Trade Alert – (AAPL) August 17, 2012

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert – (AAPL)

Buy the (AAPL) September, 2012 $550-$600 Call Spread at $46.70 or best

Opening Trade


expiration date: 9-21-2012

Portfolio weighting: 25%

($25,000/100/$46.70) = 5 Contracts

My plan to buy Apple on the next big dip is clearly not working, as the stock has broken out to a new all-time high today of $643 a share. The company is leaking like a sieve. This week, rumors have appeared online that the next generation iPhone 5 will be launched in September and will offer the beefed up performance of the newest iPad. This will undoubtedly be the largest consumer product launch by any company in history, and investors are not willing to wait.

I hate chasing stocks. But the fundamental case for Apple is so compelling its worth a shot even up here. Remember, you are buying a company with a huge growth at a PE multiple of only 8.

However, I will limit my risk by only buying the September call spread. This is short dated and far enough in the money that even if we get a market correction, as I expect, the $550-$600 call spread should expire at its maximum value.

If the correction is a modest one, Apple shares might not go down at all. I can also use this position to hedge my existing downside exposure in the (SPY), (MS), and the (FXY).

Only execute with a limit day order for the spread in the middle market. If your order doesn’t get done, then increase your limit bid in 10 cent increments until you get filled. Prices are all over the map today. Don’t enter market orders on pain of death. You’ll lose your whole profit.

Here are the specific trades you need to execute this profitable position:

Buy 5 X (AAPL) September, 2012 $550 Calls at………………. $94.65
Sell short 5 X (AAPL) September, 2012 $600 calls at…….….-$47.84

Net Cost…………………………………………………………. $46.70

Maximum profit at expiartion = $50.00 - $46.70 = $3.30

($3.30 X 100 X 5) = $1,650, or 1.65% for the notional $100,000 model portfolio.

I'll Take Another Bite Steve!