I've been studying about half-a-dozen new "extreme income" strategies and because of my eagerness to get us into shares of AVN before the company released its Q4 results, I got my facts mixed up when I put out the particulars of the 12% Apple STRIDES trade.

For that I apologize. There is no "knock in" feature tied to the AVN trade -- although there is with something called "Reverse Convertibles," but they're another security for another day.

I recommended the 12% Apple STRIDES (AVN) Tuesday, and shares of Apple Inc. (AAPL) fell hard following its earnings release when the company provided more conservative guidance for Q2 2008 than expected.

Here's the straight skinny on the Apple STRIDES: If shares of AVN are not called before maturity, then you will be issued shares of Apple Inc. (AAPL) in lieu of cash. That's the part I got wrong.

When the shares were issued in September 2007, Apple closed at $133.33 per share. At that time, a multiplier is applied to the future conversion -- in this case the multiplier is .1875 and it works like this (using a $10,000 as an investment example):

Take that $10,000 and divide it by the issue price of AVN shares ($25 per share) and you get a figure of 400. Then multiply that 400 by the .1875 multiplier and you come up with 75 shares of Apple, which you will receive on the maturity date with a cost basis of $133.33 per share. (75 shares x $133.33 = $9,999.75). That assumes the stock isn't called by then.

Another way to look at it is that for every share of AVN, you are entitled to .1875 shares of Apple (AAPL) that was priced at $133.33 per share. Multiply $133.33 x .1875 and you come up with $25, the initial offering price of AVN when it was issued.

As long as the stock trades above the $133.33 level, shares of AVN will be called away at a higher price than the first call of $26.81 per share. There have been several Apple STRIDES issued prior to this one, and they have all been called away by Merrill as the stock rose well above their initial conversion prices.

The only way you will be issued stock on the maturity date is if Apple's shares are trading below $133.33 on that date, Sept. 4, 2009.

Based on growth forecasts for Apple, I strongly believe we will be called out well ahead of that date. Shares of Apple are under pressure at the present due to a lot of hot, leveraged money coming out of the stock, but I'm confident that we will see Apple regroup and push much higher in the months ahead.

The company is forecasting 30% top- and bottom-line growth for 2008-2009 -- below the Price Earnings Ratio of 25 the stock currently carries. This is a steep discount for the kind of growth Apple is enjoying.

Remember, too, if you get into shares of AVN in the low-$26 area, you are locking in approximately an 11.5% dividend that's paid monthly.

The bottom line here is that we're OK. Hold AVN and/or buy it if you haven't already done so.

Finally, this trade might not be for everyone. If you're not comfortable with it, you can turn to the Fresh Money list where I've provided some of our most-stable securities that are good investments right now.

I'll see you Friday with the Weekly Update.

Bryan Perry

Editor The 25% Cash Machine