We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
A massive iPhone upgrade cycle is just around the corner for Apple. The tech giant is slated to release the newest version next month; the AI-driven launch of the iPhone 16 is expected to usher in a considerable growth phase over the next year.
With more than two billion active devices globally along with the implementation of Apple Intelligence, new and exciting monetization opportunities are on the way. In a partnership with OpenAI, Apple’s newest iPhones will seamlessly integrate ChatGPT, helping users write with enhanced language capabilities, create stunning images, and communicate with a more capable Siri.
The Zacks Rundown
Apple (AAPL - Free Report) shares broke out of a wide, multi-month base earlier this year. The stock, which is currently a Zacks Rank #3 (Hold), has begun to display signs of outperformance.
The company is part of the Zacks Computer – Micro Computers industry group, which ranks in the top 41% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has over the past 3 months:
Image Source: Zacks Investment Research
This industry is also showing favorable characteristics as we can see below:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Apple shares are trading just a few percent below their all-time high ahead of the September iPhone release event. While there are many ways to take advantage of a potentially bullish move, options provide us with flexibility, enabling us to tailor our strategy to the current market environment.
Option Essentials
Before we analyze today’s trade, let’s review some option fundamentals as a refresher. There is no need to worry about complex mathematical formulas or equations. Over the years I’ve found that the more complicated a strategy is, the less likely it is to work over the long run.
Options are standardized contracts that give the buyer the right – but not the obligation – to buy or sell the underlying stock at a fixed price, which is known as the strike price. A call option gives the buyer the right to buy a particular security, while a put option gives the buyer the right to sell the same. The investor who purchases an option, whether a put or call, is the option buyer, while the investor who sells a put or call is the seller or writer.
These contracts are valid for a specific period of time which ends on expiration day. There are weekly options, monthly options, and even LEAPS options which are longer-term options that have an expiration date of greater than one year.
Options consist of time value and intrinsic value. In-the-money options consist of both components; at-the-money and out-of-the-money options consist only of time value. At options expiration, options lose all time value.
Below we’re going to explore a call option purchase strategy.
Multiply Your Apple Returns
Apple stock is in a price uptrend and is a good candidate for a call option purchase:
Image Source: StockCharts
When done correctly, trading options provides huge profit opportunities with limited risk.
In today’s trade, we’re going to target the September 20th expiration date and the 180-strike price. Purchasing this option gives us the right, but not the obligation, to buy 100 shares of AAPL stock at $180 on or before September 20th, which is a bit over 1 month from now.
The table below displays the risk/reward profile for this trade. Apple stock is currently trading at $224.10 (orange box). We are purchasing 1 September 20 180-strike call at 45.3 points, which is the option premium. Since options account for 100 shares of the underlying stock, the total cost for this call option trade is $4,530 as we can see in the yellow highlighted box.
Image Source: Zacks Investment Research
The top (blue) row shows the performance of Apple stock based on different percentage scenarios at expiration. The bottom (purple) row shows the corresponding percentage return for our call option trade. We can see that if Apple remains flat, this trade would encounter a minor loss of 2.6%. If Apple moves up 5%, this trade will realize a 22.1% profit. If AAPL advances 15%, we would realize a 71.6% profit.
This illustration shows the inherent leverage that options provide. A stock investor who bought 100 shares of AAPL would have to contribute $22,410, which is a much bigger investment. A 15% increase in the stock price would yield a $3,361 profit.
On the other hand, in this example the option trader only needs to contribute $4,530 to control the same amount of underlying AAPL shares. A 15% move in AAPL stock would net a $3,242 option profit – a nearly identical profit amount with only about one-fifth of the investment!
Also note that this option contains relatively little time value. The 1.2 points worth of time value (red box) equate to just 0.5% of the underlying stock price. A good way to manage risk when buying call options is to minimize time value and maximize intrinsic value, as time value decays rapidly in the days leading up to option expiration.
Bottom Line
With Apple Intelligence powering the next generation of iPhones, the stage is now set for Apple to experience an outsized bullish run. Apple could very well be in store for a period of outperformance.
A great way to take advantage of this move is via low-risk call options. This allows us to leverage Apple stock returns with the power of options. Be sure to keep track of how AAPL stock performs heading into the upcoming iPhone announcement.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Weekly Option Windfall: Trading AAPL Options Ahead of iPhone Upgrade Cycle
A massive iPhone upgrade cycle is just around the corner for Apple. The tech giant is slated to release the newest version next month; the AI-driven launch of the iPhone 16 is expected to usher in a considerable growth phase over the next year.
