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How to make another 2% from your Apple shares

For those who want to double the money they're making from Apple shares, an attractive opportunity presents itself, according to options guru Dennis Davitt of Harvest Volatility Management.

The tech giant, which opened Friday's trading at $112.46, already throws off a 2 percent dividend yield. To make another 2 percent on the name, traders could sell the 120-strike call option expiring in January for $2.68.

To take a step back, a call represents the right to buy a stock for a given price within a given time period. By selling a call, then, one is granting someone else this right. In this case, one is giving the buyer of this call the right to buy Apple shares for $120 — something they will only reasonably do if Apple shares are trading above that level come January expiration.

Normally, selling a call is a risky play. For instance, if Apple shares were to double in price, the seller of this call would still be on the hook to hand over Apple shares for $120 a pop. This means they would see a loss of more than $100, all in the service of trying to make $2.68.

But in this case, since one already owns the stock, the gains made on the actual shares would make up for the losses suffered on the call. The only risk, in this case, is that one will not get to participate on the upside if Apple does rise above $120.

For Davitt, this is an appealing trade-off.

"You take in an extra 2 percent to hold a pretty stable stock," he pointed out Thursday on CNBC's "Trading Nation."

Indeed, the options market implies just a 30 percent chance that the stock will be above $120 come January expiration — meaning that 7 out of 10 times, one will reap the rewards of selling the call without missing out on any gains whatsoever.

Further, Davitt doesn't think there's a big risk of the shares sliding, given its substantial dividend yield, low valuation, substantial cash hoard, and the stability of its business.

For Max Wolff of Manhattan Venture Partners, owning Apple shares through earnings is a good play. "Buy the rumor, sell the fact — that's a consistent way to make money on Apple," he said.

Indeed, this could be another benefit of selling the call option on Apple: It instills investing discipline by setting a predetermined level at which to sell.

In this case, if the stock indeed rises above $120, one will make $10.79 in less than four months' time, for a sweet 9.6 percent return — thus allowing one to happily forget about Apple and move on to the next trade.


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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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