The worlds largest company will be under the spotlight, yet again as we get closer to its earnings report this Tuesday. For those of you who follow Apple (NASDAQ:AAPL) it was inevitable that a correction would eventually come. The main pessimistic view throughout Apple's historic rise to the worlds largest market capitalization was its "parabolic" chart that seemed it could fall the other direction at anytime. Looking today at their 3M, 6M, 1 year, and 2 year charts, it is easy to recognize that they now look anything but parabolic. On CNBC the comparison to Apples chart and the tech bubble were often seen, but rarely argued. Although I am only 20 years old I remember the day the tech bubble burst spiraling markets downward. Furthermore, this bubble has been a fascination of mine since I began investing around that time period in the early 2000's. For the most part over valuation and a retail investor buying spree gave company's who never produced a profit, sky-high stock prices. To compare one of the biggest bubbles in history to a corporation who's innovation is unmatched and soaring revenues has allowed a 100 billion cash hoard is absolutely absurd!
Although I was $1.00 from being In-the Money (NYSEARCA:ITM) in the middle of the month with my AAPL $645 October Call option, I still found these past couple of days tough. I consider myself a disciplined investor, however anytime you have nearly a 50% gain and lose it...it's hard. Moreover, I was inspired by this recent sell off (or correction) as an opportunity to go buy some really cheap and (potentially) profitable options. I'll concentrate on my AAPL $645 October Call to show the correct way to play this sell-off. First, thank god we have one more day until earnings, which will allow us to execute this purchase without the premium becoming inflated. Right now the premium price has hit a low of $32; about 1 month ago I bought my block for $38. I have seen this premium hit $50's twice and steadily stay around mid-$40's. You can easily treat this as a week to week trade and make a killing. But if you want to stick around for awhile you'll see your profits grow even more. First we have two more earnings reports to go and just by Apples track record they do not like disappointing shareholders. Furthermore, October being when the contract expires plays a crucial role into why this is such a great trade. Earnings will be released, along with the iPhone 5 in October 2012 creating a profit potential in the anticipation alone!
*Sorry, if the article did not provide as much technical analysis as you would have liked. But you can read the other APPL articles and form your own opinion. My first SA blog.
Disclosure: I am long AAPL.