The Shine Is Starting to Come Back on Apple Stock

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Apple stock - The Shine Is Starting to Come Back on Apple Stock

Source: Apple

Shares of Apple (NASDAQ: AAPL) have run into some serious resistance after making all-time highs at the end of August. Apple stock has fallen 4% so far in September, double the 2% drop for the NASDAQ 100 in the same time frame. While Apple stock is still not overly attractive at current levels, it certainly begins to look compelling on even another leg lower. I would look to be a buyer of AAPL stock on any further meaningful weakness.

In my previous article on Apple stock from August 31 I had a cautious view on AAPL and recommended buying puts — which proved to be a profitable proposition. Now that Apple stock has dropped 10 points, my cautious view has tempered somewhat because price ultimately matters. While some of the previous valuation concerns I had regarding Apple stock still linger, lower prices in AAPL stock definitely helps to alleviate those issues.

The prior concerns from a technical viewpoint have definitely been eliminated. Apple stock has bounced off support twice the the $216.50 level. Shares are no longer overbought on an RSI basis while MACD is now at the lowest readings in the past 6 months. Previous times when MACD was at these extremes marked significant short term lows in AAPL stock. There is also additional downside support lurking at the 50 day moving average of $208.35.


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Implied volatility (IV) has also jumped recently due to the drop in AAPL and is now at the 92nd percentile.This means Apple options are comparatively expensive which favors option selling strategies when constructing trades. So to position to be a buyer of AAPL stock at even lower levels, an out-of-the money put credit spread makes sense.

Earnings are due the end of October, so let’s use the traditional monthly options that expire on October 19 to avoid any earnings risk.

Apple Stock Trade Idea

Buy AAPL Oct $200 puts and sell AAPL Oct $205 puts for a 65 cents net credit.

Maximum gain on the trade is $65 per spread with maximum risk of $435 per spread. Return on risk is 14.94%. The short $205 strike price provides a 6% downside cushion to the $218.24 closing price of AAPL stock.

Tim may hold some of the aforementioned securities in one or more of his newsletters. Anyone interested in finding out more about Tim and his option-based strategies can go to https://marketfy.com/item/options-and-volatility.

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, four years as Lead Options Strategist at ThinkorSwim and three years as a Market Maker for First Options in Chicago. Tim makes weekly appearances on Bloomberg TV  “Options Insight”, Business First AM “Trader Talk”, TD Ameritade Network “Morning Trade Live” and CBOE-TV “Vol 411” to discuss everything from volatility and option related.


Article printed from InvestorPlace Media, https://investorplace.com/2018/09/the-shine-is-starting-to-come-back-on-apple-stock/.

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