How to play Apple earnings

Apple reports Thursday.

I’m getting loads of questions about what to do and how to “play it.”

That’s logical, but it dramatically highlights the short-term “casinofication” of markets we talk about frequently.

Let’s cut right to the chase.

• Critics say that Apple is expensive

• Analysts are worried about falling iPhone sales

• Punters fear Chinese sales

• Newsies say it’s already up 50%+ this year

The implication, of course, is that anybody dumb enough to buy it will get what they deserve when prices fall.

Really??!!

People have argued with me for years that Apple can’t get bigger, more valuable, or more important, yet that’s exactly what the company’s done. And, odds are, will continue to do.

Apple has returned a jaw-dropping 63,731% over the past 20 years and 1,297% over the past 10 years. It’s up another 51.64% this year alone.

Apple…

1. makes $158B a day or nearly $2,000 a second

2. consumers around the world cannot buy enough of what it makes

3. is one of the most widely held companies in the world, which means that every institution, fund, and major player likely owns, hedges, or trades it in some form because they must

When you get right down to it, the real reason people grouse about Apple is because they’ve a) missed the boat, and b) have no idea what to do next.

This isn’t rocket science.

These days, it’s not enough to know what to buy, you’ve also got to know how if you are serious about building, protecting, and growing your wealth.

Here are 5 simple, profit-boosting, risk-reducing tactics any investor can use immediately no matter how you “feel” about Apple.

#1: Averaging In

Gradually purchasing shares over time at different price levels reduces the impact of short-term market fluctuations on your overall investment portfolio while also allowing you to harness the volatility others fear.

This is ideal for nervous nellies or those investors who simply want to build, protect, and grow their wealth over time.

My favourite versions are Dollar Cost Averaging and its lesser-known cousin, Value Cost Averaging, BTW.

#2: Reinvesting

People tell me all the time whenever I bring this up, “Duh,” as if reinvesting is a foregone conclusion. However, I submit that if more people really did it and it really were a foregone conclusion, then there wouldn’t be so much complaining.

Reinvesting dividends and capital gains helps you tap into exponential growth—especially with a company like Apple because it means your returns generate still more returns over time.

This, in turn, leads to a snowball effect that can significantly enhance long-term gains, sidestep volatility that clobbers other investors, AND accelerate wealth creation.

#3: Using Impossibly Low LowBall Orders

One of my favorite tactics for adding shares while ensuring the discipline needed to do so effectively is something I call the “LowBall Order.”

LowBall Orders are super powerful because they’re a line in the proverbial sand set at some percentage or dollar amount below current market conditions. Effectively, you’re creating your own “sale” if you use ‘em correctly and regularly.

How low, or how much below current prices, is entirely up to you... but my experience is that setting Lowball Orders far enough “down” that your friends scratch their heads in amazement or tell you, “That’ll never happen,” is usually about right. You’d be surprised how many times the markets will come to you when you least expect ‘em to.

Think Apple at $156–$166, a 15–20% discount.

#4: Selling Options

There are two variations that can dramatically accelerate the wealth-building process: Selling Cash-Secured Puts and Selling Covered Calls.

People often think about these strategies in terms of income because that’s how most options seminars teach ‘em, but that’s not what I’m talking about.

I am talking about Selling Cash-Secured Puts as a way of getting paid to shop for stocks you want to buy and Selling Covered Calls as a means of locking in profits on stocks you already own or want to own more of.

Both strategies can help lower your cost basis while offering additional income that can help reduce overall risk, especially when used to augment core positions in stocks like Apple.

#5: Buying Put Options

This is a more sophisticated tactic and decidedly more trading oriented, but one that can work nicely if you have the chops (and the risk tolerance).

In this instance, you could buy put options anytime you think Apple has reached a short-term price peak (as is the case now, ahead of earnings), and you want to profit from the possibility of a short-term price decline.

If Apple’s price falls before the put options expire, the value of your put options will increase. You’ll have to contend with time decay and a few other variables as part of the process, but those are nuances we’ll save for another time.

At that point, you can sell your puts for a profit, then use the proceeds to purchase additional shares of Apple. Or simply pocket your profits.

You could also use bearish options spreads, butterflies, and other options-related strategies to accomplish the same thing, but that’s also a discussion we’ll save for another time.

So let’s review.

Apple’s trading at $196.03 as I type, and the company reports Thursday.

I don’t really care which way shares go from here.

I have a plan either way.

You?

Now, let’s get out there and MAKE it a great day!

Keith