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Hate Apple Inc. (AAPL) Stock, But Love This Trade

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Under a month ago, I wrote about how it wasn't too late to create free profits from Apple Inc. (NASDAQ: AAPL ) stock. The trade yielded almost $5 in pure profits. I gained $3 from my debit call spread appreciation and $2 from selling the naked put.

Now Apple stock sits near its all-time highs making it difficult to recommend an entry point. Furthermore, other mega-caps like Amazon.com, Inc. (NASDAQ: AMZN ), Facebook Inc (NASDAQ: FB ) or Alphabet Inc (NASDAQ: GOOG ,NASDAQ: GOOGL ) have more obvious entry points.

So is it too late to set another long trade in AAPL? I don't think so; there is still time to set another trade using options for another potential run of free profits.

Fundamentally, Apple stock still is a money printing machine with a rosy intermediate outlook. I have my concerns about its leadership though; I strongly believe that Tim Cook will ruin Apple, but not in the next few months. Meanwhile, and if markets in general don't suffer a sustained correction this year, AAPL should be higher through 2017.

Click to Enlarge Technically, AAPL has a few constructive points. First, it made a wide rounding bottom rejecting the last swoon.

Also, I think that if Apple stock sets a new high it would invite more frantic buyers who were leery of the potential of another double top.

The Trade: Buy the AAPL April debit $135/$140 call spread. This is a bullish trade for which I pay $1.40 per contract to open. If Apple rallies well past my spread, I stand to triple my money. The price I pay to open the trade is the maximum I could lose. Usually I like to lower my exposure. In this case, I want to sell downside risk premium to finance the purchase of my calls or more. It's difficult to do so near all-time-high levels, but not impossible.

The Bank: Sell the AAPL Jan 2018 $105 put. This also is a bullish trade for which I collect $3 per contract to open. By selling naked puts I am committing to buying the stock at the strike sold if Apple stock falls below it. But even if that bad scenario unfolds, I would have bought the stock at a 20% discount from today's levels. This trade has a 90% theoretical chance of success.

As long as AAPL stock stays above my put sold, any premium I collect from selling my debit call spread can be pure profit. So if price action becomes too bearish, I could sell back the debit call spread for a profit even if the price I get is lower than my entry price.

I am not required to hold my trades through their expiration dates. I can close either at any time for partial gains or losses.

Nicolas Chahine is the managing director of SellSpreads.com . As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic .

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The post Hate Apple Inc. (AAPL) Stock, But Love This Trade appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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