You may have been seeing a lot about “share buybacks” in the news lately – especially after Apple, Inc. (AAPL) announced a new $100 billion stock repurchasing program.
Now I know that “buybacks” may not sound like the most exciting thing in the news right now – but the truth is, they’re extremely important for the overall market.
In fact, they’re even more important when the major indices are in the red – like we saw on Tuesday when the Dow plummeted nearly 200 points.
But that’s where a buyback comes in…
Not only could it be the catalyst for the start of a new rally higher – it could open the door to a new, lucrative trading opportunities –
Like this one…
Three Reasons Why Share Buybacks are Good for Your Bottom Dollar
The Amephenol Corporation (APH) is an electronic and fiber optic manufacturing company in Connecticut. Late last month, on April 25, the company released their earnings and beat all expectations, including earnings per share and reported revenue.
But more importantly, they recently announced their plan to execute a $2 billion share buyback program that will equal to 7.9% of their stock.
Now buybacks are always a sign of good things to come. You see, they tell investors that the company has confidence in its growth prospects – and it also shows confidence in the operations, sales and revenue producing potential over a longer haul. And this make the company much more appealing to investors as you know the stock has the capability for continuing to climb in price.
Here are the top three reasons why share buybacks are good for the stock market – and your pockets:
- To prove to investors that the company is confident and expecting growth in the near future.
- It’s a way to also pay off investors and reducing the overall cost of capital for the company.
- The company believes the shares are undervalued so they can pick them up at this deemed suppressed price and when the price increase issue back at the higher value.
How to Bank 200% on APH’s Buyback
Now, APH does not have Long-Term Equity Anticipation options (LEAPs, for short) – and the farthest out option expiration is October 2018.
But here’s a trade idea for you to consider…
October 19, 2018 $85 Call
Now, the current price is $6.40 – which means your total cost would be $640 (remember, one contract controls the rights to 100 shares). That’s why I always say – flip stocks – don’t buy them outright. To give you an idea, buying 100 shares of APH, as of the time I’m writing, would cost you $8,828 – or 1,279.37%
more than buying one single options contract.
Pretty big difference…
The ideal setup for this trade would be to close half of your position when your trade doubles in value and close the remaining half for another double. That’s a 200% profit on one trade – not too shabby.
Of course, this is a trade consideration only – so you’ll want to speak with your broker to determine the most suitable profit plan for your needs.
Now if you’re a buy-and-hold investor, then you’ve got nothing to worry about in terms of duration or expiration….
The thing is, the amount of money and time you need to build your wealth buying and holding stocks – especially in volatile markets – depends on your own lifestyle and desires. There’s no “magic number” to get to.
Now I’m not disputing that you can make money over the long haul…
But my friend and colleague, who just so happens to be the #1 stock trader at Money Morning, just dropped a two-ton bomb on the financial industry, one that I had to see to believe. It’s a new way to collect THOUSANDS of dollars each week by clicking a single button on your computer or smartphone, and without touching a single stock (or stock option).
And like I said, in today’s chaotic market, this is the PERFECT way to make insane money each and every week. I’m honestly jealous I didn’t come up with it myself… Click here to see for yourself.
To your continued success…
Tom Gentile
America’s #1 Pattern Trader
