DailyPlay – Opening Trade (AAPL) Closing Trade (ADBE) – January 10, 2025

Closing Trade

• ADBE – 36% loss: Sell to Close 1 Contract (or 100% of your Contract) Feb 21 $425/$470 Call Vertical Spread @ $11.63 Credit. DailyPlay Portfolio:  By Closing this Contract, we will receive $1,163. We initially opened this Contract on Jan 7 @ $18.23 Debit. Our loss, therefore, is $660.

AAPL Bearish Opening Trade Signal

Investment Rationale

In light of the U.S. markets being closed on January 9, 2025, in observance of a national day of mourning for James Earl Carter, Jr., the thirty-ninth President of the United States, we will execute the following Daily Play on Apple, Inc. at the market open on Friday, January 10.  This will serve as our Daily Play communication for the day, in respect and honor of his memory.

Apple Inc. (AAPL) has recently reached overbought conditions on both daily and weekly timeframes, exhibiting signs of exhaustion that suggest a higher likelihood of a strong selloff ahead. Fundamentally, AAPL appears significantly overvalued, trading at an 86% premium relative to its peers. While its net margins of 23.97% exceed the industry average of 8.40%, justifying a premium valuation, the recent decline in these margins introduces significant downside risks. AAPL’s forward PE ratio of 33.86x is considerably higher than the industry average of 17.89x. Additionally, its expected EPS growth of 11.41% and revenue growth of 6.91% are only marginally different from the industry averages of 13.93% and 6.50%, respectively. The company is expected to announce earnings after the close on Thursday, January 30, 2025, which will be factored into the option strategy chosen for today’s play.

AAPL – Daily

Trade Details

Strategy Details

Strategy: Long Put Diagonal Spread

Direction: Bearish Put Diagonal Spread

Details: Buy to Open 8 Contracts AAPL Jan 17/Jan 31 $232.50/$235 Put Diagonal Spreads @ $2.38 Debit per Contract.

Total Risk: This trade has a max risk of $1,904 (8 Contracts x $238) based on a hypothetical $100k portfolio risking 2%. We suggest risking only 2% of the value of your portfolio and divide it by $238 to select the # contracts for your portfolio.

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

1M/6M Trends: Mildly Bearish/Bullish

Relative Strength: 7/10

OptionsPlay Score: 99

Stop Loss: @ $1.19 (50% loss 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 Wednesday’s closing prices, with consideration given to the market holiday in honor of President Carter. Should the underlying move significantly during pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry.

View AAPL Trade