Apple Buy Write Could (i)Pad Profits

There was a significant amount of Apple (NASDAQ: AAPL ) news last week and while the majority was positive, the NASDAQ rebalancing of its Nasdaq 100 — the underlying for the PowerShares QQQ (NASDAQ: QQQ ) — appears to have outweighed any encouraging reports. Not only is Apple producing its award winning iPad faster, but its competitors are facing difficulties. As a long-term investor, I am more concerned with essential news that impacts fundamentals rather than information that could have a minimal impact on earnings. There is no denying that options trading investors will see selling pressure in Apple in April but there is still an opportunity to profit with these strategies. With a "true cash" adjusted P/E of 17 I believe that Apple is likely approaching downside resistance levels and is becoming a bargain. With this information, executing a buy-write on AAPL Apr 16 335 Calls would be the best strategy due to its risk-return profile. If you are uncomfortable with this level of risk, I suggest utilizing the 330s. Conversely, for those seeking to increase potential returns the 340s may be a better choice for your individual strategy. An alternative strategy is to sell out-of-the-money puts and collect the premium without having to purchase the stock outright. In this case the AAPL Apr 325 and 330 Puts are attractive. Think about it: would you be willing to receive $2 to potentially be forced to buy Apple at $330? Note that if the stock declines to the strike price, you are obligated to buy the stock (or closeout the position). For more depth, please consult a detailed option chain. To read my full analysis, please continue here . Disclosure: Paul Zimbardo is long AAPL and short the AAPL Apr16 360 calls.
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