Watch your back, Apple.
Apple (AAPL) and Spotify (SPOT) currently boast roughly 125 million paying subscribers to their music-streaming services, and many see them as something of a duopoly in the space. But that will potentially change Tuesday with the unveiling of YouTube Music by Alphabet (GOOG) , (GOOGL) .
Apple and Alphabet are holdings in Jim Cramer's Action Alerts PLUS.
This is actually Google's fourth attempt at gaining music-streaming market share via YouTube (the planet's largest video site). Is it "fourth time's the charm" here?
Well, Google intends to promote the launch with the most-expensive advertising campaign in YouTube history. There'll also be a free YouTube Music version supported by advertisers, as well as a higher-end subscription version that will start at $10 a month.
Morgan Stanley analysts predict YouTube Music will likely draw some 25 million paid subscribers by the year 2022, according to the Financial Times. If that's true, the new service will generate approximate $3 billion in new annual revenue for Alphabet.
I'm currently long Alphabet and Spotify, but sold my Apple stake ahead of its recent earnings report. The YouTube Music news kind of makes me want to sell SPOT, but what I'd really like to do is re-initiate an Apple long precisely where I took my profits ahead of earnings. (Doesn't Jim Cramer often say something about owning this name and not trading it?)
Regular readers know that I sold Apple at $176, as that was my price target for the name (and I thought at the time that I was pretty smart). I then made a few bucks on an Apple bull-call spread following the stock's post-earnings pop, which was nice, but still left me flat the name.
Well, here's how I intend to buy back my Apple shares at my price, or at least make some dough trying. Let's first look at Apple's chart:
We can see that the pitchfork pattern's central trendline provided some recent resistance. We can also easily see that a 38.2% retracement of Apple's most recent surge lands the stock back in the $178 area vs. Friday's close at $186.31.
Now, Apple is set to release fiscal-third-quarter earnings on July 30, and there's some premium value associated right now with options that expire just ahead of that. So, here's my plan:
- Sell (write) one July 20 $180 put at or close to Friday's close of $2.79.
- Sell (write) one July 20 $175 put at or close to Friday's finish of $1.68.
My net credit on the above comes to $4.47 per contract. If I'm exercised against, then I'll have to purchase 200 Apple shares at a $177.50 average price less my $4.47 options credit.
That's a $173.03 net cost basis in the worst-case scenario on a stock that closed Friday at $186.31 (and is trading at $187.79 in the premarket as I write this Monday morning). Does that sound like a decent risk/reward proposition to you?
And of course, if the shares never come in, making $4.47 per contract for nothing is more than chump change.