Consumer tech giant Apple (AAPL) is up 21% over the past year, slightly lagging the overall market. One trader sees shares pulling back slightly over the coming weeks.
That’s based on the October 4 $210 puts. With 32 days until expiration, 6,261 contracts traded compared to a prior open interest of 175, for a 36-fold rise in volume on the trade. The buyer of the puts paid $1.35 to make the bearish bet.
Apple shares recently traded for about $230. Shares would need to drop by $20, or about 9.5%, for the option to move in-the-money. Apple is slightly off its 52-week high of $237.23, set back in July.
Markets do tend to trade lower in September and even into October, particularly in election years. Some pullback could be possible in the months ahead. And with Apple trading at 34 times earnings, it’s a bit expensive to go long shares right now.
Action to take: Investors looking to buy shares may want to wait for a seasonal pullback to take place first, as shares could easily get cheaper. Apple currently pays a 0.4% dividend.
For traders, the October $210 puts are an inexpensive way to profit on a market decline over the next few weeks, including the possibility of another correction. Traders can likely see mid-double-digit returns on a modest pullback, and higher returns if markets have a steep decline again.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.