Just a few days ago I shared a trade on how to short Apple Inc. (NASDAQ:AAPL) for free and delivered quick profits. Just a few weeks before that, I shared on how to go long AAPL with confidence and that also delivered quick profits.
Don’t worry if you missed both entries. Thanks to the Apple options market, there is always a trade to be taken. Today I am sharing a long-term bullish setup in AAPL stock through September with relative peace of mind.
Fundamentally, its midterm prospects are as sure a thing as you can find. Long-term I still say that Tim Cook will likely ruin the company, but for now, the giant money-making machine is on rails.
Technically, Apple has a few potential short-term pitfalls. I see lower highs knocking on a floorboard, and if that board breaks they could overshoot to the downside. In that case, AAPL could retest $138/$136 per share area.
In the larger scheme of things, it’s not a disaster, but given that it had a giant rally in a short amount of time, it could turn out to be weak hands all the way to $130 per share.
This is not a forecast but I do have to account for its potential.
Click to Enlarge Apple earnings are coming soon. The short term reaction to earnings is more gambling than investing so I am not about to risk $141 per share buying the stock into that event. Instead I will use AAPL options where I can build a healthy 15% buffer from the current price.
AAPL Stock Trade Idea
The Long AAPL Stock Bet: Sell the AAPL Sep $120 put for $1.75 per contract. This is a bullish trade that has a 90% theoretical chance of expiring for maximum gains. I need Apple to stay above $120 for a complete win. Anything below $118.25 per share would accrue losses for me. I bet that at $120, investors like Buffet would add to his position in Apple stock.
Usually I like to hedge my bet by selling opposing upside risk but given the quality of the company, the margin for error that I set and the time until expiration, I will opt out of doing so for now. I am comfortable that I will be able to manage my risk against the short-term price drops.
Learn options as easy as 1-2-3 in a personal 1on1 webinar here. Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.
