As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert - (AAPL)
Sell the Apple (AAPL) January, 2014 $490-$520 bull call spread at $29.90 or best
Closing Trade
1-16-2014
expiration date: 1-17-2014
Portfolio weighting: 10%
Number of Contracts = 4 contracts
Apple (AAPL) has delivered again, choosing the expiration week of my January, 2014 $490-$520 bull call spread to take forward their gigantic joint venture with China Mobile (CHL), far and away the world?s largest phone company. Expect to see video of long lines forming at Apple stores throughout china. This is always good for the share price.
This assures that the spread will expire at its maximum value of $30, up 22.7% from my $24.45 cost. Not bad for a six week position.
The China deal promises to take Apple a quantum leap forward in the global marketplace. There are 40 million high-end consumers in the Middle Kingdom who already own deactivated and unsubsidized iPhones costing $1,000 each. The (CHL) deal is expected to add another 10-30 million buyers to that figure, taking the total China market up to 70 million units.
That is equivalent to a hefty 26% of global sales. Some 57% of China?s Internet traffic takes place using Apple?s IOS operating system, another indicator of how widely these devises are used.
The China deal caps a six-month offensive by the company on the good news front. It has upgraded virtually its entire product line. The iPad Air, which I bought yesterday, is a wonder to behold. Sales are coming in ahead of expectations, and earnings are improving. Competitor Samsung has been knocked back on its heels.
The grand finale for this move could come when the company announces calendar Q4 earnings on January 27. The average consensus EPS of 22 analysts is $14.04/share, compared to $13.81 for the same period a year earlier, a gain of 17%.
Apple has been a steady earner for me since the stock bottomed last July. Since then, Apple has been one of the top performing technology shares, rocketing some 49%. So I wouldn?t necessarily load the boat right here. Better to wait for the next 10% dip, which always seems to come.
The valuation of Apple remains a mystery to long time equity analysts, who can?t understand why the firm remains so constantly cheap. It now trades at only 12 times earnings, a 25% discount to the market S&P 500.
With a market capitalization of $504 billion, it is the world?s largest publically listed company. It therefore takes a lot of money to move the needle on this stock. It is already owned by 1,279 mutual funds and is their largest holding. It seems that a different physics applies when exploring balance sheets and income statements of this size.
By the way, if you have switched your company over to an all Apple network, as I have, and are dying for some first class technical support, check out the company?s Joint Venture service (click here for the link at http://www.apple.com/retail/business/). For $500 a year you can get a genius to call you at anytime, anywhere, to answer questions about any Apple product. Since I have all of them, it is worth its weight I gold. These people are really worthy of the term ?genius.?
If you can?t get your spread done at the $29.90 price, wait a day. Expiration with Apple over $520 looks like a slamdunk from here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don?t execute the legs individually or you will end up losing much of your profit.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months further out.
Here are the specific trades you need to execute this position:
Sell 4 January, 2014 (AAPL) $490 calls at????.$64.45
Buy to cover short 4 January, 2014 (AAPL) $520 calls a?$34.55
Net Cost:????????????....??..?.?......$29.90
Profit: $29.90 - $24.45 = $5.45
($5.45 X 100 X 4) = $2,180 ? 2.18% for the notional $100,000 model portfolio.
