How Stock Options Traders See Apple’s (AAPL) Death Cross

Alternatively, speculators seeking a near-term espresso shot in AAPL stock may consider an aggressive options strategy called the bull call spread, specifically, the 205/210 call spread expiring July 18. This transaction involves buying the $205 call option and simultaneously selling the $210 call. The proceeds from the short call partially offset the debit paid for the long call, resulting in a discounted net debit.

Functionally, the bull call spread allows market participants to modulate the interplay between risk-taking (or debit distribution) and risk underwriting (credit reception). Stated differently, you could theoretically just buy the $205 call outright, knowing that the death cross response will likely drive AAPL stock to $210 by expiration.

However, a $205 call option on Apple is quite expensive, even if it’s out of the money. Selling a call would result in a premium, thus helping to defray some of the cost of the long call.

Of course, the penalty of the bull call spread is that the sold call represents an obligation if it, too, goes into the money. Because you bought a call at a lower strike price, you cover this obligation. At the same time, if the target security screams higher, the reward is capped at the short strike price.

Of course, one could elect an ultra-high short call within a bull spread strategy to extract maximum reward. The problem with this approach is that there’s a chance that the spread will fail to break even. If so, you risk losing the entire net debit paid. On the other side of the equation, too low of a short call may lead to leaving money on the table.

I prefer the aforementioned 205/210 call spread because of the relatively small net debit required, combined with the arguably high probability of success. Ultimately, though, the choice of spread will come down to individual risk tolerance.

On Wall Street, AAPL stock carries a Moderate Buy consensus rating based on 17 Buy, 11 Hold, and 4 Sell ratings over the past three months. AAPL’s average price target of $248.28 per share implies approximately 32% upside potential over the next twelve months.

Apple is on the verge of flashing the death cross, a technical pattern in which the 50 DMA slips below the 200 DMA. Ordinarily, this indicator represents a major warning. However, for AAPL stock, it’s a contrarian signal, an opportunity to buy the equity. Nevertheless, timing this pattern is critical.

Statistically, it’s better to avoid the one-month mark following the flashing of the death cross and instead target the three-month mark. By simple deduction, we calculate that there’s a solid chance AAPL stock could reach $210 at the July 18 expiration date. This speculation — and the confidence in this narrative — will ultimately dictate which specific options strategy to deploy.

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