- Throughout your investing career, you’ve probably passed on stocks you liked simply because the price was too high — only to watch it go
even higher. So what you thought was expensive, in hindsight, was actually cheap.Take Amazon.com (), Apple (),
MasterCard () and Google ().
At $132, $236, $254 and $569 per share, respectively, we can understand your hesitation in rushing out to buy these stocks. But these four names are
likely headed even higher, so rather than doing nothing, why not evaluate your options.
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Apple (AAPL)
By Chris Johnson and Jon Lewis
Wouldn’t it be nice to invest in Apple () for far less than
the price of an iPod Shuffle? Especially since this technology wizard is on a huge roll that seems to bring a new all-time high every day.Now the tech world is abuzz with news that AAPL may finally be coming out with an iPhone to satisfy those millions of Verizon ()
customers who’ve been reluctant to switch to AT&T (). That huge
market should boost phone sales into the stratosphere and take the stock price with it. And don’t forget about the iPad, either.With AAPL getting more and more expensive every day, take out a long-term rental contract on the share price by buying the AAPL July 250
Calls () for around 10 bucks.
That comes out to a little more than 4% of the current share price. Who said you can’t get a bargain on an Apple?
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Google (GOOG)
By Nick Atkeson and Andrew Houghton
There is a good chance Google () will earn about $30 over the
next 12 months. At 15 times earnings, the stock would be trading at $450 rather than its current $560. How would you feel if you could be paid for
the exposure of owning Google at 15 times earnings?If you like the idea of owning Google substantially lower and being paid to assume this obligation, we recommend selling the GOOG Jan 2011
470 Puts () for about $20.
If the stock declines to $470 or lower by this coming January, you will be put the stock and take ownership. Because you collected $20 when you sold
the put, your stock cost will be $470 minus the $20 option premium for a net cost of $450.New to selling options?
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MasterCard (MA)
By Chris Johnson and Jon Lewis
The retail sector has come alive of late. Same-store sales numbers are pointing higher, showing that shoppers have found the wherewithal to continue
spending, though now more within their means instead of in excess.Besides the retail chains, a primary beneficiary of the consumer dollar are credit card companies such as MasterCard ().
Like Visa () and others, MA benefits from the transaction fees racked
up by those magnetic stripes swiping at the register.After dipping in February, MA looks ready to renew the assault on its January high. Beyond that lies plenty of room to run higher before the stock
encounters its all-time high at $320. An unwinding of high short interest should add to assist the rally.Playing the MA July 260 Calls () at
around 4% of the current share price provides both great leverage and enough time for the expected move to play out.
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Amazon.com (AMZN)
By Nick Atkeson and Andrew Houghton
We want to be long Amazon.com () via options in a manner where
we benefit almost immediately from any appreciation.We recommend buying the AMZN Jan 2012 140 Calls () for
about $25. It’s a lot easier to fork over $25 for these LEAPs than $132 for the stock. But, you can reduce the cost further by selling to
open the AMZN Jan 2012 200 Calls () for
about $7.50, making you net cost is only $17.50.To lower the cost even further, we recommend selling the AMZN Jan 2012 100 Puts () for
about $11. We are down to $6.50 to own AMZN for the next year and a half between $140 per share and $200. If the stock does close at or above $200 on
expiration, you will have made a handsome return on a $6.50 investment.Related Articles:
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