Apple Inc. (AAPL) might be out of favor with Wall Street at the moment. Several analysts have lowered their views on AAPL shares over the past few days, and the stock has slid 6% in just a matter of days.
But take heart.
For one, Apple is hardly rotten to the core. AAPL has come against a fair share of struggles, and nothing about its current problems appear to show that Apple is somehow on its last legs.
Also, while Apple does regain its balance, investors and traders have several Apple-centric options — namely, some companies in AAPL’s supply chain — that are worthy of your attention right now.
Let’s take a look at a pair of Apple stocks and discuss why price action and cord cutting away from the tech giant are providing opportunities for bullish options traders.
Apple Stocks Breaking Out: Avago Technologies (AVGO)
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Currently, AVGO is handily outperforming all other Apple stocks by carving out a bullish, first-stage base, cup-with-handle pattern after announcing a solid earnings report and receiving upgrades from the Street.
Off the chart, Avago could be creating plenty of additional value via a recent acquisition of fellow chipmaker Broadcom (BRCM). According to an analyst note by FBR & Co. last week, “Broadcom’s networking division will become Avago’s growth engine” and supports the broker’s “outperform” and $185 price target initiation in AVGO.
Looking at the AVGO options board, I like the use of the Jan $145/$155 bull call spread for $3.50 with shares near $142.50. What’s nice about this vertical is it doesn’t require a breakout to begin profiting, as it maintains an expiration breakeven of $148.50. The risk is contained to roughly half the max profit of $6.60.
Traders can always attempt to take a smaller, managed loss in the open market prior to expiration, should the handle setup fail.
Apple Stocks to Buy on the Down-Low: NXP Semiconductors NV (NXPI)
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With NFC, NXP Semi should prove a critical player within the emerging Internet of Things and driverless, connected auto markets, and allow for solid future growth.
In turn, NXPI stock should prosper even if AAPL becomes less sweet with investors.
Despite the allure, NXP Semiconductors stock looks a bit range bound on its price chart and technically speaking, unique compared to our other Apple stocks.
There appears to be decent overhead resistance in NXPI, but the downside also seems limited in our opinion. Bearing this in mind and having a bullish underlying conviction on the stock, I like the idea of selling an out-of-the-money put spread.
Reviewing NXPI’s options board, the Jan $75/$72.50 bull put spread for a credit of 50 cents is attractive.
The full credit is captured above $75 which still allows for about 10% of downside. And should NXPI move even lower, risk in the spread is limited to $2.
The limited risk allows the trader to either exit with the managed loss or accept assignment and begin a long stock campaign with an effective, initial purchase price of the current NXPI stock price + $2 if shares are below $72.50.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
