How to Buy Apple Shares at an 8.9% Discount

apple-stock-priceThe questions have been rolling in since the split.
Yes, I’m talking about the 7-1 split in Apple.
Over a year ago I wrote an article about how you can get paid to buy stocks. The technique is simple, real and more importantly, a great source for driving income on a monthly basis. Moreover, it is a great way to purchase a stock at the price YOU want.
And since the split in Apple, inquisitive minds have been asking me how they can use this strategy to buy Apple at the price they want.
But before I get into the details, I just want to say there are so many advantages to using this simple strategy to buy stocks you want to own. Again, it’s a safe and reliable way to bring in income, but some investors simply use the strategy to lower the cost basis of their stock. Either way, it’s a strategy that every investor should incorporate in their quest to grow wealth.
So why aren’t more investors selling puts?
Simply put, most “experts” in the financial media think this kind of investment is too risky or complicated for the average investor. And frankly, there’s no money in it for the advisors of the world. Remember, financial planners make their money gathering assets and wrapping a nominal fee around those assets.
I can promise you, once you learn how to use this type of investment for yourself, you begin to see the whole world of finance differently. Instead of “paying” people to invest your money, you learn to get paid to invest.
The first key to selling puts safely and profitably is knowing the real risks in owning a company’s shares. We need to assure ourselves the companies on which we sell puts are fundamentally sound.
For instance, take Apple.
It’s a company that most of us feel comfortable owning for the long haul mostly due to its unwavering quest to please shareholders. Apple continually makes strides to please shareholders and it pays a decent dividend of 2%.
The stock is currently trading for roughly $92.
For example’s sake, let’s say we think the price is a little inflated. We prefer to pay $85, 7.6% less than where Apple is currently trading.
Remember when I said we want to get paid to be investors? Well, given our desire to own Apple at $85 – we can get paid. Think about that: we can get PAID to agree to buy a stock at a lower price that we prefer.
I don’t want to get into the details in this short column, but we can sell one put contract that gives us the ability to buy 100 shares of Apple at $85 a share – and collect an immediate $120.
And no matter what happens, we get to keep that $120. If Apple stays above $85 – the $120 we collected is ours. We can either use it is as a steady income stream or apply the $120 to our cost basis by $1.20 each and every time we sell puts on Apple.
But for the sake of understanding, we should examine the alternative – Apple closing below $85 by option expiration.
In that case we’d keep the $85 and be forced to buy Apple stock at $85 per share.
In this case, we’d actually own the stock for $83.80 per share – that’s the $85 strike price minus the $1.20 premium. That is 8.9% less than Apple’s current market price.
Here’s that math:
Initial income from sold put premium: $120.
Purchase 100 shares of Apple at $85: $8,500
Initial outlay: $8,380
The important thing to remember is that if the stock trades below $85 by option expiration, you become a shareholder just like everyone else … but at an 8.9% discount.
Plus, you’d get the dividend going forward of at least $47 per 100 shares, as each share pays a 47-cent annual dividend.
Another way to think about it is that you’d receive $120 on an $8,500 investment. This works out to 1.4% return each and every time you decide to sell puts.
To me, this safe 1.4% return is a superb way to collect income on arguably one the best stocks the market has to offer.
One other thing to mention … had we been put Apple stock, I probably would have recommended selling a set of calls against our new stock position. This would further boost the income on Apple … but let’s not get too far ahead, as I want to save this discussion for a later date.

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