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Dan Nathan: What Did Apple Inc. (AAPL) Miss On The Apple Watch?

Apple Inc. (NASDAQ:AAPL) has started taking pre-orders for its Apple Watch on Friday. Reports suggest that Apple Inc. (NASDAQ:AAPL) will start the sales of these smartwatches on April 24. Many investors hinge their hope on Apple Watch to do well and boost the stock. Piper Jaffray’s Gene Munster said earlier that Apple Inc. (NASDAQ:AAPL) will be able to sell 1 million units of these wearables in the first weekend and he also said that 10% of Apple Inc. (NASDAQ:AAPL)’s revenues will be generated by these wearables by the end of 2016. Option Action traders Dan Nathan, Carter Worth and Michael Khouw discussed their outlook for Apple watch on CNBC.

AAPL, Apple Smart Watch

Nathan mentioned that he was one among the very few customers at an Apple store to preorder the Apple watch. He said that it feels like an anti-climax after all the hype around Apple Inc’s big launch. He accepted the fact that the wearables will be a big category for Apple Inc and he agrees to Munster’s view that Apple watch will account for 10% of Apple’s revenues in two years.

“[…] Wearables is going to be around for a very long time. I will just say this one point. I think they missed on this one. I think they should have gone fuel band and reinvent that category, just like they did with the tablet computer existed before the iPad. The smartphone existed before you know the iPhone. […] I just don’t think it is going to have mass adoption this iteration,” Nathan said.

Worth said that he would stay long with Apple Inc stock. Since he feels that the company has grown pretty big and even exceeds many categories in the S&P 500 as one big individual sector. Khouw said that Apple Inc stock has reacted very well to the recent downgrades and didn’t drop a lot of its value. But he feels that stock is going to go sideways for the next couple of months.

Khouw said that it is better to take advantage of higher option premiums for Apple Inc.

“[…] If you own the shares (AAPL), I would seriously consider selling some cover calls against it, because I think you are going to get to just collect that premium,” Khouw said.

Nathan said that options market is implying about a 7%-8% move by May 1. From the market Cap point of view, Nathan pointed out that it is close to $70 billion. He said that if you long the stock, you could think about adding some yield by selling. Khouw said that if you don’t plan to long the stock, you can sell some cash cover puts.

Disclosure: None

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