DailyPlay – Opening Trade (APPL) – September 8, 2023

AAPL Bearish Opening Trade Signal

View AAPL Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts Nov 17th $180/160 Put Vertical Spread @ $5.91 Debit per contract.

Total Risk: This trade has a max risk of $1,773 (3 Contracts x $591) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $591 to select the # shares for your portfolio.

Trend Continuation Signal: This stock is bearish and expected to break to lower levels.

1M/6M Trends: Bearish/Neutral

Technical Score: 9/10

OptionsPlay Score: 144

Stop Loss: @ $2.95 Credit (100% loss).

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Thursday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Investment sentiment has continued to sour this week as China’s ban of iPhones for government employees threatens the largest company in the world. China accounts for over 20% of all revenue Apple (AAPL) generates and concerns over retail customers shunning Apple products as well is not yet fully baked into the valuation. Apple currently represents one of the most expensive large cap tech companies at 27x forward earnings while expecting only 9% EPS growth next year. This growth expectation also does not factor into any slowdown in demand globally, or the potential downside risks that China now represents. Since implied volatility has expanded meaningfully over the past 2 days, it’s best to trade a spread to mitigate further downside risks by buying the Nov $180/160 Put Vertical @ $5.91 Debit. With a hypothetical portfolio of $100,000, I recommend risking 2% of the portfolio’s value on this trade, which is 3 Contracts for a risk of $1,773. We will set a stop loss on the spread at 50% of the premium paid @ $2.95 Credit.

AAPL – Daily