2014-06-13

As we round up a week of trading the options of players and potential winners in the Internet of Things landscape, it becomes essential that we explore the options of Apple Inc. (NASDAQ:AAPL).  Apple, a $550B company that now trades for $91.6 apiece after its 7-to-1 stock split is one of the chief proponents of the Internet of Everything. The company  designs manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

Link to Internet of Everything

The race to establish dominance in the Internet of Things landscape is tacitly on between Apple and Google especially after the Google’s purchase of Nest Labs. However, Apple is still very much in the race as it seeks to keep users locked within its iOS ecosystem with new products launches, upgrades and strategic acquisitions. Another key move by Apple into the Internet of Things landscape is the Homekit that was introduced at the company’s Worldwide Development Conference. The Homekit is a new tool that provides developers with way to build custom applications for the Internet of Things on Apple’s iOS.

Surges in Recent Past

Investors in Apple might have momentary panic attacks on Monday after the stock opened at $92 apiece after it closed at more than $500 last Friday. The stock has moved from that $92 open on Monday to a $95.05 high on Tuesday before it started to decline in line with the general market direction. However, Apple’s current “affordable” share price, optimism on the horizon and low P/E ratio of 15.26 suggests that the stock has upside potential.

Apple’s Upside Potential in Mobile Payments

Shareholders of eBay are in the best position to tell you how profitable the mobile payment processing business can be considering the contribution of PayPal to eBay’s top and bottom lines. Apple is entering headfirst into the mobile payments industry and I have reasons to believe that the company has what it takes to succeed in this venture. For one, it has outfitted its latest iPhone with a fingerprint scanner for making purchases in the app store. More so, consumer preference will adopt mobile payments as smartphones becomes more versatile and the wallet goes the way on the two-side cassette tape.

Upside in Share Price

It is somewhat tricky to calculate the upside potential in Apple’s share price because the market is yet to fully wrap its head around the idea of trading shares of Apple at less than $100 apiece. However, the “affordability” of the share price will be the major driver for volume action as soon as the market leaves the current consolidation mode. The share price of Apple is need of one or two events in the news to serve as catalyst to propel the stock above $100.

How to Trade AAPL Option

Shares of Apple are now available in the multitudes; hence, we cannot really expect much by way of exponential increases in the share price. However, this multiplicity of shares provides us with the perfect opportunity to profit on covered calls. I am writing covered calls on the AAPL Jan 2015 100.000 call (AAPL150117C00100000) to collect the $3.30 premium over the course of the next six months when the option might or might not be executed. I take the covered call over bullish calls especially now that Apple will need a massive volume action to record price gains.

— Daily Option Alerts

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