Apple Inc. (AAPL) has been bruised and likely soured with many investors thus far in 2016. But past the bearish headlines, there may be good value on and off the AAPL stock chart — and more certain, well-priced opportunity using a bullish AAPL stock option’s vertical spread.
From concerns over a marginalized Chinese consumer to worries of Apple’s standoff with authorities regarding the right to privacy versus access to information in the name of national security — AAPL stock has left investors with a bit of a sour taste in 2016.
By comparison, the S&P 500 has snapped back over the last week to a less painful decline of around 4.5% on the year after being down more than 10.5%. At the same time, AAPL stock is still within about 4% of its 2016 low and lagging with a decline of around 10% year-to-date.
Is AAPL stock cheap though? It certainly looks it — on paper at least — when comparing apples-to-apples and Apple to other stocks.
But it’s never that simple. As other dominant companies and one-time favorites of investors like International Business Machines Corp. (IBM), Intel Corporation (INTC) or Microsoft Corporation (MSFT) can all attest to — if history repeats itself, AAPL stock could be a value trap.
And unfortunately, Apple as a battleground stock between value bulls and law-of-large-numbers bears is also depicting an equally contentious situation on the AAPL stock price chart.
AAPL Stock Daily Chart
Currently, AAPL stock has formed a potential double-bottom off the August flash crash low. As the price action has developed as part of a 30% correction and base reset pattern, bulls have some evidence the reversal formation can develop into a lasting bottom.
AAPL stock has also tested its 50% retracement from its 2013 low and its 38% retracement from the 2009 bottom is just slightly lower, near its uptrend line around $87.50. This too should help attract bullish investors and support shares of Apple in the process.
On the other hand, bears could look at the double-bottom and see an inverse cup-with-handle forming on the heels of a lower high. AAPL stock has also already broken a steeper uptrend line, which could point towards a more meaningful bearish trend.
At the end of the day, I’m mostly optimistic on AAPL stock, but respect there’s ample technical-based food for thought supporting both bulls and bears without getting too particular and abstract with the Apple price chart.
AAPL Stock Bull Call Vertical
Reviewing the AAPL stock options board, the April $97.50/$100 bull call spread fits in well with our view.
With shares near $96.50, the vertical costs $1.05 and allows for a max profit of $1.45, or 138% return, in under two months if AAPL stock is able to climb about 4% and above the $100 strike call at expiration.
A move of that magnitude would still find AAPL stock trading cheap relative to the broader market, and could result from something as simple as a catch-up bid in the name, as trader sentiment grows more favorable.
Further, given the spread reduces unwanted Greeks such as time decay and volatility risk and Apple has been hotly rumored to unveil its new 4” iPhone, updated iPad and iWatch band designs on March 15, it’s all the more reason to see more certain value from this AAPL stock vertical.
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.