With more than two billion active devices globally along with the implementation of Apple Intelligence, new and exciting monetization opportunities are on the way. In a partnership with OpenAI, Apple’s newest iPhones will seamlessly integrate ChatGPT, helping users write with enhanced language capabilities, create stunning images, and communicate with a more capable Siri.
The Zacks Rundown
Apple (AAPL - Free Report) shares broke out of a wide, multi-month base earlier this year. The stock, which is currently a Zacks Rank #3 (Hold), has begun to display signs of outperformance.
The company is part of the Zacks Computer – Micro Computers industry group, which ranks in the top 41% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has over the past 3 months:
Image Source: Zacks Investment Research
This industry is also showing favorable characteristics as we can see below:
Image Source: Zacks Investment Research
Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
Apple shares are trading just a few percent below their all-time high ahead of the September iPhone release event. While there are many ways to take advantage of a potentially bullish move, options provide us with flexibility, enabling us to tailor our strategy to the current market environment.
Option Essentials
Before we analyze today’s trade, let’s review some option fundamentals as a refresher. There is no need to worry about complex mathematical formulas or equations. Over the years I’ve found that the more complicated a strategy is, the less likely it is to work over the long run.
Options are standardized contracts that give the buyer the right – but not the obligation – to buy or sell the underlying stock at a fixed price, which is known as the strike price. A call option gives the buyer the right to buy a particular security, while a put option gives the buyer the right to sell the same. The investor who purchases an option, whether a put or call, is the option buyer, while the investor who sells a put or call is the seller or writer.
These contracts are valid for a specific period of time which ends on expiration day. There are weekly options, monthly options, and even LEAPS options which are longer-term options that have an expiration date of greater than one year.
Options consist of time value and intrinsic value. In-the-money options consist of both components; at-the-money and out-of-the-money options consist only of time value. At options expiration, options lose all time value.
Below we’re going to explore a call option purchase strategy.
Multiply Your Apple Returns
Apple stock is in a price uptrend and is a good candidate for a call option purchase:
Image Source: StockCharts
When done correctly, trading options provides huge profit opportunities with limited risk.
In today’s trade, we’re going to target the September 20th expiration date and the 180-strike price. Purchasing this option gives us the right, but not the obligation, to buy 100 shares of AAPL stock at $180 on or before September 20th, which is a bit over 1 month from now.
The table below displays the risk/reward profile for this trade. Apple stock is currently trading at $224.10 (orange box). We are purchasing 1 September 20 180-strike call at 45.3 points, which is the option premium. Since options account for 100 shares of the underlying stock, the total cost for this call option trade is $4,530 as we can see in the yellow highlighted box.
Image Source: Zacks Investment Research
The top (blue) row shows the performance of Apple stock based on different percentage scenarios at expiration. The bottom (purple) row shows the corresponding percentage return for our call option trade. We can see that if Apple remains flat, this trade would encounter a minor loss of 2.6%. If Apple moves up 5%, this trade will realize a 22.1% profit. If AAPL advances 15%, we would realize a 71.6% profit.
This illustration shows the inherent leverage that options provide. A stock investor who bought 100 shares of AAPL would have to contribute $22,410, which is a much bigger investment. A 15% increase in the stock price would yield a $3,361 profit.
On the other hand, in this example the option trader only needs to contribute $4,530 to control the same amount of underlying AAPL shares. A 15% move in AAPL stock would net a $3,242 option profit – a nearly identical profit amount with only about one-fifth of the investment!
Also note that this option contains relatively little time value. The 1.2 points worth of time value (red box) equate to just 0.5% of the underlying stock price. A good way to manage risk when buying call options is to minimize time value and maximize intrinsic value, as time value decays rapidly in the days leading up to option expiration.
Bottom Line
With Apple Intelligence powering the next generation of iPhones, the stage is now set for Apple to experience an outsized bullish run. Apple could very well be in store for a period of outperformance.
A great way to take advantage of this move is via low-risk call options. This allows us to leverage Apple stock returns with the power of options. Be sure to keep track of how AAPL stock performs heading into the upcoming iPhone announcement.