Retail investors decide what percentage of their portfolios to allocate to any given stock. If Seagate ( STX) is growing relative to your other holdings because it's trending faster than the rest of your portfolio, you don't have to rebalance unless you want to. It's not an excuse to be reckless, but flexibility and quickness are key advantages. Timing is maybe the greatest edge the average investor has over large fund managers. Retail investors can pick and choose the time frame for any given position. For example, in
"BlackBerry Isn't a 10 for Investors" I suggest that Research In Motion ( RIMM) may be bought for a gain, and then sold or shorted for another gain when the BlackBerry 10 is released. Most funds can't micro-time entries, exits, and reversals to the degree retail investors can. Timing not only includes buying and selling, but also sitting on your hands. Sometimes fund managers would just as soon stand fast, but they have to allocate money as capital comes in. An investor can add money to his account and hold it as cash while waiting for the right time to enter. The choice to say "no" or do nothing can be powerful, and an investor discounts it at her peril. I believe the time is now to start/add Apple, but not everyone agrees. The Street's Rocco Pendola makes a valid point on CNBC "Fast Money Tuesday" about earnings releases. I fully agree with Pendola that it's foolish to try to time an entry into a company reporting earnings unless you're fully comfortable with the volatility that accompanies the potential market reaction. The fact is most are ill-prepared for the kind of volatility earnings deliver. It's the same volatility that takes my focus toward options as the vehicle to gain exposure. I have written several bullish takes on Apple lately, and they all advise selling volatility into earnings because it lowers your risk and provides an edge. I used options to enter a bullish Herbalife ( HLF) position by selling put options, and I expect to short Research In Motion by selling call options. Using options as a hedge, an investor can time a Herbalife long incorrectly (I was early) and still have the staying power to continue the position while time works to his advantage. Within a day or two, Herbalife was back to the same price I averaged in, but the options experienced time decay and loss of implied volatility. As a result, I was back in black on a trade that would would have only broken even had I bought stock instead.
Investors timing Apple on the day of its earnings release should follow the same strategy: Exploit volatility and hedge a current position, or enter a new position with the advantage of offsetting the risk of others as your own for a price. No different than the insurance model, but at a scale you're comfortable with. OK, by now you're likely asking what the trade is, and I am not going to disappoint you. Early in the trading day, I will look to sell puts with a strike price of $500 to hold through earnings. At the time of publication, the author held no positions in any of the stocks mentioned. Follow @RobertWeinstein This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.