This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple Won't Let Investors Back In

TheStreet Premium Services

A complimentary preview
of Options-Profits Previews

Apple (AAPL) won't let investors back in. After the stock bottomed on April 19, shares have rallied 15% with nary a dip to buy. I expect more price upside in the short term as managers who dumped their positions in March scramble to add exposure. More importantly, I expect AAPL's option implied volatility to decline in the coming months as expectations for the stock's volatility converge to broader estimates.

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

Jared can be followed on Twitter at


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.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV

Partners Compare Online Brokers

Top Rated Stocks Top Rated Funds Top Rated ETFs