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The Apple Inc. (AAPL) Stock Selloff Is Ripe for a Reversal

The losses are mounting for Apple Inc. (NASDAQ:AAPL) shares. With Friday’s drop, AAPL has now shed 8% this month making it one of the worst-performing big-cap tech stocks. But with technical support levels looming close and implied volatility reaching substantial heights, the world’s largest company is ripe for a trade.

The Apple Inc. (AAPL) Stock Selloff Is Ripe for a Reversal
The Apple Inc. (AAPL) Stock Selloff Is Ripe for a Reversal

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This month’s downturn has carried AAPL back below its 20-day and 50-day moving averages. And at least one pivotal support level was breached in the process.

Fortunately for shareholders, the weekly uptrend remains firmly intact so, for now, the big picture remains healthy. And that has me thinking this month’s dip could be a buying opportunity.

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Fridays drop officially filled Apple’s earnings gap from last month. And up-gaps, once filled, tend to turn into support zones, so watch closely this week to see if buyers come out of the woodwork.

If this level gives way, then $142.50 is the next likely downside target. Both the 200-day moving average and multiple prior support pivots rest in this area.

Sell Pumped AAPL Options

Demand for Apple stock options rose during last week’s drubbing. And with an implied volatility rank of 63%, Apple carries one of the highest volatility readings on the board suggesting that short premium strategies are paying handsomely right now. Here are two trades to capitalize.

If you’re willing to wager that the AAPL stock price is close to bottoming, sell the Oct $145/$140 bull put spread for 80 cents. The max reward is limited to the initial credit and will be captured if the Apple stock price sits above $145 at expiration. The max risk is $4.20, but you can minimize the loss if the stock breaks $142.50.

Another interesting idea that sidesteps a directional bet is selling an iron condor. This particular play will pay out if the stock remains between $145 and $160.

Sell the $145/$140 bull put spread and the $160/$165 bear call spread for a net credit of $1.15. The max reward of $1.15 will be captured if AAPL sits in the previously mentioned range.

As of this writing, Tyler Craig held bullish options positions in AAPL. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.

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