Apple Stock Event Gives 3 Option Trade Ideas – Investor's Business Daily

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Apple (AAPL) is hosting an online event on Oct. 13 with rumors of an unveiling of new 5G-capable iPhones. These events always generate a lot of interest and opportunities for traders of Apple stock and option traders.


Here are three option trade ideas on AAPL stock in advance of the event:

Bullish Option Trade On Apple Stock

For bullish traders, a bull put spread can achieve a nice return in a short space of time. Selling a 100-95 put spread with a Nov. 20 expiration can generate around $85 in premium. The maximum risk is at $415, which you calculate by taking the difference in the strike prices and subtracting the premium collected. That makes for a potential return of 20.5%.

For a trade like this I would set a stop loss if the premium doubled to $170. You could also gauge it off the Apple stock price. A drop below 110 in the stock could suggest it’s time to cut your loss.

Something For The Bears

For traders who think AAPL stock is unlikely to rally after the virtual event, a bear call spread could be a good idea. A 135-140 call spread with a Nov. 20 expiration generates about $55 in premium and a risk of $445. That produces a potential return of 12.4%.

For a trade like this I would set a stop loss if the premium rose to around $150 or if Apple stock broke through 120.

The Neutral Trade For AAPL Stock

Sometimes the news is already priced in or there isn’t anything that suggests a significant change in prospects for Apple stock. For traders who think AAPL stock will stay flat for the next few weeks, you could combine two vertical spreads to make an iron condor. An iron condor is a neutral trade that will benefit from stable prices and a decrease in volatility.

Combining the bull put spread and the bear call spread would generate $140 in premium with risk of $360. That’s a potential return of 38.89%.

The risk here is that Apple stock makes a huge move following the event, which certainly seems like a possibility. Remember, too much on the upside or downside and you start to lose. For a trade like this, I would set a stop loss if the premium doubled to $280. It would limit the loss to just $140.

You Choose Which One Is Right

Whether you’re bullish, bearish or neutral, the beauty of options is that you can structure a trade to suit your outlook for Apple stock.

Hopefully these three trade ideas give you some food for thought.

It’s important to remember that options are risky and investors can lose 100% of their investment.

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions. Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on Twitter at @OptiontradinIQ


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