Here’s When Apple Could Give You the Biggest Profits

I’ve said before that I’m an Apple guy. I have the smartphone and laptop, among other products, and have been pleased with them for some time.

But aside from my personal fondness for Apple, there are both fundamental and technical reasons why it’s far more lucrative to take profits by December 31 than to get in and out ahead of or shortly after earnings come out.

And these are the top four:

1. The iPhone 8

For the first time in three years, Apple will be releasing a new iPhone design sometime in early September. The new design will also possibly include a fingerprint reader embedded into the display. Now this isn’t confirmed, but images of the schematics were leaked a couple days ago seem to agree with this speculation:

There is also the likelihood that it’ll include a dual lens 3D selfie camera (under the screen and invisible to the user).

And I believe that, as long as it comes to fruition, the iPhone 8 could be unlike any other smartphone in the market – which is good news for the stock (I’ll get to that in a minute).

2. Project Titan

Guess who’s listed on the California Department of Motor Vehicles website as an approved autonomous vehicle tester? That’s right – this iPhone company.

No matter how strange it may look seeing Apple listed on the website alongside companies like Tesla, Nissan, and Subaru, it’s there. In fact, they’ve already started hiring Tesla employees to work on this project, called “Project Titan.”

3. Its Services Business

Credit Suisse recently predicted that Apple’s services business (which includes the iTunes Store, the TV App Store, Apple Pay, and Apple Music) will double within the next three years.

And I agree.

As of this February, Apple’s services business accounts for 9% of revenue, at $7.2 billion. Not only is that an 18% increase from the same time last year – it’s also a quarterly record. Apple has also said that they plan on doubling the services side of the business by 2020 and believe this segment could increase its revenue to $50 billion by then.

4. The Stock – AAPL

Between Trump’s presidential victory last November and now, AAPL has been in a healthy uptrend. It’s broken new highs and is one of the leading components that’s helped the PowerShares QQQ ETF (QQQ) reach new highs as well. AAPL‘s weighting in QQQ is at around 12% right now – almost double that of Microsoft Corporation (MSFT), the second-highest weighted stock in the fund. That’s why AAPL and QQQ correlate so well.

Now as of the time of writing, AAPL is trading around $142 – a bit off from its all-time highs. I consider the $140 price to be a previous resistance point from which AAPL broke out to its most recent high of $144. Should it hold at this price, then you’re looking at the technical formation of old resistance becoming new support.  And the upcoming earnings report, which comes out after the market close on May 2, could account for most of the stock’s movement – at least in the short term.

So long as we don’t get a bad earnings surprise, you can expect to see AAPL climbing higher throughout the rest of the year. In fact, I predict it could reach $180 by the end of the year, which is exactly why you could get even bigger profits by waiting until December 31.

Now you could take the old buy-and-hold approach, of course. But as you know, I’m an options guy. I like options because you can “rent” and control 100 shares of stock instead of paying to own a single share of stock. Options are also a much more profitable way to make money on a stock – without the same risk you face when buying and holding stock.

So one of the better options strategies to consider for AAPL is a Long-Term Equity Anticipation Security (LEAP).

Take a look at the January 19, 2018 $140 Calls…

One contract of these calls at $11.15 would cost you $1,115. Remember, you’d be getting control of 100 shares of the stock at this price. But if you wanted to buy 100 shares of AAPL at $142.39, then you’re looking at a total cost of $14,139.

To profit on these calls, all you need to do is ride AAPL higher and close your position by the January expiration date. You also might’ve heard of selling calls (or shorting calls) to generate monthly income. But remember that this strategy comes with potentially unlimited risk. So talk to your financial professional before doing that.

And keep an eye out next week – I’m going to tell you exactly what you can expect from the markets next month.

Until then…

Good trading,

Tom Gentile

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