Volatility is rising on Wall Street. Climbing yield prices inflation concerns are beginning to erode stock prices. As a result, there are fewer and fewer true bullish bets in the market. I believe one of those bets, however, lies with Apple Inc.’s (NASDAQ:AAPL).
Apple is longer be the “Steve Jobs company” that drove fanatical investment and radical product offerings. But that doesn’t mean the company no longer has long-term growth potential.
Apple still has a considerable customer base, locked into its walled product garden. It’s why the company can get away will a successful HomePod launch months after being beaten to the punch by similar products. And let’s not forget that Apple is making inroads into artificial intelligence and online video services — two potentially profitable markets for Apple’s walled garden.
Click to Enlarge Over the short-term, sentiment remains solidly positive. Thomson/First Call reports that 32 of the 38 analysts following AAPL stock rate it a “buy” or better, with no “sell” ratings. Furthermore, the consensus 12-month price target rests at $192.43, suggesting nearly 12% upside for the shares.
On the options front, AAPL stock speculators are showing a bit of wear and tear. Currently, the March put/call open interest ratio arrives at 0.92, which is an unusually high reading for Apple stock. Given the recent market correction and growing volatility, this negativity is understandable, though.
Turning to March implieds, options traders are pricing in a potential move of about 5% for AAPL stock through expiration. This places the upper bound at $180 and the lower bound at roughly $163.
From a technical perspective, Apple stock has short-term support at $170. This area has provided support in the past and is also home to AAPL’s rising 50-day moving average. The shares are pulling back to this region today, making now a good time to consider a long position on Apple stock.
2 Trades for AAPL Stock
Call Spread: Traders looking to bet bullish on AAPL might want to consider a March $175/$180 bull call spread. At last check, this spread was offered at $1.50, or $150 per pair of contracts. Breakeven lies at $176.50, while a maximum profit of $3.50, or $350 per pair of contracts — a potential return of 133% — is possible if AAPL stock closes at or above $180 when March options expire.
Put Sell: If you’re looking for a more conservative play on AAPL stock, then a March $160 put sell might be a way to capitalize on AAPL’s technical support. At last check, this put was bid at 80 cents, or $80 per contract.
As always, you keep the premium received as long as AAPL stock closes above $160 when March options expire. The downside is that should AAPL trade below $160 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $160 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.