Tech stocks have cobbled together a modest rebound over the past few trading sessions, but Apple Inc. (NASDAQ:AAPL) remains under pressure. Indeed, since the Nasdaq Composite had the rug pulled out from under it on June 9, AAPL stock has been dead money.
That’s frustrating to bulls and bears alike.
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Fortunately, the options market provides a way to create cash flow while Apple stock dithers.
Last month’s drop and the stock’s subsequent meandering can be seen in all their gory detail in the accompanying chart.
At $145, AAPL stock now sits about 8% off its all-time high. Its short-term trend is pointing lower as suggested by the declining 20-day moving average. Meanwhile, the intermediate-term trend has flatlined (see the 50-day moving average).
The recent $5-wide range has found support at $142.50 and resistance at $147.50. Both levels have been tested multiple times reinforcing their significance. Predicting the eventual resolution of sideways consolidation is always tricky. And that’s why most traders simply wait for confirmation.
That is, if Apple breaches $142.50, go bearish. Or, if it pops above $147.50, go bullish. But there is a third alternative.
How to Trade AAPL Stock
If you’re willing to wager the stock remains neutral — at least up to Apple’s Aug. 1 earnings release — then consider selling an iron condor that expires on July 28. The trade consists of selling out-of-the-money bull put and bear call spreads. The best-case scenario is to have AAPL sit between both spreads at expiration.
Sell the 28 Jul $150/$155 bear call spread and the 28 Jul $140/$135 bull put spread for a total net credit of 91 cents.
You will capture the 91-cent premium if AAPL stock sits between $150 and $140 at expiration. If you want to further increase your odds of success, then close the trade once you’ve captured half of the max reward.
The max loss is limited to the spread width minus the net credit, or $4.09, and will be forfeited if Apple stock falls below $135 or rises above $155 by expiration.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out the replay of Tyler’s recent webinar on how to systematically sell Iron Condors for monthly income.
