Apple Inc. (NASDAQ:AAPL) stock prices had gone nowhere in the last 3 months. Apple Inc. (NASDAQ:AAPL) is just hovering around the $130 per share mark in the last 3 months. But investors and analysts believe that Apple Inc. (NASDAQ:AAPL) is all set for an upward movement. Option Action Traders Carter Worth and Michael Khouw talked on CNBC about the possibility of an upward movement in Apple Inc. (NASDAQ:AAPL) stock and the probable options play to gain some profits out of this stock.
In the last two years, since June 2013, Apple Inc. (NASDAQ:AAPL) stock had gone from around $60 per share to a whopping $130 per share, which is a staggering 120% growth in the last two years. This growth puts Apple stock over a trend line, which Worth pointed out as Apple’s trend line in long term. He mentioned that Apple’s stock prices had jumped off consistently from the trend line for the past two years. He feels that Apple Inc. (NASDAQ:AAPL) stock is all set to bounce off the trend line again.
Worth pointed at the short term Apple’s chart for the last 1 year. During this period Apple stock had gained more than 50%, but most of the growth happened in the second half of 2014 and nothing much in the first half of this year. Worth pointed out that the Apple’s stock has not increased in the last three months. He said that even in the short term the trend suggests that the stock is all set to go up by at least 5-6%.
“[…] Buyers here think up and out. Should be a good 5 – 6% move,” Worth said.
Khouw said that the volatility in Apple options is low, but he feels that for the Apple stock to move up, the valuation has to go up by a huge amount, which might be much higher than a good list of S&P companies put together. He said that he is still looking up to a call spread to lower the cost of call that he is interested in buying. He said that he is looking to a July 135-140 call spread for a net price of $1.55. He said that it is ok to place a bullish bet on Apple, but he feels that it is not necessary to go and buy a call directly.
“[..] So I am still looking to a call spread to lower the cost of the call that I want to buy. Specifically I am looking to a July 135-140 call spread. I could buy the 135’s for $2.90 and sell the 140’s for $1.35. So the net I am spending about a $1.55. and the reason is because we are looking at about a 8% increase in valuation, to get to that high strike, which is an increase of $60 billion in the valuation for Apple. Think about what that mean. So I think its ok to make a bullish bet here, but you don’t necessarily need to go outright and buy calls, because for the stock to go up 10-15% will be an increase in valuation. I don’t think we are going to see between now and July,” Khouw said.
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