It has been an interesting week of trading stock options as we explored possibilities in the options of retailers in anticipation of the holiday season. We started with an exploration Walmart Options and UPS options before I was sidetracked with circumstances beyond my control on Wednesday and Thursday.
We will round up this week of trading stock options with an exploration of the options of Apple Inc. (NASDAQ:AAPL). Apple with its market capitalization of $678.99B is well-known in investing circles as the company designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.
In short, we are examining the options of the company behind the iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings.
Why We Are Looking at Apple Today
Shares of Apple made a new 52-Week high of $119.75 on Monday December 01, in a move that made it look as if Apple was gearing up to end this year with a doubling of its share price –post stock split. However, no sooner had Apple made the 52-Week high than it started trading down to the current $115.49 trading price.
To the Apple bears, the fact that the stock has declined with a 3.5% pullback in the last one week suggests that the strong bullish trend on the stock has waned. However, I am convinced that the current decline offers Apple traders with a chance to buy the stock on the dip; hence, we can envisage an increase in the buying action for AAPL call options.
Takings from the Chart
The chart above shows how the shares of Apple have traded in the last one year. You will observe that the stock has been in “Overbought” territory for the greater part of November as seen in the RSI above 70 (Purple). You will also observe that Apple has gained an impressive 69.83% within the last one year to deliver serious outperformance in relation to the S&P 500 and the industry average.
Will Apple Sustain the Rally?
The strong performance reported in shares of Apple this year can be easily linked to the strong business performance in Apple product lines especially the iPhone and Mac lines. I am also conscious of the positive effect that the return of capital to shareholders through share buybacks and dividends has on the share price of Apple stock.
Going forward, I expect shares of Apple to continue with their strong bullish strength as the business fundamentals remain stronger than ever. For one, Apple has strengthened its pricing power with the introduction of a $100-higher pricing tier especially on the iPhone 6 Plus.
Apple is set to release Q1 2015 on January 26 and I strongly believe that shares of Apple are in line for another bullish ascent when Apple delivers stellar first quarter results. In addition, I am optimistic that the buy-on-the-dip frenzy will also contribute to another round of bullish rally in the stock.
How to Trade AAPL Options
I strongly believe that the bullish action remains in high gear for Apple; hence, I recommend buying AAPL call options. I am particularly impressed by the possibilities in the AAPL Mar 2015 125.000 call (AAPL150320C00125000) and you should consider getting into position at an asking price of $3.00 or lower.
— Daily Option Alerts