It’s been about six weeks since Apple announced their earnings and also announced a 4 for 1 stock split starting on August 31st. It would be Apple's fifth stock split. Apple had splits of 2 for 1 in 1987, 2000, and 2005. Then it split its stock 7 for 1 in 2014.
So against my better judgement I got long Apple today via options because I wanted to get in before the split. I bought 1 option at the $500 strike price that expires in January.
It was against my better judgement because the stock price was way overextended and due for a pull back. Regarding the stock split, some say the split won't be as effective because money to Smart Money is no object and they will buy what they like regardless of price. Also more and more brokers are offering fractional shares.
Trading isn’t just about skills and psychology, but it’s also about instinct which comes from experience losing and winning and thousands of hours of chart time and studying market dynamics. So my instinct told me something about $100 Apple stock would cause additional pent up buying demand and I was willing to put a $2k speculation trade on.
My plan was to sell right before the split as I was anticipating a pull back as profit takers like me would take some off the table before getting back in. However, early last week, price hit $515 (pre-split) and feel to below $500 the next two trading days. That was the pullback I was expecting, it just came before the split. So I decided to scratch that plan to remain long after the split which took place on Monday.
Apple (AAPL) shares touched new intraday highs on Tuesday, continuing Monday’s rally amid the stock’s 4-for-1 split.
In a research note to clients, BofA analyst Wamsi Mohan highlighted possible factors behind the stock’s “unprecedented strong run of outperformance vs. the broader market.” A recent “inflow of retail investors” suggests momentum as a factor, he said.
“Our conversations with institutional investors suggest that Fear Of Missing Out (FOMO) is not yet at work given the relatively quick rerating and concern that fundamentals can't support continued upside,” he wrote.
“Analyzing the past few weeks of trading data suggests a strong inflow from retail investors, suggesting MOMO (momentum) is the strongest attributable factor,” he said, while warning that “momentum can cut both ways, especially given risk to Sep/Dec qtr estimates (particularly on high end iPhones).”
iPhone suppliers have been asked to produce 75 million devices ahead of the release of the new iPhone which is expected in October, Bloomberg reported. Apple is thinking the number might reach as high as 80 million units, which exceeds last year’s iPhone 11 release. With a 5G enabled phone, some analysts that this iPhone launch might trigger a “supercycle” where customers upgrade to the new devices.
But it's not just hardware. Apple’s services business could be worth $100 billion by itself. Mark my words, all analysts will be playing catch up and will have to revise their price targets higher. So now that I'm up over 300%, I'm going to take one contract off the table and run with the remaining contracts for a risk free trade.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
