Use options for Apple Inc. (NASDAQ:AAPL) to make more money out of the stock, the “Options Action” traders on CNBC said in a discussion about the consumer electronics giant. The comment comes after Apple Inc. (NASDAQ:AAPL) has just reached another all-time high at over $101 at Friday’s close. The consumer electronics behemoth is also expected to launch its newest iPhone this September 9.
According to one of the “Options Actions” traders, Apple Inc. (NASDAQ:AAPL) has had a developmental phase after its past all-time high two years ago. It’s bad business to buy stocks on a down trend, he said, but for investors looking at the stock’s chart, they may have noticed that the stock has had a “cup and handle” trend over the past two years.
The “Options Action” trader explained that it is expected for the stock of the consumer electronics giant to be fallow after this most recent all-time high, thus the advice to use options.
“We have returned to where Apple was. In principle, a stock that gets back to a well-defined past top, before being able to break out [or]exceed that top, it responds to that top. That means Apple is likely to be somewhat fallow here which is to say if you own it, there’s nothing wrong with it, but you’re not going to get the outperformance in principle that’s you’ve just enjoyed over the last many, many months,” he said.
Furthermore, he said that investors should hold their positions, but do something with options.
Meanwhile, Michael Khouw, managing director and primary strategist at DASH Financial, also advised investors to use covered options to make more money out of Apple Inc. (NASDAQ:AAPL).
As an example, Khouw said that for the $105 calls on the stock which will be exercisable in November 2014, an investor can collect about 3% of the stock price. He added that if an investor is able to do this four times over the year, that works out to a cost basis reduction of 12%.
Furthermore, he said that an investor has an additional upside since even if the stock is called away from the investor or if it runs through $105, the exit price is more like at about $108.30.
Apple Inc. (NASDAQ:AAPL)’s shareholders included0 Carl Icahn’s Icahn Capital LP. The hedge fund reported about 52.76 million shares in the company by the end of the second quarter. Another investor in the consumer electronics giant is David Einhorn‘s Greenlight Capital. The firm reported a holding of about 9.45 million shares of the company by the end of the second quarter of the year.