Apple has announced an event on September 12. Traditionally, Apple announces new iPhones and other “gadgets” in September, and expectations are high.
So, what is an investor to do?
If you are a long-term investor, nothing. Absolutely nothing. The event will generate some noise in Apple’s stock price, but the actual effects will take place over the months and years as Apple executes on its strategy, and how well the new phones are received.
Short-Term Apple Trade
What about a short-term investor looking for a little trade on Apple’s big event?
In that case, it’s time to look into options and start pricing volatility plays. No matter what Apple announces there will be a reaction. In fact, there is a very good chance that there will be an OVER-reaction. That reaction will show up in a quick rising, or falling stock price.
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Now, if you don’t understand options, and don’t already have an options enabled account, this move is not for you, but if you’ve been to this rodeo once or twice before, there is money to be made here in a good volatility trade, coupled with the usual leverage of stock options.
Buy Apple Stock?
What about just buying (or shorting) some shares of Apple stock?
While that is certainly doable, you should carefully calculate your expectations and risk IN DOLLARS. As always, it’s too easy to get caught up in sexy percentages and forget what you are actually looking at.
As of right now, Apple stock is trading at about $225 per share. To buy 100 shares, you would need $22,500. If the stock price rose, say $10 per share based on the announcement (around 4% to 5%), you would make $1,000 profit on your $22,500 investment. A $20 share increase (almost 10%) would net your $2,000 on your $22,500 investment.
So, is it worth the risk (and trade costs) of dropping $22,500 to buy some stock in order to make $2,000? If the answer is yes, and you can afford to risk the money (no college funds!), then there would be dumber trades out there.
Remember, however, that expectations are HIGH for this event. If Apple disappoints, with a few “incremental upgrades” it might be a long while before you see a $225 share price again. That $2,000 quick profit, could be a $2,000 quick loss just as easily, and the prices will react so quickly, you’ll never get a shot at getting out. Even a stop-loss could send you reeling.
Will I be getting in on this short-term Apple trade?
Short-term trades aren’t my style. Easy ones like this don’t come along all that often, and the juice isn’t always worth the squeeze. I do have some Apple stock already. Buying in a while back gives me a nice ongoing dividend, so I’ll be rooting for Apple, but the shares I already own will have to be my skin in this game.
At the time of publication, the author owned shares of Apple stock. That may change at any time, without notice. This is not an offer to buy or sell securities, nor is it financial advice. The author does not hold himself out to be a financial advisor. The author is not a licensed broker. This article is for general informational purposes only and should not be considered financial advice.