Now Is the Right Time to Buy Apple Option LEAPS

Sep. 19, 2008 4:56 AM ETApple Inc. (AAPL)12 Comments
Jason Schwarz profile picture
Jason Schwarz
48.41K Followers

In a Harvard Business School lecture given by Mark Sellers, we gain the following insight into what separates the great investors from the average ones. He says:

The rarest trait of all is the ability to live through volatility without changing your investment thought process. Most people have a terrible time not selling their stocks at a loss, they can't average down, they can't handle short term pain even if it would result in long term gain.

The panic instinct steps in and shuts down normal brain function including the ability to buy stocks when others are panicking and sell stocks when others are euphoric. Everyone thinks they can do this but when October 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy.

If you're an investor with Apple (NASDAQ:AAPL) in your portfolio, it's time to make some important decisions. Many Apple bulls have sold out of the stock because of the widespread financial panic, but as this period of capitulation draws to a close it is time to position yourself for the bounce.

If you own ETFs with Apple in them you should increase risk and move to AAPL stock. If you own the stock you should buy in-the-money call options. If you already own these, then you should move some capital to out-of-the-money call options. This is the moment to increase your risk/reward level.

As an options strategist, I am very cautious about discussing option LEAPS in articles because of their volatility, but this represents one of the few times I will do so. We at Lone Peak Asset Management are buying a mix of the following call options: January 2010 $140's for 30.00, April 2009 $180's for 6.00, and the most risky of all January 2009 $200's for 1.00.

This article was written by

Jason Schwarz profile picture
48.41K Followers
Jason Schwarz authors the popular Economic Timing investment newsletter. His fundamental and technical research has become a primary resource for hedge funds and individual investors.

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