Best value is another way of saying dirt cheap and Apple shareholders are clearly tired of owning an ever increasingly dirt cheap stock. Tim Cook finger-pointing and disappointment are the hallmarks of many Apple articles. TheStreet's Rocco Pendola wrote an article that sums up his opinion of Cook's performance as CEO If Apple Bought Twitter It Would Ruin It. I will admit I laughed when I read the title, but I also consider Pendola a friend and laughing was more about Pendola's writing creativity than believing it was true. Pendola's exceptional creativity aside, Pendola has made it crystal clear he isn't Tim Cook's fan club president. However, Pendola should give credit where credit is due. Apple is not running into the ground; it recently reported one more in a long run of record earnings.
By my last count, Apple sold $54.5 billion worth of goods in the fourth quarter of 2012 while managing to keep $13 billion in its pocket. If that is considered running Apple into the ground, I welcome Tim Cook to take over my household and run my family into the ground at his earliest convenience. I understand Saintvilus' response of despair. I can think of many more pleasant topics of conversation with friends and peers other than a stock holding that I'm underwater in. Everyone is an "expert" on Apple's stock and the direction the stock has already made. I'm sure Saintvilus has received his fair share of "experts" telling him why he should have sold at the "obvious exit price" of $705, but I am equally sure Saintvilus has learned to tune most of it out. I, on the other hand, maintain a bullish opinion of Apple, but typically don't own it. As an active trader, I usually don't position into stocks over $100. My edge diminishes as the price increases much beyond $100 per share. I rely on price movement to gain an advantage, and stocks over $100 don't have the same characteristics as stocks under $60.
The first price point/condition is your entry. The other three are your exits, entered at the same time. Emotion is your enemy and will reduce your overall portfolio gains much more than selling a stock at the wrong time because of your investing rules that you stick to. Here are my rules for selling Apple put option premium. When the trade is over, you will know if I made or lost money. I will sell the May strike because it has about 28 trading days. My primary objective is to capture time decay and four weeks is generally the minimal amount of time that is worthwhile for this strategy. I want to sell puts instead of covered calls (same thing from a total risk/reward point of view) because it involves one transaction instead of two, and a synthetic covered call (a cash secured put short is a synthetic equivalent to a covered call) should have slightly less premium than a put with a stock that is falling. My next concern is the strike price. I want to choose a strike that if Apple does fall below, it's likely to recover to (there are other considerations that go beyond the scope of this article). The $350 strike price meets the criteria. I will sell a May $350 strike price put option for $6.10/contract if able on Friday. I will use a stop loss of $12.20, and a profit target of $2 for the first week, $4 for the second week, and if I hold beyond that, I will want to close out for 10 cents or less. The option expiration date is my hard time limit for the trade. After placing the trade, I know I have already completed the worry, thought process and method of action. The only thing left to do is watch Rocco Pendola the next time he is on CNBC. 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.