Apple Inc. (AAPL) 10/29/09 PriceWatch Alert Up To 4.31% Downside Protection

Posted: Thursday, October 29, 2009 8:16 AM EDT
By: Market Intelligence Center Staff

Apple Inc. (NasdaqNM: AAPL) closed yesterday at $192.40. So far the stock has hit a 52-week low of $78.20 and 52-week high of $208.71. Apple stock has been showing support around 186.92 and resistance in the 200.76 range. Technical indicators for the stock are Bullish and S&P gives AAPL a positive 4 STAR (out of 5) buy rating. AAPL appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 195 covered call (APV LS) for a net debit in the $184.10 area. That is also the break even stock price for this trade. This covered call has a 51 day duration, provides 4.31% downside protection and a 5.92% assigned return rate for a 42.37% 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 '11 90 Call (VGA AR) and selling the Dec '09 195 call (APV LS) for a $97.35 debit. The trade has a 51 day life and would provide 2.62% downside protection and a 7.86% assigned return rate for a 56.00% annualized return rate (for comparison purposes only). Apple does not pay dividends at this time. [THA-Seven Summits Research]