Options Trade – Apple Inc. (AAPL) Wednesday, October 10, 2012

An Opportunity To Buy -- Shares On A Discount!

**OPTION TRADE: Buy the AAPL Jan 2013 800.000 call (AAPL130119C00800000) at or under $3.60, good for the day. Place a protective stop limit at $1.50 and a pre-determined sell at $5.50.

by Ian Harvey

October 10, 2012

Introduction

Apple Inc. (NASDAQ: AAPL - 629.00) has taken a plunge in the past few days. Yesterday the tech giant was trading down once again, looking to extend its losses that started in late September.

The possible future direction of AAPL should be positive with new products in the pipeline and the iPhone 5 clearly seeing impressive demand; the time would now appear to be ripe to invest in Apple.

While the stock has pulled back about 11% since its Sept. 21 peak of $705.07, its uptrend still remains intact. We are starting to see some of the short-term moving averages crossing below longer-term moving averages, however, which signify declining upward momentum. Note in the chart below how the 10-day moving average is trading beneath the 40-day for the first time since early June.

Daily Chart of AAPL since September, 2011
With 10-Day and 40-Day Moving Averages

The $640 area was the site of Apple's April peak, which may be a significant price level to watch. Currently, the stock is trading south of this region.

It is also important to note that the company is set to report earnings after the market close on Oct. 25.

Apple Rumors and AAPL News

• Asian component makers say Apple (NASDAQ:AAPL) has placed orders to produce 10 million iPad Minis during the fourth quarter, according to The Wall Street Journal. Earlier reports indicated that production on the smaller-screen iPad began last month. Apple has neither confirmed nor denied the existence of a smaller iPad, but analysts expect the company to introduce the device this month, perhaps as early as next week. The iPad Mini is believed to feature a 7.85-inch screen and will compete with tablets from Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) and Samsung. With smaller-screen tablets eating into Apple’s market share, analysts say the iPad Mini could be a strong product for Apple, if it is priced competitively. Some analysts have suggested a price of $250 for the iPad Mini.

• Apple’s 15-inch Retina MacBook Pro will soon get a smaller sibling, CBS News notes. The company will launch a 13-inch Retina MacBook Pro sometime after the debut of the iPad Mini, which will likely be unveiled later this month. The 13-inch Retina MacBook Pro will feature a 2,560 x 1,600 pixel display. The 15-inch MacBook Pro was launched in June and is priced at $2,199. Analysts have anticipated the debut of the smaller Retina MacBook Pro for some months, though earlier forecasts of a September launch proved premature.

• Apple’s mobile devices are rapidly becoming an indispensable tool for physicians, The New York Times notes. Apps like MedCalc allow doctors to perform complicated dosage calculations in seconds, while filing apps like Evernote allow the archiving of information for quick retrieval directly on the iPhone. Other apps provide warnings about potential drug interactions, create patient risk profiles and improve stethoscope performance by editing out external noise. Medical students at Johns Hopkins and the University of Chicago now receive iPads. However, the proliferation of iPads and iPhones among younger doctors has prompted some concern from senior practitioners that patient interaction is being lost in the digital explosion.

Analysts Opinions

The company’s dedicated bullish analysts continue to insist that concerns about the drawback are overblown. Sterne Agee’s Shaw Wu, who has an $840 price target on Apple, calmed investor worries stemming from employee disputes at Foxconn, iPhone 5 supply and demand questions, and recent product criticisms through a note to investors on Tuesday.

“From our latest supply chain work, we have not picked up a drop-off in demand and production appears to be improving with the bottleneck moving from components to the assembly of the iPhone 5 itself,” Wu wrote, according to Fortune. “Our sources indicate that iPhone 5 is not easy to build with Apple’s very high standards where it aims to produce each model to be an exact replica where variance is measured in microns.”

Wu added that it was, in fact, overwhelming demand that was causing shipping lead times to remain at three to four weeks and resulting in stocks at the retail level staying low. The analyst said he expected Apple to report sales of 27 million iPhone units in the September-ending quarter and 46.5 million in the December quarter.

Wu also expressed confidence that the rumored iPad Mini was on its way.

Analysts expect Apple to boost sales another 24% in the fiscal year that just began this week, to an eye-popping $194 billion. Projected sales gains are solely attributable to new levels of success for the iPhone and the iPad, along with the rumored launch of an Apple-based television set -- another Jobs concept.

The iPhone Problem

The iPhone 5 was clearly experiencing supply constraints and not demand issues, and that sales figures fell short only because analysts’ expectations had become too aggressive: Several surveys have shown that 75 percent of the Apple Stores are out of the device, and that there is still a three-to-four-week wait at the online stores. The 5 million units sold in the first weekend was a new record, coming in better than the 4-million-unit comparison for the iPhone 4S.

Conclusion

In the final months of his life, Apple CEO Steve Jobs worked hard to ensure a vital future for his company. He prepared his management team to stand on its own, and they have exceeded almost everyone's expectations. In fact, in the year since Jobs' death, Apple's stock has surged far higher.

The fact that Apple has boosted its market value by nearly $300 billion in Jobs' absence is really a testament to a management team that has learned to "stay the course." In fact, much of Apple's success in 2012 is attributable to plans and goals laid down by Jobs several years ago.

I think this is a buying opportunity now since there has been a decent pullback — a 10 percent discount for a company trading at ten times, excluding cash, with a very strong product profile that just enjoyed a record launch with 100 percent growth in pre-orders for its iPhone 5.

Therefore, with the drop in share price, and based on the facts above the following options trade is recommended…..


**OPTION TRADE: Buy the AAPL Jan 2013 800.000 call (AAPL130119C00800000) at or under $3.60, good for the day. Place a protective stop limit at $1.50 and a pre-determined sell at $5.50.


”Success is simple. Do what's right, the right way, at the right time.”


Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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