Stop Waiting For Apple To Rally... Collect Cash Today!

Selling put options is a great way to generate income and solid annualized returns by taking less risk than owning the same amount of common stock long. When I look for these trades I target earning 2% or more for every 30 days of expiration time.

Selling a put option is a strategy where you are slightly bullish on a stock and this reduces your risk by being able to name the price (called the strike price) you are willing to pay for the company. This contract is valid for a specific amount of time called the expiration date.

These terms are set by you and for agreeing you are paid upfront for the potential obligation to buy 100 shares of stock for every put sold. I typically look at options expiration dates between two weeks and two months.

Consumer-electronics giant Apple (AAPL)

With the share price range bound this stock has great potential to collect lots of option income and high annualized returns.

The company is doing great with strong demand and an even strong balance sheet. Over the last year the share price just got ahead of the companies fundamentals and needed a break. Over the last 12 months sales hit an incredible $325 billion up 21% from the prior year and earned a massive 31% profit margin. The balance sheet is so strong Apple could pay off all its debt and still have $82 billion in cash burning a hole in its pocket. This cash will be used to pay dividends, share buybacks and future acquisition which will hopefully keep sales rapidly growing.

The company share price has moved sideways and is now bouncing off the 200 Day Moving Average which is a great sign of support.

Trade Details: Taking advantage of share support.

Sell to open the July 16, $130 puts on APPL for $2.95 or better using a limit order. You are paid 2.3% upfront for agreeing to buy shares at a slight discount to yesterdays closing price.

At expiration if shares are above $130: put sellers keep the cash for a 26.7% annualized return.

At expiration if shares are below $130: put sellers will buy shares at a 2.2% discount and you can begin selling covered calls for additional income.

For protection use a stop loss at $108. Shares will be below the 200 DMA and below recent consolidation support.

Divider provided by barge

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.

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