Between its privacy battle with the FBI and concerns over flagging iPhone 6S sales, Apple Inc. (AAPL) has taken a bit of a beating on the sentiment front. Options traders have begun to edge toward put options on Apple stock, and the shares have stagnated in the $92-$100 range.
Despite this growing sense of unease, there are still a plethora of opportunities for AAPL stock options traders.
Before diving into the trading ideas, let take a quick look at Apple stock’s sentiment and technical outlooks.
For one, Wall Street analysts remain extremely bullish on the shares. In fact, data from Thomson/First Call reveals that 39 of the 48 analysts following the shares rate AAPL stock a buy or better, with no sell ratings to be found.
Furthermore, the 12-month consensus price target of $132 per share represents a 36% premium for Apple stock. Since AAPL stock’s price target has taken a bit of a hit due to iPhone sales projections, I would expect this figure to rise once more details of the iPhone 7 begin to trickle out.
Outside of Wall Street, options traders have grown increasingly restless. Currently, the March/April put/call open interest ratio for Apple stock rests at 0.79. Calls still outnumber puts among short-term AAPL options, but this somewhat elevated ratio represents a sense of unease from options traders.
Click to Enlarge Turning our attention toward March implieds, March 18 series options are pricing in a roughly 4.5% move for Apple stock during the next month. This places the upper bound at about $101, while the lower bound lies at around $92. AAPL stock has stout technical support in the $90-$92 region, while resistance is building overhead near $98-$100.
2 Trades for AAPL Stock
Put Sell: Typically, AAPL call spreads are the way to go to take advantage of the stock’s longer-term uptrend. However, current market conditions and the fight with the FBI have taken their toll on AAPL. Because of this, an out-of-the-money put sell position may be the best option when trading Apple stock over the short term.
At last check, the AAPL March $90 put was bid at 46 cents, or $46 per contract. The upside to this put sell strategy is that you keep the premium as long as Apple stock closes above $90 when March options expire on March 18. The downside is that should AAPL trade below $90 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $90 per share.
Call Spread: If you’re Jonesing for an Apple stock bull trade, then a March $97/$100 bull call spread has potential. At last check, this spread was offered at $1.26, or $126 per pair of contracts. Breakeven lies at $98.17, while a maximum profit of $1.74, or $174 per pair of contracts, is possible if AAPL trades at or above $100 when March options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
