Apple Inc. (AAPL) has taken a bit of a beating on the sentiment front during the past couple of months. Plagued by disappointing Apple Watch market uptake, flagging iPad sales, and an Apple stock has done well to find a holding pattern in the $110 to $120 area for the past several weeks.
Despite the rising tide of negativity, there is a potential profit opportunity for short-term Apple stock bulls.
Thanksgiving will descend upon the U.S. next week, and the exodus of major players during the holiday-shortened week typically leads stock on a tryptophan-induced melt up. Historically, the S&P 500 averages , and the Apple stock price should benefit as a result.
Before we get to trading ideas, let take a quick look at AAPL stock’s sentiment and technical outlooks. Despit the recent rise in bearish media headlines for Apple stock, the shares enjoy a rather bullish outlook from Wall Street analysts. Specifically, 38 of the 50 brokerage firms following AAPL rate the shares a “buy” or better.
Meanwhile, the 12-month consensus price target of $150 per share seems a bit conservative for AAPL stock, indicating that price target increases could be in the cards once the current sentiment narrative — low iPad sales and dwindling “smart money” — has run its course.
Outside of Wall Street, options traders have grown a bit gun-shy. Currently, the November/December put/call open interest ratio for AAPL rests at 0.79. While calls still outnumber puts among short-term AAPL options, this ratio arrives in the upper third of all those taken in the past year for AAPL stock.
Click to EnlargeTurning our attention toward short-term implieds, weekly November 27 options are pricing in a modest move of plus-or-minus 2.3% for AAPL stock during Thanksgiving week. This places the upper bound at $121.76, while the lower bound lies at $116.24.
With $120 being a significant short-term technical hurdle for AAPL, a breakout next week could lead to more significant gains. Meanwhile, key support at $110 appears to be safe, barring any major developments.
2 Trades for AAPL Stock
Call Spread: With an upside bias due to a holiday shortened week, AAPL bulls may want to consider flirting with a weekly Nov. 27 series $120/$121 bull call spread. At last check, this spread was offered at 48 cents, or $48 per pair of contracts. Breakeven lies at $120.48, while a maximum profit of 52 cents, or $52 per pair of contracts, is possible if AAPL stock closes at or above $121 when these options expire.
Put Sell: On the other hand, a tryptophan-induced market stagnation would be bad for any call trade relying upon any sizable holiday-week move. As such, traders might also want to consider a weekly November 27 series $113 put sell. At last check, the $113 put was bid at was bid at 15 cents, or $15 per contract.
As long as AAPL stock trades above $113 through expiration next Friday, traders pursuing this strategy will keep the $15 premium. However, if AAPL trades below $113 ahead of expiration, you could be assigned 100 shares for each contract sold at a price of $113 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
