Apple Inc. (NASDAQ: AAPL) stock is falling this morning as speculators and even some investors were disappointed with CEO Steve Jobs' keynote address yesterday at the MacWorld conference. Jobs introduced the iTunes movie rental service as well as the MacBook Air laptop. He could not live up to the expectations he built after the introduction of the iPhone at last year's conference, as well as many of the iterations of the iPod which also debuted at MacWorld. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AAPL.
After hitting a one-year low of $82.86 in February, the stock hit a one-year high of $202.96 in December. This morning, AAPL opened at $165.11. So far today the stock has hit a low of $160.68 and a high of $169.01. As of 10:35, AAPL is trading at $161.89, down $7.15 (-4.2%). The chart for AAPL looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a February bear-call credit spread above the $210 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.3% return in just one month as long as AAPL is below $210 at February expiration. Apple would have to rise by more than 38% before we would start to lose money.
AAPL hasn't been above $203 at all in the past year and has shown resistance around $180 recently. This trade could be risky if the company's earnings next week are positive, but even if that happens, this position could be protected by resistance AAPL might find at its year high at $202, where it topped out earlier this month.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AAPL.
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