With the real possibility that Apple misses estimates when it reports next week, it makes sense to step back and proceed with caution.
If, however, you're already long the stock, selling puts might not make quite as much sense. And, if you intend to stay long the stock no matter what happens on earnings, you can still take an active approach to your position without necessarily trading it.
With as little as 100 shares of AAPL and commitment to a buy-and-hold strategy, you can generate considerable income from the stock, even if it does drop on earnings. For the record, you do not have to commit to a buy-and-hold strategy; I just approach the trade from that perspective.Sell a covered call. It's quite possibly the most under-utilized -- and relatively simple -- investment strategy. That should be surprising, particularly after you see, firsthand, how easy and lucrative covered calls can be. For every 100 shares of AAPL you own, you could, for example, sell the August $650 call and, as of Tuesday's close, collect about $6.85 in premium income. That's $685 in your pocket no matter what happens to the stock. (Options use a multiplier of 100). If that call trades in-the-money (AAPL stock moves higher than $650) between now and option expiration day, you could have your shares called away. Your counterparty on the trade paid you for the right to buy your AAPL shares for $650 apiece. Chances are he or she will not exercise that option until expiration, though it could happen at any time before then. If the call expires worthless (not in-the-money), you keep your shares. That brings up another point to think about when selling covered calls. Consider it in relation to selling Intel (INTC) covered calls. I own shares of INTC. During the day Tuesday, I considered writing the July $26 call against them. At the time I think I would have collected 35 cents per call sold. Not as lucrative as selling an AAPL call, but, relatively speaking, it's a great deal. Between dividends and covered calls, you can do well on a stagnant and choppy stock like INTC while you wait for it to break out.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV