“Many traders prefer ‘cheap’ options even though the real value of the option is related to the price and expected movement of the stock over time,” Michael Shulman of InvestorPlace writes for TheStreet.com. “For this reason, many otherwise intelligent and successful traders avoid ‘high price’ calls and puts even though they represent great value and opportunity. The best example of this is Apple (AAPL) options.”
“If you believe Apple shares still have another $100 to run before the end of 2011, as JPMorgan analysts estimate, well, then AAPL is still a good buy,” Shulman writes. “The company is about as close to bulletproof as you can get. It has more cash than the Fed. It makes superior products that people are willing to pay for, giving it the best margins in the hardware business.”
“Personally, I like the AAPL April 350 Calls, now selling north of $16,” Shulman writes. “For options traders who are used to paying only a few cents or a few bucks for their trades, this may seem too rich. After all, isn’t the allure of options the ability to make outsized gains without tying up a bunch of capital? While that’s true, isn’t a $16 call that goes to $32 the same as a 20-cent option that goes to 40 cents? What’s more, as with most things in life, you usually get what you pay for. Cheap options are often cheap for a reason.”
Full article here.
MacDailyNews Take: As with Macintosh, with AAPL, you get what you pay for.
[Thanks to MacDailyNews Reader “Lynn W.” for the heads up.]