Below are some great ideas about trading Apple by my good friend and chat room member Ketan Shah (twitter: @ketaanhmshah). He sent these notes to me and they were compelling enough to share with the crowd. Some of these thoughts have been already been heard/seen/written about, but Ketan has collectively put together his ideas in a nice, concise fashion. Ketan is in our chat room each day showing off his skills, and I know of no one else who has less fear about success than Ketan – he often finds himself on the right side of the trade. If you like what you read, take a look in our trading room, where Ketan and many others generate amazing trade ideas each day.
I have been trading APPLE (AAPL) for almost 5 years, and it is one of my favorites. I am the first to admit that I lost tons of money trading on AAPL until last year.
I have been trading calls on AAPL (weeklies, please avoid Minis J), and I have traded BUPS (Bull Put Credit Spreads, credit to Suzie Smith for that).
Lately I have had success trading AAPL , I bought $AAPL Jan 2014 $470 calls at $23 in first week of August and sold some after “the Icahn tweet” (more on that below). Again, I bought some more of AAPL Jan 2014 $470 calls in September after the 10% fall after iPhone 5s release. I bought at $27, and when AAPL announced 9 million iPhone sold, it rocketed to $500. My $470 Jan 2014 calls were now trading at $44, up almost 62%! Yes, I sold some into the rally, and I am still holding some of my position. I have to give credit here to Bob Lang, as he kept repeating in our X-Team options room that $AAPL iPhone numbers will be amazing (read: high), while the Wall Street analysts were saying 3 million and that AAPL would go down.
I have a bullish case for AAPL and here is why:
1. iPhone 5s/5c sold like hot cakes – 9 million phones in just 2 days! As far as I remember, it took Samsung a month or more to hit that number.
2. The iPhone 5s is still selling like crazy. This means the sales numbers that will be reported in this quarter will be higher than 9 million.
3. AAPL is reportedly opening up 100 or more stores in India, and that market is still to be tapped. This is one of the leading media in India.
4. AAPL is a cash rich company. It is valued at more than $137 billion, which translates into around $150 per share. Currently, AAPL is trading it at 7 times earnings.
5. Blackberry, HTC, Motorola, etc. have almost given up their high stakes in the smartphone segment of the market. Who has taken that share? AAPL and Samsung.
6. Carl Icahn, a proven investor with a great track record in stocks, likes AAPL a lot. He has a $2 billion stake in it. That sounds like 0.4% or so compared to AAPL’s market share, but hey, $2 billion is a lot for anyone to invest in one single stock. Lately Icahn has been buying cheap, and the stocks that he has bought have almost more than doubled. I am not saying AAPL will go to $900, but AAPL is cheap right now.
7. Check out Carolyn Boroden’s charts, which were on CNBC. Her target is beyond $700.
8. Bill Miller is another big investor who says an AAPL buy is a “NO BRAINER.”
9. Three or four months ago, AAPL CEO Tim Cook said that the company was going to have a very busy fall season. There is a rumored October 15 iPad Mini event, followed by another one on November 12. I recently saw an ad about a new Mac arriving in the fall. More products coming out makes another bullish case for AAPL.
10. Last but not the least, we have a rumored China mobile deal that could happen at any time. With 700 million customers in China, it is estimated that AAPL could getting 30% of that share.
So, all in all, I feel AAPL is cheap right now, and with the October 22 earnings on the horizon, I am sure AAPL will have some good numbers to report. I have a trade in my mind that I am going to do next Monday: April 2014 AAPL $450 calls for $55.10. Yes, this is an in the money call, and I am playing this for two earnings: October 2013 and January 2014. I am expecting AAPL to run up to $540, which makes this trade worth at least $90.
Please note that I am already long on AAPL and bullish on the stock. Options have a risk associated to it; you have to be very careful while options trading. This is not a recommendation to anyone; this is just some of my thoughts on my beloved AAPL stock.
