Get Paid Nearly 15% To Sell Apple After Downgrade

| About: Apple Inc. (AAPL)

Apple (NASDAQ:AAPL) received a rare downgrade to hold yesterday from little-known Oracle Investment Research after reaching all-time highs and becoming the most valuable company in history.

AAPL Chart

AAPL data by YCharts

The argument put forth by Oracle is that growth is decelerating and expectations are extremely high. Obviously, as a company grows larger it becomes more and more difficult to grow. Can a company worth $600 billion grow at 20% per year? And for how long? This uncertainty raises a red flag, making Apple very difficult to value.

If you agree with the downgrade and already own Apple shares then there is good news. Call option premiums are lucrative, meaning that you can sell call options on your shares of Apple and receive hefty premiums. If the options are not exercised, you keep your shares and the premium. If the options are exercised, you keep the premium and sell your shares for a higher price than Apple trades today.

Call Options

Apple, as of close Tuesday, trades at about $656. Let's look at call options with a strike price of $690.

ExpirationDate Premium Annualized Return
Sep (12 ) 30 days $8.15 %14.37
Oct (12 ) 58 days $16.35 %14.91
Nov (12 ) 87 days $24.30 %14.78
Dec (12 ) 122 days $30.30 %13.14
Jan (13 ) 150 days $34.17 %12.05
Click to enlarge

If you sell the October 2012 $690 call options you collect a premium of $1,635 for each contract (options come in blocks of 100 shares), which is a 14.91% annualized returned based on the strike price. If Apple doesn't reach $690 within 58 days, you keep your shares. If Apple does exceed $690 your shares may be called away from you at the strike price.


Selling call options on shares of Apple allows you to achieve nearly a 15% annualized return for simply waiting to sell your shares at a price which is over 5% higher than the current market price. If you agree with the downgrade from Oracle research and believe that Apple has hit it's peak this may be a good time to sell your shares. And why not make a profit while doing it by selling call options?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.