{"id":29556,"date":"2012-05-10T08:00:19","date_gmt":"2012-05-10T12:00:19","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/05\/how-to-play-apple-aapl-on-any-budget\/"},"modified":"2012-05-10T08:00:19","modified_gmt":"2012-05-10T12:00:19","slug":"how-to-play-apple-aapl-on-any-budget","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/05\/10\/how-to-play-apple-aapl-on-any-budget\/","title":{"rendered":"How to Play Apple (AAPL) on Any Budget"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"How<\/p>\n

Below I\u2019ll show you a more affordable way to play Apple\u2019s expected growth, but first let me show you why I\u2019m so confident in the stock\u2026<\/p>\n<\/div>\n

Apple<\/strong> (Nasdaq: AAPL<\/a>) let us know last Tuesday that once again the company knocked it out the park.<\/p>\n

It had an unbelievable second quarter in 2012, largely due to strong iPhone sales \u2013 again.<\/p>\n

Analysts last month tried to read between the lines on earnings reports from Verizon<\/strong> (NYSE: VZ<\/a>) and AT&T<\/strong> (NYSE: T<\/a>), and figured there would be lower iPhones unit sales. The stock got pretty beat up for week. However, Apple showed that iPhone distribution isn\u2019t a two-trick pony.<\/p>\n

I\u2019m certainly bullish on Apple, but I also don\u2019t want to tie up all the money it takes to acquire shares in the $600-range. Below I\u2019ll show you a more affordable way to play Apple\u2019s expected growth, but first let me show you why I\u2019m so confident in the stock\u2026<\/p>\n

$1,000 By 2014?<\/strong><\/h2>\n

Let\u2019s start with earnings. Expectations were $10.07 per share, and Apple went above and beyond with $12.30 in earnings on $39.2 billion in revenue. And if you haven\u2019t heard, the second quarter is usually Apple\u2019s worst. Yet, Apple delivered its second-best quarter in history – with last quarter being the best.<\/p>\n

Apple\u2019s first quarter this year raised the bar on results both in terms of revenue levels and gross margin. According to Forbes<\/em>\u2019 Darcy Travlos, this year\u2019s first quarter was the highest gross margin quarter at 44.7%, only to be bested this quarter by a gross margin of 47.4%.<\/p>\n

She goes on to say, \u201cApple can continue to deliver these beats on expectations by putting a major emphasis on its supply chain and, for the last couple of product releases, by keeping its form factors consistent so that it can continue to improve manufacturing efficiencies.\u201d<\/p>\n

In early April, some analysts projected the stock could surge to $1,000 by 2014.<\/p>\n

Think about it. Who doesn\u2019t want a stock forecasted to get to a $1,000 a share that right now is trading in the $590 range?<\/p>\n

In fact, there are a lot of \u201csexy\u201d equities in the market like Apple, MasterCard<\/strong> (NYSE: MA<\/a>), Priceline<\/strong> (Nasdaq: PCLN<\/a>) and Google<\/strong> (Nasdaq: GOOG<\/a>) that are priced in the hundreds. You want to get in on the growth, but the average investor is priced out, regardless of attractive fundamentals.<\/p>\n

The Bull Call Spread<\/strong><\/h2>\n

Options strategies can allow you to get in the game without leveraging the farm. Sometimes the mere mention of options trading can put the fear of God into the average investor \u2013 and to be fair, there is a ton of risk if you don\u2019t know what you\u2019re doing.<\/p>\n

But I think this specific strategy, and an example, can show how this can be done fairly easily. It\u2019s called a \u201cbull call spread.\u201d<\/p>\n

The bull call spread, or vertical call spread, is when you buy call options at a specific strike price while also selling the same number of calls of the same asset and expiration date at a higher strike.<\/p>\n

As the name implies, a bull call spread is used when you believe a security is going up. The most you can gain is the difference between the strike prices of the long and short options, less the net cost of options.<\/p>\n

In the March 26 issue of Barron’s<\/em>, Striking Price<\/em> columnist Steven M. Sears gives a pretty good example of how this works:<\/p>\n

\n

With Apple at $601.31, investors can buy Apple’s January $600 call that expires in 2013, and sell Apple’s January $700 call that also expires in 2013. The position costs $37.50, and lets investors benefit if Apple’s stock hits $700 by next January.<\/em><\/p>\n

If Apple’s stock advances as expected, investors who used the Apple call-spread strategy buying the January $600 call and selling the January $700 call-will make a 168% return on their investment.<\/em><\/p>\n<\/blockquote>\n

Of course you get limited return if the stock goes above $700 because you don\u2019t own it.<\/p>\n

But keep in mind that one of the great things about this spread trade is that the expense you incur by purchasing the at-the-money call option is offset by the income you receive from writing the out-of-the-money call option \u2013 and this why your net expense for the trade is much smaller.<\/p>\n

Good Investing,<\/p>\n

Jason Jenkins<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n

Article by Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"

Article by Investment U Below I\u2019ll show you a more affordable way to play Apple\u2019s expected growth, but first let me show you why I\u2019m so confident in the stock\u2026 Apple (Nasdaq: AAPL) let us know last Tuesday that once again the company knocked it out the park. It had an unbelievable second quarter in … <\/p>\n

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