Apple Inc. (AAPL) PriceWatch Alert With 3.70% Downside Protection

Posted on Monday, August 25, 2008 8:07 AM

Apple Inc. (NasdaqNM: AAPL) ended the last trading session at $176.79. So far the stock has hit a 52-week low of $115.44 and 52-week high of $202.96. Apple stock has been showing support around 174.69 and resistance in the 178.55 range. Technical indicators for the stock are Bullish and S&P gives AAPL a weak 2 STAR (out of 5) sell rating. AAPL appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Oct '08 185 covered call (APV JQ) for a net debit in the $170.24 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 3.70% downside protection and an 8.67% assigned return rate for a 58.60% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the AAPL Jan '10 90 Call (WAA AR) and selling the Oct '08 185 call (APV JQ) for an $88.20 debit. The trade has a 54 day life and would provide no downside protection and a 7.71% assigned return rate for a 52.00% annualized return rate (for comparison purposes only). Apple does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]