Apple’s stock rose by 6% on Friday after the company announced a huge buyback program following better-than-expected earnings in the second quarter.
On Thursday, Apple revealed that it plans to buy back $110 billion worth of its own shares, which is 22% more than last year’s buyback plan of $90 billion. This move is the biggest share buyback in US history.
I’ll say it again: This is the biggest share buyback in US history.
The company’s revenue for the three months ending on March 30 was $90.8 billion, slightly surpassing analysts’ expectations of $90.3 billion. This company averages $1B a day. EACH DAY.
Despite facing tough competition, especially in China’s smartphone market, Apple’s earnings report brought relief to investors. Last month, Samsung overtook Apple as the world’s top phone maker, according to IDC.
Apple’s stock surged by 7% in after-hours trading following the earnings report, closing at $183.36 on Friday. While the company didn’t provide a formal forecast for the rest of the fiscal year, they expect double-digit growth in iPad sales and continued expansion in their Services division, which includes subscriptions and Apple Pay.
However, Apple reported a 2% decrease in net income, largely due to a 10% decline in iPhone sales. This drop was anticipated, especially for the newer iPhone 15 Pro and Pro Max models released in September.
CEO Tim Cook explained that this decline was partly due to tough comparisons with the previous year when Apple benefited from $5 billion in delayed iPhone 14 sales caused by supply chain disruptions due to COVID-19.
Sales of other Apple products, like the Apple Watch and AirPods, also decreased by 10% year-over-year. However, Mac sales increased by 4%, attributed to the new MacBook Air models featuring upgraded M3 chips.
How does CFU Trade AAPL?
We use various strategies to extract profit from this amazing company. Recently we have been using Call Debit Spreads.
Call debit spreads profit from a bullish outlook on a particular stock while limiting their potential losses. If you’re new to options trading and interested in exploring this strategy, here’s a quick guide to help you get started.
Understanding Call Debit Spreads
A call debit spread involves buying one call option while simultaneously selling another call option with a higher strike price. Both options have the same expiration date. This strategy is known as a “debit” spread because the trader pays a net debit to establish the position.
How It Works
Let’s break down the components of a call debit spread:
- Buying a Call Option: The trader purchases a call option on the underlying stock, which gives them the right to buy shares at the strike price before the expiration date.
- Selling a Call Option: Simultaneously, the trader sells a call option with a higher strike price. This generates a premium, helping to offset the cost of buying the first call option.
Risk and Reward
The key benefit of a call debit spread is its limited risk and potential for a defined reward. Here’s how it works:
- Limited Risk: The maximum potential loss is capped at the net debit paid to enter the trade. This occurs if the stock price is below the lower strike price at expiration.
- Limited Reward: The maximum profit is limited to the difference between the strike prices minus the net debit paid. This happens if the stock price is above the higher strike price at expiration.
Example Trade
Suppose AAPL is trading at $175 per share, and you’re bullish on its prospects. You decide to enter a call debit spread as follows:
- BTO AAPL 051724 $175
- STO AAPL 051524 $185
Limit Debit 3.50
In this scenario:
- Net Debit Paid = $3.50
- Maximum Potential Loss = $3.50
- Maximum Potential Profit = $6.50
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Stephen
