Spread Betting Apple Stock | Trading Apple Shares
There can be few people in this current age who have not heard of Apple (AAPL:NDQ), formerly called Apple Computer. For years it has been at the forefront of innovation in the electronic industry, creating products that no one knew they wanted before they saw them and became rabid fans. Today, Apple can boast to be the world’s most valuable company at about a valuation of $571.67bn. Many put this wealth down to the talent of Steve Jobs, who rejoined the company in 1997 following some years away, and has steered the company in the last decade. Since his unfortunate death, the jury is still out on how the new Apple will develop, but it is plain that Job’s influence will continue for a few years, developing his existing concepts.
Does Apple have a future? Or are its best days over?
Apple Inc. (NASDAQ:AAPL), to use its current name, is an American company quoted on the US exchanges, and has branched out significantly from the earlier Apple Computer. Apple started with the Apple II, first assembled in Steve Jobs garage, and went through an Apple Liza (who remembers that?) before the Macintosh line of computers which have continued to enjoy popularity, despite competing with virtually every other computer manufacturer using the IBM standard. It has long been said that the Macintosh computer is superior for certain applications, and it has been adopted, for instance, by the newspaper industry for layout and composition uses.
Apple transformed itself from being a computer company to a consumer electronics company. Apart from updates to the Macintosh, there are a host of other products which Apple invented, and virtually created the market for; devices such as the iPod, the iPhone, and the iPad, not to mention applications such as iTunes. Apple shares generally move upwards, and have recently broken the $500 barrier, although it is not certain whether this will stick. In fact Apple has increased in value so significantly that it now represents 1/6 of the NASDAQ 100 share index.
Just think for a moment.
The release of the iOS 7 operating system was met with much fanfare and included a refreshed design that favours bright colours. The new system also came with several handy new features and applications and now there is also a cheaper version of the famous iPhone: the iPhone 5C model which comes in a handful of bright colour casings.
Here is a weekly chart of Apple’s share price: –
Apple’s stock has a great and loyal army of followers with many of its shareholders also being in love with the company’s products. And this is understandable; for someone who had invested $10,000 in Apple stock when it was trading at the $100 per share level, his $1,000 investment would now be worth $40,000. You can see how Steve Job’s death caused a momentary dip in price at the beginning of October, but growth has continued, with minor retracements coinciding with occasional bad publicity, such as an iPhone issue which affected the antenna if held in a certain way.
From a spread betting perspective, you can rely on technical analysis to clue you in on the market sympathy, and give you an indication of when the occasional retracements will occur. Stock prices rarely continue in one direction indefinitely, even though it is a popular strategy to follow a continuing trend, assuming it will keep on, as trends can last for some time. The steadiness of Apple’s trends suggest that it may be worthwhile taking out futures style bets during one of the price surges, intending to hold them for several months.
As there can be occasional hiccoughs in the rising price, you should take care to have an established stop loss position any time that you have an open bet. In order to make a consistent profit at spread betting, you must ensure that you do not take any major losses to your capital. This is far more important than identifying the possible maximum profit moves.
The years of very strong trading mean that the market has very high expectations for future growth and the launch of the new iPhone 5 and iPad mini should help continue the growth story. But after years of fantastic growth the company is reaching maturity and slowing the growth trajectory (from as much as 45% for the last year to 27% for the most recent quarter). Apple is also pushing more into more niche sectors of the market which increases the risk. In particular, beware, that should Apple Inc (NASDAQ:AAPL) miss Wall Street forecasts the losses can be quite large. Just to put this into perspective a modest 2% fall in Apple shares is equivalent to around 1200 points so a spread better with just a £1 per point long position in the stock would be nursing a £1200 loss. That’s the risk one is exposed to when trading high priced USA stocks valued at hundreds of dollars per share.
Just think for a moment. On July 9, 1982, you could acquire one single share of Apple stock for $1.64. Today, you would have ended up with 56 shares worth about $127 each. $7,112 worth of stock on your $1.64 investment. Can Apple keep growing at this rate? The odds are very much against Apple having a market cap of $332,550,000,000,000 (three hundred thirty two trillion, five hundred fifty billion dollars) in 2047.
Spread Betting on Apple (AAPL)
Apple Inc. is a US based company, and has just broken the $500 per share barrier. As such, IG Index have a minimum 0.24 bet (24 pence) as opposed to the usual 50p or £1, simply because the numbers you are betting on are so large. The current rolling daily price is 50,208 – 50,216. If you think that the stock is due for a retracement, you might want to place a sell bet at, say, 30 pence per point.
Say you are right, and the price could not stay above $500 at the moment. It is an important psychological level, and may have tempted several stockholders to take their profits, which action might push the price back down. Perhaps the level dropped to 48,309 – 48,317, and you decide to close your bet and get your winnings. You can work out how much quite easily.
- Your short bet was placed at 50,208
- Your bet closed at 48,317
- The difference between these is 50,208 less 48,317, which is 1891.
- Your stake was £.30 per point
- Therefore you won 1891 times £.30
- This adds up to £567.30.
Having broken through the $500 psychological barrier, you might find that the share price continues to rise instead of dropping back, and be faced with closing your bet for a loss to avoid losing more. Perhaps the price goes up to 50,291 – 50,299 before you close your bet.
- Your short bet was placed at 50,208
- Your bet closed at 50,299
- The difference between these is 50,299 less 50,208, which is 91.
