Apple Inc. (AAPL)’s the Best Option Strategy

0

In early June, Apple Inc. (NASDAQ:AAPL) did a stock split in seven-to-one ratio, which fell in line with the company’s plans to augment share buybacks and to boost its dividend payment. The company noted during the announcement of its stock split that they planned to do it in order to make the stock of the company more available to investors.

The stock split will not adversely impact the existing shareholders or the value of company’s shares as the split will simply multiply the outstanding shares by seven.

Apple, is Apple a good stock to buy, iWatch, Jon Erlichman, Polly Mosendz,

Stock Split Effect

As a result of the stock split, shareholders as on the record date received six more shares for each share held. After the split, each share of the company is valued at $92 apiece. Alan Knuckman, the  Chief Market Strategist at Bulls Eye Options, explains his option strategy for Apple Inc. (NASDAQ:AAPL) in an interview with Bloomberg.

Knuckman said that the move represents a stock substitution strategy,

“Now Apple Inc. (NASDAQ:AAPL) is up 50% over the last year and up 15% year-to-date. So, the trend is definitely changed and now the split, the split-adjusted price, seems very attractive. Here at $92, they have a support at $90. The stock traded between $70 to $80 for the longest period of time. Their target is $90, that is a resistance and now there will be support on the downside.”

Knuckman suggested the option play as he said “The ‘in-the-Money call, the 80 call for October, is going right now for about $13. It’s $12 in the money. The breakeven is a dollar higher and it’s got four months for good things to happen.” According to Knuckman, Apple Inc. (NASDAQ:AAPL) shares could touch a high of $100 on a split-adjusted basis.

Reasonable

The move of splitting its stock has brought the share price of Apple Inc. (NASDAQ:AAPL) to a reasonable level. Thus, the measure spiked buying interest in small investors, who earlier found it difficult to own more shares of the iPhone maker at an extremely elevated price.

Intrepid Capital Management, led by Mark Travis initiated a position in Apple Inc. (NASDAQ:AAPL) during the first quarter and now has 0.43% of its equity portfolio invested in the company, comprised of 3,797 shares. Michael Moriarty’s Teewinot Capital Advisers also initiated a position in the company during the same period and now holds 10,200 worth $5.48 million.

Disclosure: none

Share.