Sell Apple Put Option on Rising IPhone, Advertising Sales, Gleacher Says

Investors should sell Apple Inc. options because “the best technology company on the planet” may gain from more iPhone sales outside of the U.S. and selling ads on mobile devices including the iPad, Gleacher & Co. said.

Technology industry analyst Brian Marshall recommended selling Apple’s January 2012 $230 puts, which fell 1.2 percent to $38.39 yesterday. Selling a put, which gives the right to sell, is a bet that the stock will rise, allowing the seller to keep the premium paid. The shares gained 1.2 percent to $242.89.

“The No. 1 driver of the stock over the next 12 months will be continued penetration into the smartphone segment, especially in the international market where their penetration is much less compared with the U.S.,” Marshall said in an interview yesterday.

Marshall has a “buy” rating on Cupertino, California- based Apple and a $345 share-price forecast. The stock has retreated 11 percent from record $274.07 on June 18.

Selling the option effectively reduces the stock price to about $192 because of the premium collected, Marshall wrote in a report yesterday. If Apple closes above $230 when the options expire, the contracts will be worthless and the seller will keep the premium they collected, while a close below the strike price would force the put seller to buy the stock at $230, he said.

Apple forecast fourth-quarter sales that topped analysts’ estimates on July 20. Revenue in the three months ending in September will be about $18 billion, Apple said. Analysts had predicted sales of $17 billion. Net income leapt 78 percent and revenue reached a record in the second quarter, the first to include sales of the iPad tablet computer and the newest iPhone.

Customers bought 3.27 million iPads last quarter, indicating Chief Executive Officer Steve Jobs made headway creating a market for entertainment-friendly devices that are larger than a smartphone and less powerful than laptops. The iPad was introduced April 3.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

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