- Your stake was £.30 per point
- Therefore you lost 91 times £.30
- This adds up to £27.30.
As an alternative, you may look to the future with Apple and decide to take a futures based bet, intending to hold onto it for a few months if it goes in the right direction. The current quote for seven months out is 50,415 – 50,448. If you think that Apple will increase in value over the next few months, then you can place a long bet at 50,448, staking perhaps £.75 per point.
Assuming the price does go up to 51,027 – 51,042, you can close your long bet and take your profit. Here’s the calculation: –
- You opened your long bet at 50,448
- It closed at 51,027
- That means you gained 51,027 less 50,448 points, or 579 points
- You staked £.75 per point
- That means you won £434.25
Once again, you must consider the other outcome, where your bet loses, and make sure that you can cope with the loss without losing too much of your trading funds. Say the price went down to 50,306 – 50,336, and you didn’t see any hope of your bet winning, you might close your bet and accept your loss. In this case: –
- You opened your long bet at 50,448
- It closed at 50,306
- That means you lost 50,448 less 50,306, or 142 points
- You staked £.75 per point
- That means you lost £106.50.
One word of caution: Everyone and his dog seems to own Apple shares these days, irrespective of what strategy they are following, be it growth, momentum, income or whatever. All it takes is one or two quarters when Apple stock doesn’t fulfill people’s expectations and investors will start to abandon the stock en masse and it could easily drop by some 15%.
Update January 2013, Trader Comment: And so it happened. The minor crash i.e. AAPL down almost 10% in the after-hours trading after results… Amazing how quickly the mighty can fall on Wall Street. AAPL was by far the most loved stock in the world this time last year, so much sentiment in the price – but nothing can continue growing at Apple’s prior rates forever even if the earnings multiple wasn’t outrageous. The question turns to, “What will Apple be doing 7-10 years from now?”, considering iPhones barely existed five years ago and an iPad hadn’t even been thought of, and that even iPods hadn’t come out five years before that, is there a risk that Apple’s earnings can tank from here? It’s just so hard to say, knowing how rapidly the technology business can change. Analysts’ earnings estimates and apple stock price targets have been cut and it remains to be seen how Apple will fend off increasing competition from Google (GOOG:NDQ) and Amazon (AMZN:NDQ) in tablets and particularly Samsung (005935:KS).
Update January 2015. Apple is now a consumers electronics company that keeps reporting healthy profits. And Wall Street only cares about income/revenue. Apple has experienced explosive revenue growth over the last 5 years with annual sales having increased from $65 billion in 2010 to over $156 billion in 2012.
The Coolest Company and the Coolest Products
So how does Apple do it, well for me it’s by making cool products that people love. Apple has always positioned itself as a “cool” company, aligning itself more to your local neighbourhood coffee shop than your local Starbucks (aka Microsoft). It’s funny really when you think about it, Apple is just as interested in making money, increasing its share price and gobbling up market share as Microsoft, Google or IBM but it somehow manages to do all that without getting on people’s nerves. Hackers don’t create viruses for Macs, now that might have something to do with that fact that most of them probably use Macs! But still, you get the picture, when people think Apple they think of a company as far removed from a Microsoft as can be.
A lot of Apple’s image has to do with how practical, intuitive and user friendly it’s products are. It blew the MP3 market wide open which it launched the first iPods. Rather than sit on its laurels it continued to innovate and soon brought us the iTouch and most recently the game changing iPhone. So what’s next?
iPhone. For me this device is without doubt the jewel in the Apple crown. It’s got off to a phenomenal start and I think it will continue to gain market share over the coming years. It truly is an exceptional Phone, Camera, MP3 player, PDA, Gaming Device, Web Brower and Personal Organiser all in one. For anyone who hasn’t tried one out yet I recommend calling into your local O2 store and giving it a whirl. Not that you’ll be able to buy one there and then, nope, unless you are very lucky they’ll be all sold out and you’ll have to try again later when the “next batch of phones are due in”. If ever you wanted an indicator as to what Apple’s Q4 results will be like there it is. Apple literally can’t manufacture enough iPhones to keep up with the demand. Out of curiosity I called into several Apple stores in different cities in the US during my recent travels and all were jammed out the door with people.
When it comes to results and guidance Apple is one of the easiest stocks out there to read. Every quarter as part of announcing exceptional results that blow away what Wall Street analysts were expecting Apple guides conservatively for the upcoming quarter. This has in the past (although not with it’s most recent quarterly results) lead to an initial sell-off post results as for some bizarre reason analysts appeared to be disappointed with guidance…I’m always left asking myself why? Do these analysts not know this is Apple? This is what Apple does, it takes what the Street is looking for, guides 10-20 cents per share lower and then proceeds to smash its own and the Streets expectations 3 months later. This has being the Apple way for many years now and provided a pretty decent trading strategy going into results. Wait for the results to be released, let the next days sell-off come the next day and once a base was formed during the day buy in and ride the stock higher over the coming days and weeks as the market forgot about the conservative guidance and instead focused on the excellent set of results just posted.
For those that missed it don’t worry, the market is fairly toppy these days and with that there is quite a bit of nervousness out there. I’d expect there will be more red days like the 2013 washout and these are the days that you should look to get long solid, cash rich companies like Apple, IBM or CAT. As discussed many times in the past the market likes to work to certain target prices.
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