Goldman: Here’s how to make money on Apple shares

Bonds vs. stocks

Goldman Sachs' Apple analyst is famously bullish on the tech giant, and expects to see the stock rise to $155 over the next year, for a rally of nearly 40 percent.

For those who are a bit less patient, Goldman's options research team has an alternative to buying and holding. They recommend that traders buy short-term calls, based on the perception of that analyst, Simona Jankowski, that Apple will impress in its April 25 report.

The earnings event is "likely to be a bigger-than-expected positive catalyst for shares," they wrote.

Specifically, in their Wednesday-dated report, Goldman recommends buying the 111-strike calls on Apple expiring on April 29, the Friday after earnings.

As of Thursday's close, each of those call cost $3.70 per share. (Of course, since each contract refers to 100 shares of stock, the minimum total outlay would be $370.)

This trade will be profitable so long as Apple closes on that Friday above $114.70, or 2.3 percent above Thursday's closing price. Meanwhile, the stock has tended to move 4 percent on earnings, the Goldman analysts report.

Not everyone is on board with the trade, however.

"You're very good just with the underlying stock," Eddy Elfenbein of the Crossing Wall Street blog said Thursday on CNBC's "Trading Nation."

"Goldman came out with a very specific play on earnings coming up, but remember, they see 40 percent upside in the common stock, so if you're an individual investor, that's a great way to play it," Elfenbein said.

The short-term nature of the options trade is what troubles Elfenbein. Even if the stock does beat earnings expectations, he points out, the stock won't necessarily enjoy a sustained jump higher.

More generally, "it gets hard to buy an option around earnings, because a lot of good news gets priced in to the options," Larry McDonald of ACG Analytics pointed out Thursday on "Trading Nation."


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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