We are encouraged that after a weekend of news about rising wages (on the low end), traders seem to be moderating their inflation expectations again.
We feel that fears about inflation and higher interest rates are overblown right now, which has kept technology companies undervalued.
We still feel we should be careful and flexible about our positions in tech.
But for now, this is a good opportunity for some quick profits.
Apple (NASDAQ:AAPL) has been consolidating in the $124-$126 range for almost two weeks, and we think a floor near $123 is very likely to hold through June.
Although we are still a little concerned about volatility in the sector in June, the risk of AAPL falling below support appears to be very low.
We recommend taking advantage of that support and selling to open a new put write on the stock.
We are setting our strike price at the $123 support level we’ve identified, and we’re going with a late June expiration date to get a better premium upfront.
From a fundamental perspective, although wage growth is a concern for inflation to damage the sector, AAPL’s consumer focus should offset that damage by increased demand and sales volume.
Taking advantage of that before the next round of earnings in late July also gives us enough time to potentially get more than one round of income out of AAPL if the stock rallies in the short term.
On the date of publication, John Jagerson & Wade Hansen did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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