DailyPlay – Opening Trade (AAPL) & Portfolio Review – February 24, 2025

DailyPlay Portfolio Review

Our Trades

AMGN – 52 DTE

Bullish Long Call – Amgen Inc. (AMGN) –  The stock recently broke through resistance with strong momentum. The position is profitable, and we plan to hold steady for now.

BIDU – 39 DTE

Bullish Credit Spread – Baidu, Inc. (BIDU) – This position was established recently and is slightly profitable. We plan to hold steady for now.

KMI – 39 DTE

Bearish Long Put – Kinder Morgan Inc. (KMI) – Since establishing this position last week, there have been no significant changes, so we plan to hold for now.

LRCX – 25 DTE

Bullish Long Call – Lam Research Corporation (LRCX) – We recently established this position and plan to stay the course for now.

PEP – 32 DTE

Bullish Credit Spread, PepsiCo, Inc. (PEP) – The stock recently broke out from its trading range to the upside with strong momentum. The position is profitable, and we plan to hold for now.

PWR – 52 DTE

Bullish Debit Spread – Quanta Services, Inc. (PWR) – The company announced earnings last week, and the stock reacted negatively to the announcement. We are down on the position but will maintain for now.

AAPL Bearish Opening Trade Signal

Investment Rationale

As Apple Inc. (AAPL) approaches its all-time highs, a series of mounting challenges has emerged. The latest iPhone 16 has not met sales expectations, signaling a more selective consumer. Additionally, AAPL faces stiff competition in their singular bet on the future of augmented reality, where rivals are putting pressure on the future of Apple’s Vision Pro. Moreover, Apple’s venture into artificial intelligence has been lackluster, failing to match the innovation of competitors who are setting the standard in AI. Compounding these issues, the economic slowdown in China, a critical market for Apple, is dampening sales further. And with AAPL trading at a lofty 65% premium over its peers, it’s becoming increasingly untenable given an outlook that lacks the dynamism to justify such a premium. This puts AAPL in a spot of vulnerability, suggesting that a breakout to new all-time highs here is less likely.

If we look at the chart of AAPL, it has underperformed the S&P 500 since hitting a new all-time high in December and has continued to print a series of lower lows and lower highs. This suggests that the stock might be due for a correction, especially considering its position near the top of its trading range.

And if we look at the business, AAPL’s valuation is hard to justify, trading at an 65% premium relative to its peers, despite growth metrics that are only in line with the industry. While its superior profitability has historically justified a premium valuation, recent slowdown in revenues and EPS growth puts this at significant risk.

• Forward PE Ratio: 33x vs. Industry Median 20x
• Expected EPS Growth: 11% vs. Industry Median 10%
• Expected Revenue Growth: 6% vs. Industry Median 6%
• Net Margins: 24% vs. Industry Median 13%

Without an immediate catalyst on the horizon, my preference is to take a bearish to neutral outlook by harnessing options premiums by Selling an Apr 4, $245/260 Call Vertical @ $6.20 Credit.

AAPL – Daily

Trade Details

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish Credit Spread

Details: Sell to Open 2 Contracts AAPL April 4 $245/$260 Call Vertical Spreads @ $6.20 Credit per Contract.

Total Risk: This trade has a max risk of $1,760 (2 Contracts x $880) based on a hypothetical $100k portfolio risking 2%. We suggest risking only 2% of the value of your portfolio and divide it by $880 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is expected pull back from recent highs.

1M/6M Trends: Bullish/Bullish

Relative Strength: 8/10

OptionsPlay Score: 106

Stop Loss: @ $12.40 (100% loss to value of premium)

View AAPL Trade

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 Friday ‘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. 

View AAPL Trade