Apple Inc.(AAPL) blew out Wall St. Analyst expectations with its quarterly earnings report released last night. Steve Jobs thank you…you were a legendary business player and the most innovative technology pioneer that ever walked the planet. And now thanks to all of your hard work Mr. Jobs, Apple has just surpassed Exxon Mobil as the largest and most valuable company on planet earth by market capitalization. WOW!!!! [$$] Apple Again Becomes Most Valuable Company, So What’s Next?at The Wall Street Journal(Wed 10:06AM EST)
Who bought shares of AAPL in 2000? Well if you invested just $10,000 on the stock back then, you would be a multi-millionaire today. The ipod, iphone, mac-books, ipad, etc have been one blockbuster innovative technology product after the next…Consumers around the globe have been buying all of these AAPL products like hot cakes and just can’t get enough of them. The halo effect has helped AAPL continue to dominate and sky rocket higher!! Everyone that I know with an iphone absolutely loves it…Sorry Blackberry and RIMM…Hello iphone and Android…And now there are over 500,000 mobile apps for that sleek, trendy mobile phone.
Let’s take a closer look at a few amazing financial statistics on Apple. It is currently sitting on over $97 billion in cash and securities!!! What should Apple do with all that cash?? Well, I would argue they should have bought back millions of shares(treasury stock) the last few years and that would have been the best return on their capital for shareholders as AAPL shares continue to sky rocket higher!! Well, they missed that boat and now is time for the company to consider paying out a special dividend to shareholders and consider acquiring smaller technology companies that they see fit to add more value to shareholders. Apple is sitting on $103 in cash per share. AAPL now has a market capitalization of over $418 billion and hit an all time record intraday high of $454.45 a share today. Will AAPL hit a $1 trillion market cap in the next decade? Maybe the next 5 years?? It is starting to feel very realistic and only time will tell the rest of this amazing Tech story…
What is the Options play? Well, clearly buying the Call Options now are very expensive and that should have been done prior to this blow out quarterly report by AAPL and big spike in the shares…I would wait for a big pull back in the shares before buying any out of the money calls on AAPL. I do feel that the longer term trend in AAPL shares is still much higher and think the stock could hit $525 in 2012. The law of large numbers tells me that the stock may pull back to around $415, before surging to $500+ though and would wait for a pull back in the stock to buy Call Options or shares of the stock.
However, for the short term trade, I would consider selling the $440 Feb 17, 2012 AAPL Put Option for $12.70. Yahoo Finance Options Chain: http://finance.yahoo.com/q/op?s=AAPL&m=2012-02. Keep in mind that in order to sell 1 Put Option contract on AAPL at a $440 strike, I will need $44,000 in cash in my brokerage account in case I get exercised on the AAPL shares. By selling this Put Option, I will receive $1,270 and I am comfortable with the worst case scenario of being exercised on the shares at $440. Best case scenario, the shares remain above $440 through the Feb expiration date and I pocket $1,270 without having to buy the shares as well. For longer term AAPL investors, I would wait for the shares to pull back to the $400-415 range before loading up on the shares or adding to already existing core positions in the stock.
Stay tuned to Optionshoney.com for the next big opportunity to buy some Call Options on AAPL, if the stock pulls back 10-12% from its current stock price level of around $447. I will be waiting patiently on the side line for an opportunity to buy these Call Options if AAPl stock pulls back to around $415. If it continues to go straight up, I may have missed the boat on this trade and will just have to watch it keep flying higher.
Buying Call options after a big spike in a company’s shares is always a high risk trade and not one that I want to put my money on very often. Patience and timing are both very instrumental in making money and winning Options trades.
Chart Courtesy of Fidelity Investments: