27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
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The post makes a number of compelling points that could lead to further declines in the name, which has lost more than 20 percent over the last 52 weeks.
To support its short position, Bluegrass identified six key areas where the company has weaknesses. These include leadership, capital allocation, over-dependence on one product, the declining relevance of the smartphone, Apple's closed ecosystem and the company's scale.
The first weak point that the author identifies is Apple's current leadership in the wake of Steve Job's death. The analyst wrote that Jobs "has been dead now for several years, and never created a sustainable culture that will allow the company to continue to create and develop new products/services that consumers desire." This has been an ongoing debate in the investment community for quite awhile.
The key question becomes: Can Apple continue to innovate in the absence of its visionary founder? So far, the company has not excelled in this area, although the jury is still out.
In another section of the document, Bluegrass pointed out that Apple is earning 90 percent of the profits in the smartphone market with just 20 percent of the total installed base, meaning that the company has eye-popping margins. The analyst wrote, "The company is dramatically over earning vs its peer group, and economic theory + mean reversion would make the case that this dominance will not continue indefinitely."
In the piece, Bluegrass also touches on scale, noting that in order to move the needle on the share price, Apple will "need to develop new products/services w/ correspondingly huge market opportunities."
The problem currently, according to Bluegrass Capital, is that "in every current identifiable large consumer or technology vertical (outside of smartphones), AAPL has no existing, competitive offering, while all of its peers have successful products growing rapidly."
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This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.