We are trading call option contracts in Apple (NASDAQ: AAPL) again. Yes, we know there are those that are saying AAPL is overvalued. Yes, we know there are those that say AAPL has gone up too much too fast. But we are skeptical of these experts. We think Apple is still very much a compelling story and cannot be ignored.
First of all, if one looks at AAPL from March 2009, then yes, it has gone up dramatically (over 100%). But if one looks at the recent bull run over the last several weeks, it has been the Financials that have made the run. Apple stock price has languished. We are looking at three catalysts here:
1. The impending announcement around the tablet PC. This is a well discussed event, but we feel Apple still has the ability to surprise at this event.
2. Earnings are coming up and we are again betting for upside to the same and an immediate pop in the stock price.
3. The rumor mills around the change in their accounting system and policy which in turn is expected to lower their P/E ratio. The accounting folks are still working their pencils on this one but we expect them to come to some consensus soon. And when that happens we expect it to be positive for the stock price.
Accordingly we are buying the AAPL April 2010 $250 call option contracts at a premium of $280 per contract. This is a far out of the money contract. But we have time on our hand. And time will tell.
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