On Tuesday, AAPL sold $17B in the largest corporate bond offering in history. It's not clear how AAPL will invest its cash, but it seems premature to declare that the company is becoming another slow-growth, Microsoft-like sleeper. Apple's Jony Ive is said to have been leading a redesign of iOS, and the new version is expected this summer, and I won't be sold on the "slower AAPL" thesis unless we see lackluster product launches and no major innovation in 2013. But even if AAPL is entering a new phase fundamentally, changes to the company's capital structure should put a floor under shares and reduce return volatility in the near term.
Investors should look for AAPL's option implied volatility to decline relative to Nasdaq 100 implied volatility in the coming months. The attached chart shows that the ratio of one month implied vol estimates for AAPL and for the Nasdaq 100 has increased over the last year. If that relationship reverts to the mean, it would most likely be via a decline in Apple option premiums. In that context, even though AAPL implied vol is near a 6-month low, it's easy to see how lower levels are possible.
Trades: Sell to open AAPL July 390 puts at $5.10 and buy to open AAPL July 380 puts for $3.75.
We are selling a vertical put spread for July expiration given the outlook for flat-to-higher share prices and lower option IV.
OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits
Jared can be followed on Twitter at twitter.com/CondorOptions
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
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
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
More than 30 investing pros with skin in the game give you actionable insight and investment ideas.