Consider This Longer-Term Apple (NASDAQ:AAPL) Trade

By Andrew Keene  SEP 20, 2012 3:55 PM

Apple will stay or grow through the end of the year.


MINYANVILLE ORIGINAL Apple (NASDAQ:AAPL) has been all over the news in the last two weeks because of the iPhone 5 release, which was accompanied by a second milestone: Apple stock breaking its all-time high price multiple days in a row.  Since September 12, Apple has seen an astounding 6% growth, or $40, crushing the bottom of its 52- week low and this year’s start price of $354.24 and $405.00 respectively. The market cap is 653.93 billion. Apple’s EPS has seen explosive yearly growth up $12.53 in 2011 to $27.68, with expectations of $44.25 for 2012.

Apple iPhone 5 reviews are suggesting it is the best phone ever made and Apple will be opening five new stores for the release. The company is trying to push its competitors off of its hardware, announcing its plan to create a competing product for Pandora’s (NYSE:P) Internet radio software and the removal of Google Maps (NASDAQ:GOOG) as the standard map utility application, while replacing it with its own build.  Finally, the iPad Mini and Apple TV Mini are to be released before the end of the year.
Legal fights continue with other competitors, like Samsung (KRX:005930). Apple recently won a suit against Samsung, which is now adding the iPhone 5 to its patent lawsuit litigation, saying it will infringe on eight different patents already asserted by Samsung in the lawsuit. Options traders today switched to a slightly more bearish sentiment. The Jan 13 ATM implied volatility sits at 27.1, while the ATM straddle is priced at $85.63, implying the stock will move more than 12% by the New Year. The open interest in calls are bull biased with the most open interest ATM, while open interest in puts has its largest open interest at the 670 strike price.
My trade is to buy the Jan 13 670-720 call spread for $25. This trade is a 50/50 risk ratio with risk at $25 and reward at $25 or $2,500 per one lot. My breakeven is halfway between my spread at $695.

No positions in stocks mentioned.