Apple (AAPLE) is the hot stock of the day as traders and investors alike pile on board the train that is up over 30% since its last pullback that rebounded in February. There’s a myriad of reasons why everyone seems to be getting long the Silicon Valley tech giant. Among them is the general sentiment that Apple has overcome the loss of its late innovator, Steve Jobs, and has found itself once again as a well-oiled machine aimed at creating a complete life experience for its expanding user base.
Apple’s born again innovative mindset is exciting consumers who are waiting patiently for the new iPhone 6, said to have a much larger screen and increased battery capacity. But these features are for the simple-minded compared to the big picture Apple is focused on. They appear to be setting up to create one continuous life experience through their devices, connecting users’ mobile devices not only to each other, but to seemingly anything with some sort of connectivity capacity such as a kitchen appliance or car. These goals are obviously a little farther down the line than the iPhone 6, which is expected to arrive sometime this year, likely September. Apple’s tendency to make the next leap in technology throughout its history is almost weighing the stock down relative to its competitors as they scramble to shrink the time gap between Apple’s innovation and the deployment of their own similar technologies.
Tim Cook is proving to be a very savvy CEO as well. Not only has he been able to refocus the company on integration and mass adoption, but he is also expanding the target consumer base, pledging to double Apple’s presence in China (in terms of the number of stores). The exact timing of this move is uncertain but stores are being built at six new Chinese locations and the search for management is on, according to Apple’s website. This would essentially be the opening of the Bombay doors as Apple was already able to attract 130 million new customers over the last twelve months with the most populous nation in the world still somewhat out of reach. Presumably, these new users are coming from rivals such as Android and Windows, giving reason for Cook to even publicly make fun of Android, calling them a “mistake.”
He certainly has the numbers on his side in this matter, amongst other things. The biggest threat to Apple’s momentum is coming in the form of a no-nonsense smart phone from Chinese-based OnePlus that has an exclusive device that seems to trim the fat in terms of unnecessary software often found on iOS and Android devices. However, Apple appears to be hedging any competition by expanding horizontally, providing the most lucrative app store for developers and apparently making plans to more fully integrate Apple products into the education environment. Both of these undertakings should spell great news for Apple bulls.
This brings me to the technical analysis. The intraday chart is decidedly bullish, with APPL trading well above the Ichimoku cloud and there’s no resistance in sight. I expect the stock to keep climbing through September and the release of the iPhone 6. Institutional order flow is agreeing as major September call activity is coming across the tape today. The first major activity had Sep 105 calls trading for $0.85 and they are $0.97 bid now representing a $120 gain per 1 lot in the time it took to write this article. Keep in mind that the vast majority of open September positions were opened this morning. Let’s take a look at how to get long AAPL:
The Trade
Buy AAPL Sep 105 calls for $0.97
Risk: $97 per 1 lot
Reward: Unlimited
The Greeks
Delta: Long
Gamma: Long
Theta: Short
Vega: Long