Shares of consumer tech giant Apple (AAPL) hit a new 52-week low this week. One trader sees shares rebounding in the coming weeks.
That’s based on the January 20 $127 calls. With 21 days until expiration, 10,526 contracts traded compared to the prior open interest of 253, for a 42-fold jump in volume on the trade. The buyer of the calls paid $4.78 to make the trade.
Apple shares recently traded for just over $126, making this an at-the-money trade. A sizeable rally in the coming weeks could lead to a big move higher for the options, although Apple will likely take a long time to get back to its old high of $183.
Despite revenues rising 8 percent in the past year and earnings moving up about 1 percent, Apple has now lost 27 percent of its value. While shares may trend lower, they’ll likely see a snap higher first in the coming weeks.
Action to take: Long-term investors can consider shares under $130. The stock pays a growing dividend, although the starting yield is a bit low at 0.7 percent. Plus, the company has done a fantastic job of buying back shares and reducing the float of stock over the years, a trend likely to continue.
For traders, the January $127 calls could deliver mid-double-digit returns in the coming weeks. They’re unlikely to be a runaway winner, but are close enough to where shares trade that downside will also be limited.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.