Apple Inc. (NASDAQ:AAPL) stock price has started dropping since the start of December and it has dropped by around 9%. It has dropped around 5% just in the week that just completed. This fall in Apple Inc. (NASDAQ:AAPL) prices has prompted many to think about selling this stock. But what do the option action traders think about this stock. Option Action traders Dan Nathan, Michael Khouw and Carter Worth talked on CNBC about the ways to earn from Apple Inc. (NASDAQ:AAPL) stock.
Nathan mentioned that drop in stock prices for Apple Inc. (NASDAQ:AAPL) has reduced the option prices, but it has started increasing again.
“It’s giving an opportunity to spread these puts. When you think about it, $110 is a very big level here. I will be very surprised to see this below $100, just on its fundamental news between now and January expiration, remembering that this expiration does not catch their Q1 earnings, which are going to be probably on January 23rd. So I think you actually pay $2.20 for the $110 put, I think you sell the January $100 put for a $1. Now you have a $10 wide put spread, that’s going to give you about 9% protection for about a $1,” Nathan said.
Worth supported Nathan’s point and said that $100 lower level is very important since it gives a lot of flexibility and he added that $100 is a well-defined level.
Khouw added that it might be tempting for many to cash in when the hedges turn green, but he feels that they should give it a bit of time before cashing in, since they might miss a lot of profits by doing that. He added that hedges are anyway winning at the moment.
CNBC’s Melissa Lee questioned Nathan, if his options would change post the 1Q earnings for Apple Inc. (NASDAQ:AAPL). Nathan said that first half of the year is very important for Apple Inc. (NASDAQ:AAPL). Nathan said that Apple Inc. (NASDAQ:AAPL) has gained nearly $100 billion in market due to the new phone launches. He added that this might be boosted by accounting the last quarter of 2014 and first quarter of 2015 sales. He mentioned that Apple Inc. (NASDAQ:AAPL) has gained on an average 30% in the last 5 years, which might not happen anymore, since the market cap has gone very high now.
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