Analyst: Apple Inc. (AAPL) Options Strategy for Thanksgiving

On CNBC yesterday, Dan Nathan of RiskReversal.com was talking about Apple Inc. (NASDAQ:AAPL)‘s stock movement, and how he thought the stock’s action was “pretty darned good” after losing less than a percentage point, on a day when Hewlett-Packard Company (NYSE:HPQ) pulled down most tech stocks.

Nathan, who was joined by Jon Najarian of optionMONSTER.com, said that there are option strategies that can help investors “take some premium” out of the stock during the Thanksgiving Day holiday, and leading up to the weekend. Nathan said that there’s the possibility of a “decent rally next week” for Apple, but stated that he believes “600 [dollars] is the top, though.”

Nanjaran, known as the “Doc” to his avid followers, then expanded on a possible options strategy to use this week. He had this to say about what a good trade for Apple Inc. (NASDAQ:AAPL) may be:

“Selling the straddle in the near term – the one that expires this Friday [...] you lose almost 80% of the value over the next couple days of this straddle, because you don’t have trading basically in two of those days [...] Buy the next week out, straddle against it at the same strikes. That gives you time decay working in your favor big time, and if we sit [...] and sort of jostle around that, uh, 20% up or down [...] you make a lot of money on this trade, just over a couple of days.”

While shares of Apple Inc. (NASDAQ:AAPL) look to be cheap using nearly every metric under the sun, and bullish investors likely think that $600 isn’t a high enough price target for the tech giant, Nanjaran’s strategy may be useful to employ over the short run.

Over the longer term, we think that Apple is in need of a catalyst, so to speak, that can vault its shares up to a fairer value. Whether this comes in the form of a deal with China Mobile or confirmation of an Apple TV, it appears that the markets are searching for the company’s next big growth driver. Earnings expansion is slowing down – sell-side analysts expect AAPL’s EPS growth to average 20-21% over the next half-decade, compared to a +60% average the past five years – but it’s worth noting that this still trumps what is expected of Google Inc. (NASDAQ:GOOG) (15.7%) and Microsoft Corporation (NASDAQ:MSFT) (9.6%).

What are your thoughts? Is it worth employing an options strategy on Apple Inc (NASDAQ:AAPL) over the next couple weeks until a clear breakout is in order? Or is it better to get in now, sit on the stock and hope for a value-based appreciation over the longer term?

According to our database of over 400 hedge fund managers, Ken Griffin and Citadel Investment Group held a pretty massive long straddle position in Apple at the end of the third quarter, while guys like David Einhorn and Cliff Asness were long-only. For a complete look at the hedge fund industry’s sentiment toward AAPL, continue reading here.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!