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AAPL Options on CNBC

The tagline on CNBC’s Options Action show on Friday was something like Get Paid to Buy Apple Stock. Sound too good to be true? Take a look:

The show outlined a plan where you could buy an aapl call option that expires in December for about $2500 and simultaneously sell two call option contracts for about $2600. Specifically, the contracts looked like this at the close on Friday:

Buy this for $2520 ($25.20×100):
Strike Symbol Last Chg Bid Ask
380.00 AAPL111217C00380000 25.20 3.60 25.40 25.80

Sell two of these for $2690($26.90×100):
Strike Symbol Last Chg Bid Ask
410.00 AAPL111217C00410000 13.45 1.35 13.15 13.65

You immediately pocket the $100 and hope Apple climbs – but not too far. Why ?

Because the two contracts you sell in their transaction are for a strike price of $410. The one you buy is for a strike price of $380. So the contract you bought will gain value as it rises above $380, but your gains will be capped when the underlying stock price reaches $410. And there’s more:

You sold TWO contracts. For each of those sales you’re obligated to sell 100 shares for $410 each if the contract is executed. That’s 200 shares. The good news is that 100 of those shares are provided by the call option you bought. Hopefully you were holding 100 shares of aapl outright when you entered into this transaction so you can deliver the other 100 shares. They do mention on the show that this example is for current stock-holders looking to tweak their position. If you find a way to exit the position by buying back your call you can keep your shares. But keep in mind the price of the contracts you sold will rise with the underlying shares.

Like they say on the show, you make your profit above the strike price of the option you bought, but your profits are capped because of the contract you sold. Essentially, you want aapl to rise to $410 but no further. As aapl goes past $410 the 100 shares you held outright aren’t going for the ride – because the option you sold called them away.

You can watch the show here, they start talking about this some time past the 8 minute mark. So – what about their claim? Are you getting paid to buy Apple? Maybe you could look at it that way, but the caveats are quite substantial.

Regardless, I have little interest in this play at this time of year. Apple has the potential to make a decent run between now and the end of the calendar year. Look at what’s coming up: new iPhone launch, iOS5, iCloud, Earnings in October, Christmas shoppers waiting in line, China… The last thing I want right now is a cap on my holdings. It’s not Apple that might hurt the share price between now and January. It’s everything else in the economy that I’m worried about.

Past performance is no indication of future results, but take a look at the last two years and how aapl has done between September and January. Then add a reality check by looking at 2008.



I saw on Daring Fireball today that John Gruber didn’t know, to my surprise, that David Pogue isn’t an employee of The New York Times.
I only knew about Pogue’s status because of an interview I heard two years ago, when Leo Laporte had him on This Week in Tech.  I should probably listen to it again, but I’d be forced to count how many times Pogue says, “dude.” It was interesting to listen to, especially as Pogue pointed out repeatedly and defensively that he’s not a “journalist.” He’s a columnist.  I can say he was defensive, I’m a blogger.
What Pogue calls himself means nothing to me.  But I’d still appreciate it if he revealed his conflicts of interest when he’s reviewing a product.  For The New York Times !
Pogue makes money writing books about Apple software. He builds a bigger name for himself by getting exclusive access to unreleased Apple products, along with other non-journalists like Walt Mossberg. If he starts slamming Apple products or grading them on a tougher curve he can kiss his access to Steve Jobs goodbye. In the interview he more or less admits he’s not going to ask the tough questions because he’ll lose access. And because it’s not his job. (He’s not a journalist.)
Daring Fireball linked to a July 6 post (that I missed) by the New York Times readers’ representative declaring that Pogue’s appearances as a representative of the publication will be curbed.

Arthur S. Brisbane:  “…my inquiry into it has led to a Times internal review and, as a consequence, Pogue is barred from making any more speeches like this one to public relations professionals.”

I don’t expect much to come of this.  Pogue is an extremely popular piece of New York Times content.  Personally, I find his videos over the top and not as funny or informative as his commenters find them.  Fans jumped to his defense in the July 6 comment thread, with excuses similar to those Pogue made on Leo’s show.  Which was that essentially all tech reporters are cozy with the tech companies.  If Mossberg can collect big paydays for speaking why shouldn’t Pogue?

We all know there will always be certain reporters who get special access.  According to the NYTPicker piece on the subject Pogue actually claims he’s pushed the New York Times to reveal his other endeavors, but failed.

The average New York Times reader and iPad buyer could care less about any of this.  Granted, Pogue isn’t the only one up to these kinds of shenanigans.  But he’s high-profile and with that comes the heat.  Am I turning to Pogue for truth in technology reporting?  No way.  I read him from time to time – but only so I know what everyone else is reading.

Leo Laporte’s interview with Pogue, from the TWiT network.  1:39:20h into the show.

David Pogue’s disclosure, undated, at the New York Times: A Note About Ethics and Disclosure.  You have to click through to his profile to find it, it’s not listed within his columns.

Apple to Report 2011 Q3 on July 19

Apple is set to report earnings for the third quarter on July 19.  Longs hope the release will start the run toward $450.  Expect Philip Elmer-DeWitt to keep us busy between now and then with predictions about Andy Zaky’s predictions.   And expect Scott Moritz to twist every scrap of news into Apple’s doom.

Also of interest, I hadn’t seen or heard anything about this iPhone-formatted page for Apple Investors.  Try on your iPhone. How long has that been around?

Why is FaceTime 99 Cents on a Mac ?

I was surprised to see the announcement today that Apple is charging for FaceTime on the Mac.  iChat has always been part of the OS.  And in a way, so is FaceTime as it’s included with the new MacBooks announced today.

So why charge?

The only logical explanation I see is an App Store try-out for Mac users.   There have to be plenty of Mac users who don’t own iOS devices.  Admittedly I have no idea how many, but a significant number.  Many of these users have probably never tried the App Store and Apple wants them to experience it – thinking it will lead to additional sales.

Those who own iOS devices may not have tried the Mac App Store yet either.  I know I haven’t bought anything.  In fact, I think I opened it once to take a look, and that was it.

I suppose they could have added it to the App Store and made it free.  Or is this some kind of Sarbanes Oxley thing??  Who knows?

Mystery App for iLife: iPad MediaBook Builder

mockupRumors have been circulating: The new 64-bit iLife ’11 will ship with a “Mystery App” – and without iDVD.   Could these two rumored details be related?

Here’s what I expect:  An iLife application for creating rich iPad “MediaBooks” – virtual photobook presentations you swipe your way through.  A page contains some combination of photos, videos, maps, and text.  Music tracks are assigned to a range of pages.  The layout might be very similar to the books you create and purchase as printed copies through iPhoto.  But they’re multimedia, instant and free. Click the photo above for an ultracrude-mockup.

The format would replace what many people would have done with iDVD.  Until now, iDVD has been the way to distribute and present (minimally) interactive content.  But DVD menus aren’t the most inviting interface.  Given a choice between navigating a DVD or flicking through pages on an iPad which do you think Steve Jobs would pick?

The flipbook model better reflects Apple’s direction.  Does Jobs want you gathering people around the TV to watch a DVD, or would he prefer passing an iPad around – immersing people in a mediabook of your summer?  The same gestures used in the iPad’s native photo app are a crowd-pleaser – pinching and expanding a virtual pile of photos. Expand a video to play full screen. View included maps in the Maps application. It’s an application that sells iPads.

Throw in some slick page turn animations and the people still using iDVD will forget about it.  Best of all – it’s a reason for iPad-owning Windows users to consider a Mac.

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