPL) develops mobile communication and media devices, personal computing products, and portable digital music players.  Of course, you probably already know that.  Chances are you own at least one Apple product and maybe more.

Apple’s trading at $406.13 (prior to earnings) and is currently down 23% for the year.  The shares are down 42% from the 52-week high of $697.80, and they’re only up 5% from the 52-week lows of $385.10.

Is this an opportunity to buy call options on AAPL after the company’s earnings and revenues were above expectations?  Or should you buy put options on AAPL because of the company’s inability to develop the next big thing?

The bulls make a convincing argument…

AAPL just reported much better than expected earnings.  The company beat analysts’ expectations on both revenue and earnings.  And, sales on both iPhones and iPads increased year over year.

More importantly, the company is giving $100 billion back to investors.

Management has elected to significantly increase its share buyback plan by $50 billion.  Plus, the dividend is getting a 15% hike to $3.05 per share.  That’s obviously great news for investors.

Not to mention, it answers some of the critics who’ve been complaining that Apple is doing nothing with its massive cash holdings.  It’s hard to argue with better than expected revenues and earnings, along with $100 billion going back to investors.

But the bears have a compelling case as well… 

AAPL management still hasn’t unveiled an exciting product to add to their line of popular items.  The company has made a name for itself by coming up with the “killer” product that everyone wants.

Without a shiny, new iPhone, smart watch, or whatever, competitors will continue to erode Apple’s market share.  Android now has over 70% of the smartphone market, with companies like Google (GOOG) and Samsung are putting heavy pressure on Apple to come out with new products.

Moreover, while AAPL beat expectations, earnings and revenue growth have slowed considerably.  In fact, earnings declined year over year by over $2.00 per share – the first quarterly decline in more than a decade.

Are AAPL’s surprising earnings enough to overcome increasing industry competition?

If you think the bulls are right, take a look at buying the AAPL June 2013 $500.00 calls for around $2.00.

If you think the bears are right, take a look at buying the AAPL June 2013 $325.00 puts for around $1.75.

Note:  These prices could change significantly based on what occurs in overnight trading post earnings release.

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.