Well, Apple (AAPL) did it. They managed to create hype of epic proportions with the new iPhone. It is almost unbelievable that they were able to hypnotize people into waiting in line for a product that was unproven which admittedly has less functionality than many of its competitors.

In the spirit of full disclosure, let me tell you that it is now 45 minutes past Zulu (6:45) on Friday and I have no idea what the reports are from initial iPhone owners. Since I am on another international flight, I am writing this blind to what is going on at ground level. The truth is, riots could have broken out and countries could have gone to war over the iPhone and I am oblivious to it. Here is where it gets weird(er) though: I am asking the flight crew to see if the Captain can get me any information available about what is going on. I figured that on other flights they provide sports scores to the passengers, why not iPhone sales statistics? No go, never happened.

Here is my take on the entire iPhone hysteria: The magic of owning this device is purely about the look and style. I was convinced of this before today, but on my way to Moscow I read a few interesting articles and interviews about the iPhone. It was striking that the underlying theme from all I read was the simple fact that it is not about the technical benefits. No No No!!! Rather, it is all about how it looks.

Face it, some men have trophy wives, some women have 10 carat diamonds they flaunt, others people drive Aston Martins. The iPhone draws in those that want that eye-candy appeal. They want to gain the status of owing it and the want to be a part of the buzz. It is simply lust. Wild, hot, sweat and juicy. To the Apple fanatic it is a 4 or 8 giga-byte climax in a box.

The mystery surrounding the functionality has also helped to make it even more of a must-have. If for nothing else than to provide the answers to the countless iPhone mystery. The problem is that sometimes after a steamy and torrid night of “interaction”, reality hits and the emotion turns to regret.

Friday night has the makings of a spontaneous and sweltering love affair for the millions of iPhone virgins, who are now deeply satisfied. Millions of virtual cigarettes should be lit up after the evening as buyers leave stores satisfied with their new toy.

BUT, what about the many problems and technological shortfalls of this device? What shortfallshow about these:

1) Skimpy memory (4 or 8 Gigabyte maximum)
2) Inability to upgrade memory
3) Battery life of 8hours maximum
a. I bet it is more like 4 hours talk-time, further reduced by video and other media usage
b. Battery not removable
4) Slow network as it is on the slower data network rather than the 3G AT&T offers
5) 6 Step process to make a phone call
6) No keyboard/keypad
a. Learning curve may be steep and frustrating
7) Scratch proof? That is what they are saying about this. Apple also said the same thing about iPods, which was not true
8) Initial lack of integration with many software products
9) 2 mega-pixel camera NiceNOT!
a. That is technology of 2001, not 2007
10) NO Wifi connectivity
11) youtube integration to watch movies.
a. Nice idea, but with slow network it may take HOURS to download even a short film/video
12) Steep cost for a phone
a. $499 or $599 and contract requirement from AT&T
13) Mandatory firmware upgrade prior to initial startup of phone
a. Security flaws already?
14) What happens when this thing is dropped?
a. Aside from the hysterical owner crying out of control

The obvious question that really needs to be asked is why did Apple wait until 6pm on a Friday to begin sales? It is only possible, as they wanted to wait until the stock market closed and have the weekend to manage the firestorm of potential problems that will be reported on. I am sure that the PR team will be out in full force 24/7 this weekend.

Unless there is something more the Apple is holding back on (which is very possible) this may be a classic example of buy the rumor, sell the news. The investment play is a gob of options in the form of puts. Yes puts!

There is surely the opportunity for Apple shares to open up sharply higher on Monday, but there is also the real possibility that even with the amazing hype and a great weekend of sales that the stock could have its own form of “morning after syndrome”.

For the contrarian investor looking for a speculative trade, the solution is top buy options, out of the money looking for a settling of the froth on Monday. CLICK HERE for how to best utilizes options to profit from this theory. (as far fetched as it may be)

In summary: Even thought this is fighting the tape, I cannot come up with any good reason that over the short term, Apple shares will benefit. Hasn‘t it all been priced into the stock already?

* Horowitz clients are Short and Long Apple Shares as of this post