Can Apple Investors Be Their Own Boss?
Apple’s (NASDAQ:AAPL) big pile of cash has seemingly been bothering its investors, who want to share in the company’s recurrently huge profits a little more than they already do. The iPhone maker’s dividend strategy was making big news on Thursday after investor David Einhorn filed a lawsuit demanding preferred stock and the company responded by saying it would consider it.
But all this drama may be needless, according to Barron’s, which suggests Apple shareholders find their own way of maximizing the value of their holdings. There are two ways of increasing income earned on Apple stock, it said: the classic “covered call” strategy and the more risky method of selling “strangles.”
The first option involves selling a bullish call option with a strike price higher than the current stock price. With Apple at $465, investors can sell the March $485 call that expires March 8 to collect $5.25, it suggests. “Some purists will scoff that Apple’s implied volatility, the critical element of options prices, is at a subdued 30 percent, compared with 45 percent historical volatility over the past 12 months,” Barron’s wrote.
However, with the CBOE Volatility Index hovering around 14, Apple’s implied volatility is double that of the broader stock market.
The second option, according to Barron’s, is for investors with more trading experience. The strangle strategy entails selling a call with a strike price higher than the stock price, but the call sale is augmented by also selling a put with a strike price below the stock price. In short, in addition to selling the March $485 call, a strangle will involve selling the March $440 put to collect an additional $7.
Barron’s adds that while sharp stock movements make options-selling strategies risky, it is possible for Apple investors to not need to wait for the company to make a decision.
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