Finance, Options Trading, Stocks

3 Ways to Buy the Apple Stock Dip

Written By: InvestorPlace
Reviewed by: Mike Reyes
Last Updated March 31, 2022
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Apple (NASDAQ:AAPL) shares are struggling alongside the rest of the equities market. The tech giant’s size, fantastic fundamentals, and cash hoard have meant little in the face of such indiscriminate selling. While the reasons for the recent rug pull vary, the takeaway is clear.

The daily uptrend in AAPL stock is broken, and bulls are on the run.


But if history has taught us anything, it’s that you shouldn’t bet against the market of all i-Things for long.

All previous bearish episodes have created compelling chances to buy on the cheap. It’s never been a matter of if Apple recovers, but when.

The same can be said about the current correction. From peak to trough, prices have fallen 10%. And though stocks were trying to rally back Tuesday morning, the attempt has been pathetic.

Let’s take a look at the recovery bid. Then we’ll provide three ways bulls can shop this discount.

Lackluster Bounce of AAPL Stock

Monday’s super spike in the CBOE Volatility Index (CBOEINDEX:VIX) signaled panic was in the air. And while you only see such fear during nasty downturns, they inevitably crop up near the low. Moreover, bounces tend to be vicious when born from oversold market conditions and high VIX levels. Anyone who witnessed the market rally during the 45 minutes of Monday’s session will attest to its vigor.

Unfortunately, the follow-through has been found wanting. Though stocks gapped higher to start the session, sellers were quick to strike. For its part, AAPL got smashed at Monday’s high and has been dribbling lower ever since.

As of this writing, the tech kingpin was nearing a gap fill. This type of price action is hardly inspiring. It proves that selling rallies is still in vogue, and sellers maintain the upper hand. Until this pattern changes, patience will be required for those looking to profit from an eventual rebound.

If you can set aside the short-term weakness, I think you’ll find the longer-term charts are returning to some potentially actionable price levels for dip buyers. The past three down bars appear nothing more than a bull retracement pattern returning prices to an old resistance zone and the rising 20-week moving average on the weekly time frame. So while the daily trend has been damaged, the weekly has not.

Apple (AAPL) weekly stock chart with bull retracement

Source: The thinkorswim® platform from TD Ameritrade

To prepare ourselves for the eventual price resurrection, let’s explore three ways to buy the AAPL stock dip.

AAPL Stock Covered Calls

A silver lining that always accompanies market downturns is the jump in implied volatility which juices up options premiums. One way to capitalize is to sell calls against any stock purchases. Doing so captures the pumped-up premiums while increasing your probability of profit. The covered call consists of purchasing 100 shares while selling a short-term, out-of-the-money call option. This will be the most expensive of today’s three trade ideas, but it also carries the highest potential gain.

Covered Call Trade: Buy 100 shares while selling the October $148 call.

Bull Put

If the concept of increasing your odds of success sounds appealing, then the next trade is for you. The rise in implied volatility has lifted both call and put premiums. The first trade exploited the former; this play games the latter. So, if you’re willing to bet, AAPL stock stays above $135 for the next month, then enter the following.

Bull Put Trade: Sell the October $135/$130 bull put for 50 cents.

You’re risking $4.50 to capture 50 cents potentially.

Bull Call

The third and final idea is far cheaper than the covered call but offers more upside than the bull put. Consider it a wager that Apple can climb back to $155 over the next two months.

Bull Call Trade: Buy the November $145/$155 call vertical for $3.70.

You’re risking $3.70 to capture $6.30 potentially.

 On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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