Apple (AAPL): One Last Thing

by Dan December 23, 2019 11:55 am • Trade Ideas

After more than ten years appearing as a panelist on CNBC’s Options Action program, Friday’s was my last. In April on my ten year anniversary, I wrote about my experience (First on CNBC), but without going into more detail I’ll just say it has been the longest standing, and certainly one of the most rewarding professional endeavors of my now 25-year career. I will still appear on CNBC’s Fast Money program Monday through Friday at 5 pm.

I suspect it’s fitting that my first trade idea on the show back in April 2009 was on Apple (AAPL), so I guess it was also destined to be my last.

Here were my notes about AAPL for my OA hit on Friday’s show:

-you’d have to be crazy to buy AAPL here, up 77% on the year. the stock has gained $600 Billion in market cap this calendar year, a feat that has never been done before.
-investors convicned the stock should have a higher P/E multiple given new revenue streams, despite iPhone units not growing. Also lots of investor excitement about Streaming Services, which will likely disappoint expectations, Airpods (huge hit but 1 month lead time for new Pro offering) and maybe China iPhone sales not as bad as some expect (don’t hold your breath)…
-The stock has $1.25 trillion market cap, up nearly 100% from Jan 3, BUT over the last four quarters the company’s EPS and Sales were FLAT, meaning they did not grow, and its PE MULTIPLE expanded from 12 to 21x

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This multiple expansion is likely discounting any and all good news in early 2020.

Options Prices are trading near 2019 lows, with 30-day at the money implied volatility below 18%.

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Back in Sept, the last time I talked about AAPL on the show the stock was $213.50 and my trade was do buy Oct calls… (One More Thing) and detailed on CNBC (here), with the stock has been on a runaway breakout since then I am a lot more cautious.
AAPL should release their fiscal Q1 results the last week of Jan, the options market is implying on a 6.5% move between now and then…

Hedge Long positions for those who do not want to take profits to avoid pay taxes 

AAPL ($280) Buy Feb 275 put for $8
Break-even at 267 losses up to 8 between 267 and 275, protected below 267 down 3.5% for the next two months.

Here was the video from CNBC: