Apple Inc. (NASDAQ:AAPL), still riding the post-earnings wave, looks poised to reclaim old territory north of $110. Formerly bearish-leaning analysts on Wall Street have come around, and technical developments thanks to a continued rise in AAPL stock have bolstered the sentiment backdrop for Apple considerably.
Click to Enlarge But speculative options traders aren’t buying into the rally just yet.
Technically speaking, Apple stock has been in rebound mode for the past month. Shares are up more than 12% since the beginning of July, drawing AAPL’s 10-day and 200-day moving averages into a bullish cross. Shares gapped north of psychological resistance at $100 immediately following earnings, and follow-through buying has pushed AAPL stock north of technical resistance at $105.
Furthermore, Apple’s rally into the weekend pushed the shares north of significant call open interest accumulations at the $106 and $107 strikes, leaving little in the way of overhead hurdles until Apple stock hits $110.
Turning to the sentiment backdrop, despite moaning about Apple Watch and iPhone sales, Wall Street analysts remain extremely bullish on the shares. In fact, Zacks data indicates that 28 of the 32 analysts following AAPL stock rate it a “buy” or better, with only two “sell” ratings to be found.
That said, there is room for improvement, as the 12-month consensus price target of $124.06 represents a modest 15.4% premium to AAPL’s close on Friday.
Outside of Wall Street, options traders have grown downright bearish over the short-term. While the August/September put/call open interest ratio for Apple stock comes in at an unusually high 0.85, the August ratio has ballooned to a perch of 1.49, with puts easily outnumbering calls among options set to expire this month.
As for August implieds, the monthly Aug. 19 series is pricing in a roughly 3% move for Apple stock during the next month. This places the upper bound at about $109.89, while the lower bound lies at $104.11. AAPL stock has mounting technical support near $105, while resistance lies overhead at $110.
2 Trades for AAPL Stock
AAPL Call Spread: If you’re looking to buck the trend in the options pits and join the bullish contingent in the brokerage community, then a Sept $110/$115 bull call spread has potential. At last check, this spread was offered at $1.15, or $115 per pair of contracts. Breakeven lies at $111.15, while a maximum profit of $3.85, or $385 per pair of contracts, is possible if AAPL trades at or above $115 when September options expire.
AAPL Put Sell: If you’re still not sold on the AAPL recovery, then a September $100 put could fit a neutral-to-bullish stance. At last check, this contract was bid at 57 cents, or $57 per contract. The upside to this put sell strategy is that you keep the premium as long as Apple stock closes above $100 when September options expire. The downside is that should AAPL stock trade below $100 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $100 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
