Apple (AAPL) Might Be a UFO!

Do you like my new hairdo? I'm suspicious it might be a UFO! But before I get to talking about Apple...

What's the Word on the Street?

The market is currently mixed. The Dow and Russell are down, while the S&P and Nasdaq are up. Weekly jobless claims this morning showed that for the sixth week in a row, fewer people are claiming unemployment.

Yesterday after the closing bell, Alphabet (Google) reported its earnings and investors were pleased with the results. That’s probably a driver behind technology stocks rising higher today, as investors are reassured in the vast amounts of cash companies are shoveling into artificial intelligence.

Apple (AAPL)

What Is It?

Apple, Inc. engages in the design, manufacture, and sale of smartphones, personal computers, tablets, wearables and accessories, and other varieties of related services. It operates through the following geographical segments: Americas, Europe, Greater China, Japan, and Rest of Asia Pacific. The Americas segment includes North and South America. The Europe segment consists of European countries, as well as India, the Middle East, and Africa. The Greater China segment comprises China, Hong Kong, and Taiwan. The Rest of Asia Pacific segment includes Australia and Asian countries. Its products and services include iPhone, Mac, iPad, AirPods, Apple TV, Apple Watch, Beats products, AppleCare, iCloud, digital content stores, streaming, and licensing services. The company was founded by Steven Paul Jobs, Ronald Gerald Wayne, and Stephen G. Wozniak in April 1976 and is headquartered in Cupertino, CA. The listed name for AAPL is Apple Inc. Common Stock.

Why Is It a Possible UFO?

Primarily its current share price relative to its fair value and what other option traders expect are the reasons AAPL could be a UFO.

What About Recent News?

I mentioned how Google reported earnings and touted its gains in the AI race. Well Apple hasn’t been benefitting from that race very much. Last year Apple showed off a number of promising AI-powered features that have since been delayed. The market hasn’t been very happy about that. Not to mention how tariffs could send the price of Apple products higher, leading to fewer iPhones being sold (something investors always talk about (like a lot))…

All of that has made Apple one of the worst performers in the Magnificent 7. But, Apple is one of the biggest companies in the world for a reason. It may not have any homegrown AI that can compete with Alphabet’s Gemini and OpenAI’s ChatGPT, but Apple has teamed up with the latter and there are plans to add the former as an extension to Apple Intelligence.

There is also speculation that Apple could buy Perplexity to catch up in the AI race. Either way, Apple knows it needs to do something to impress investors. Maybe something will be announced soon?

Otherwise, Apple still makes plenty of money. Its service revenue has been growing steadily, and it’s just launched a new service (AppleCare One) that is expected to continue that growth.

What's the Current Price?

As you can see, AAPL has been left in the cold compared to its other tech rivals. Though it has been up ~6% in the past month, so some momentum could be building. It’s worth noting that earnings will be reported on 07/31 after the bell and the expected move is ~3.80%.

What's the Fair Value?

I’d first like to emphasize that fair value is subjective. Many analysts at many banks and institutions rate stocks differently and assign fair value in their own unique way. So, what I like to do is take all the recent fair values since the most recent earnings report and average them. In this case…

Since AAPL's most recent earnings report on 05/01/2025, it has received 12 ratings and taking the average, the fair value might be somewhere around: $233.61.

8 ratings are a Buy, 2 are a Hold, 1 is a Sell, and the rating from Morningstar is unknown. The lowest price target is $170.62, while the highest is $270.

What Do Options Traders Think?

Calls are trading over equidistant puts, which means traders think there is a chance to the upside. You can see because… forget about the green columns and focus on the red. Notice how on the right side for the $200 put it says $2.61, it’s $3.35 for the equidistant call at $225.

The premium (the credit you receive for executing the trade) is currently less for selling puts, as opposed to selling calls. Basically because of that, option traders expect the stock to go up, rather than down.

How About Volatility?

The IV rank (the purple line) for AAPL (stock price in blue) is currently hovering around 28.43, which is not very high (IV Rank goes from 0-100). This makes short strategies (which are what I prefer) not as attractive as I'd like, but it's still tradable.

What's the Trade?

My preferred trade is a variation of the wheel without the rolling, AKA cash-secured puts. I typically like to target stocks that offer a dividend and are below fair value. 

Why a dividend? If the trade results in assignment and I’m on the hook for X amount of shares, I can at least be satisfied knowing I picked a (hopefully under fair value) company that will pay me a small amount while I run the other side of the trade AKA covered calls.

It’s a fairly low-risk strategy (all options trading is risky!), that has a higher probability of success, but requires a higher amount of collateral. 

AAPL does offer a dividend yield of 0.47%.

So if you saw the most recent image above, I already STO (sold to open) 1 contract of the $200 put for the August 29th expiration earlier this morning. I like to have a DTE (Days To Expiration) that is around ~45 days.

When the trade reaches 50% profit I will buy it back. I don’t like to be greedy and go for more profit, because I would rather not waste my time being in a trade for too long.

What About Alternative Trade Ideas?

1. If the collateral requirement is too high, another idea is a put credit spread. You would sell a put at a strike below the current share price and then buy a put at a lower strike than the put you sold. By doing so, you will avoid the collateral requirement of a cash-secured put, but the credit received will be smaller. Also, if the trade goes sideways, you will not be assigned shares so no collecting dividends and running covered calls afterwards.
2. Just invest! 1 share or even fractional shares are a way to get a foothold in a stock that you think might increase in value.

Wait…Where Are the Candlesticks? And All the Other Indicators?

I know many traders love their candlesticks and a ton of indicators. I prefer simplicity. Candlesticks aren’t necessary unless you’re the kind of trader that wants to try and pick the perfect moment to execute a trade, and even then it’s not a sure thing. 

As for indicators, there are a ton. Some of them work sometimes. None are perfect. I don’t want to get bogged down with too many. You’ll drive yourself crazy looking at too many of them, so find a handful you like and stick with those.

Disclosure

• I currently have an open trade with AAPL (as mentioned in this post).
• No trade is a sure thing. There is always risk involved. 
• This blog post is not meant to take the place of financial advice, but hopefully acts as a guide for learning or informational purposes.