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How to Buy Apple Stocks at a Discount When AAPL Is Overvalued

Do you lament missing out on investing in Apple when the stock was cheaper?

Do you wish you can go back in time to buy AAPL when it was undervalued?

SlashTraders will show you a technique to buy Apple stocks at a discount, even when AAPL is overvalued.

Why Do You Want to Invest in Apple Stocks?

Let's face it, so many people own iPhones now that there's no question which is the top-selling flagship smartphone brand.

The market share of iPhones and Apple products and the association of Apple products with celebrities and influencers are huge competitive advantages, or the moat, of Apple that other competitors struggle to compete with.

Apple has as wide and as deep a castle moat as other FAANG stocks, such as Facebook, Google, Netflix and Amazon.

apple competitive advantage
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The popularity of iPhones and the Apple brand make Apple extremely competitive.

In short, Apple is a healthy and profitable company that has very low risk of bankrupcy, and Apple's market capitalisation shall continue to increase in value in the near future. Similar to TSMC and S&P 500 index ETF, SPY, AAPL is a great stock to invest in long term.

Recent Price Trend of AAPL

Since we want to hold on to value stocks for the long term, we want to analyse recent trends of AAPL to look for patterns in price changes.

We can tell from the AAPL chart in the last year, that 50-day, 100-day, 150-day and 200-day moving averages are all trending upwards. Even when Apple stock price fell a great deal around March 2020, the price recovered very quickly to the normal upward trajectory.

aapl moving averages
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All the moving averages of the recent AAPL price chart are trending upwards.

Even when the stock price fluctuated, AAPL would rebound after touching the 100-day moving average, so we can deduce the investors in general like to set stop losses around the 100-day moving average.

蘋果股價在100天平均線反彈
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Apple stock price usually rebounded after touching the 100-day moving average.

So we can be confident in the operation and financial strengths of Apple to invest in it for a long time.

How Much Is AAPL Worth?

Based on the Trefis estimates within TD Ameritrade's Analyze tab, we can see Apple's stock price's fair value is $99.92, much less than the $130 market price.

The analysis of AAPL is as follows:

  • 42.5% is based on the sales volume of iPhones
  • 23.6% is based on software service, including App store, Apple TV, Apple Music and iCloud
  • 14.9% is based on the sales volume of Apple Watches, Apple TVs and other accessories
  • 7.8% is based on the sales volume of Macs and peripherals
  • 6.3% is based on iPad sales volume
  • Apple also has $84 billion in cash
AAPL股價分析
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Breakdown of AAPL's value by Trefis.

If AAPL is only worth $100, while the current market price is $130, you might think it's too late to invest in Apple stocks.

Well, it depends how you trade.

Buy AAPL at a Discount With This Strategy

You can buy Apple stocks on the cheap if you trade in options.

We can sell a Put option at $100 to make sure we only purchase AAPL when it falls below $100.

A Put option is a contract to give the buyer the right to sell 100 units of a stock at the strike price before expiration.

By selling a Put option at $100 that expires in a month and a half, we can pocket 80 cents for the trade.

There is a 94% chance of AAPL remaining above $100 within a month and a half, so we know there is a high probability of this option expiring worthless, and we take the 80 cent profit.

aapl short put options income
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Choose a desired purchase price for our short Put options to earn an income while waiting for the AAPL price to drop.

If AAPL falls below $100 before the option expiration, the buyer of Put option can sell 100 units of stocks to us at $100, while our cost per unit of stock will be $99.20.

You'll quickly realise that you can continue to sell Put options with 45-day expiration indefinitely as long as AAPL stays high.

TimeCost per stock
45 days$99.20
90 days$98.40
135 days$97.60
180 days$96.80

If we are patient, we can keep earning income from selling Put options until the Apple stock price falls to our desired level.

Most Undervalued Quality Stocks

Apart from AAPL, we can use the Bullish Value Stocks to find a list of financially strong companies that are currently undervalued.

The list shows both Shopify and Facebook are extremely undervalued right now. They are great companies with profitable software platforms and huge competitive advantages:

  • Both companies have close to 100% Upside from their respective Fair Values.
  • Plus the Long Signal Days indicator shows both stocks bottomed out last week.
trending bullish stocks shop fb
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Both SHOP and FB are heavily undervalued stocks that we want to buy-and-hold for the long term.

So we can trade Cash Secured Put options to SHOP and FB to earn income from the premium while anticipating an upward rebound.

SHOP's market price is currently around $600, we can sell a Cash Secured Put at 0.20 delta, $495, that expires next month. The options trade will earn us an income of $19.40 per share.

sell shop cash secured put
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Sell a 0.20 delta SHOP Cash Secured Put that expires next month to receive $19.40 premium per share.

If the stock price drops, we have a chance to buy 100 shares of Shopify at $475.60, around 21% off the original price.

Meta's market price is currently around $200, a short Cash Secured Put at 0.20 delta, $175, that expires next month will receive $3.60 in premium per share.

sell fb cash secured put
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Sell a 0.20 delta FB Cash Secured Put that expires next month to receive $3.60 premium per share.

If the stock price drops, we have an opportunity to buy 100 shares of FB at $171.40, around 14% off the original price.

Both Cash Secured Put trades give us the opportunities to buy stocks at a discount. Apart from the differences in discounts, we also notice the differences in cash buying power required for the two trades.

StocksDiscount on stockCash needed
SHOP21% off$47,560
FB14% off$17,140

The SHOP trade requires $47,560 of cash to secure each Put option contract. While the FB Cash Secured Put option requires $17,140 of buying power per contract.

Now is your turn to try the strategy we discussed today. Please leave a message below if you want me to analyse other popular stocks.

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