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Upon announcing the iPhone 5, Apple (NASDAQ:AAPL) rose over the next week from the $665 area to over $700 for the first time ever. After staying around $700 for a week or so, and peaking at $705.07, the rally ran out of steam shortly after the new phones hit stores, with the stock pulling back to around $675-680. Investors are now wondering if Apple will continue higher or if $700+ is "too far, too fast".

The after-announcement pop followed the trends of the previous iPhone announcements, as detailed in my article, "How to Play the iPhone 5 Announcement." There is no reason to believe the stock won't follow the post-release dip and beyond. For such a volatile stock, Apple is actually somewhat predictable.

For instance, the iPhone 4 was announced on June 7, 2010. Over the next two weeks, the stock popped about 11% and then retreated after the phone was released (sound familiar?). However, after the post-release drop, the stock stagnated around the pre-announcement level of $260 for about a month, and then began a steady, sustained climb in anticipation of the earnings announcement on October 18, 2010, which was to be the first reported earnings to reflect the iPhone 4 sales. The end result was a relatively quick move to around $310, which the stock held.

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When the iPhone 4s was announced the following year on October 4, 2011, the stock popped 20.5% in the two weeks following the announcement. The stock was trading around $355 the day of the announcement, then climbed to around $425 over the next two weeks, and then retreated to the $390 level. Just like with the original iPhone 4 announcement, the stock stagnated after the initial pop and retreat, then as sales numbers began to show the iPhone 4 selling better than expected, it began a very steady climb from late December 2011, the next time it broke above $400, through late March 2012, when it broke through $600 for the first time. Looking at the chart of this time period, there were only a few down days during the peak selling months of the iPhone 4s.

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The stock has followed the same pattern for the past three iPhone announcements and releases, and there is no reason to doubt that it will continue for the iPhone 5 product cycle. Any short-term dips in Apple should be viewed as gifts; incredible buying opportunities for a stock which should begin its rise to $800 and beyond in the next few months if history repeats itself once again. Consider playing Apple with intermediate-term call options. Since I expect the next big leg up in Apple to take place over a period of several months, I want to make sure I have plenty of time to let the rise happen. My favorite Apple trade at this time is to buy the April 2013 $675 call for $66.00 and simultaneously sell the $775 calls for $27.20. This creates a net cost of $38.80. Should Apple trade at over $775 next April, this would result in the maximum profit of $61.20, or almost 158% of the initial investment. This trade makes money if Apple is above $713.80 at expiration, which is only about $9 above what Apple traded at last week. I like this trade as opposed to an outright purchase of the stock because it gives you the upside of 100 shares for only $3,880, when a direct purchase of 100 shares will cost around $70,000.

Source: Why You Should Embrace This Dip In Apple