To The Moon

$Apple(AAPL)$ is expected to report its 1Q FY'24 results earnings on Thursday after market close. Analysts expect Apple's revenue to be $117.97 billion, adjusted net income to be $32.32 billion, and adjusted EPS to be $2.105, according to Bloomberg's unanimous expectations.

Apple's 1Q results will likely indicate iPhone sales pressure in the greater China region amid increased competition from Huawei and reduced consumer spending. Furthermore, the guidance for the current quarter is expected to miss estimates on softening hardware demand.

AAPL option order flow sentiment implies that traders are wagering bearish bets in AAPL stock on-balance. After converting the options volume into an equivalent number of AAPL shares bought or sold, we can find that traders sold a net equivalent of -1,376,723 shares of $Apple(AAPL)$ stock on Wednesday from the chart below.

Source: Market Chameleon

We can't tell what anybody is thinking or what people do. But we can look into stock options trading behavior to get a better understanding of traders sentiment for Apple stock. If we take the total bullish trades and subtract total bearish trades, we can see that traders place mostly bearish bets on balance for the past 31 trading days.

Source: Market Chameleon

Since Apple stock is facing some obstacles. This is good for near-term expiring covered call option plays. Investors can make extra income with these trades.

Selling covered call options is a strategy adopted by many large funds. It can also be used by retail investors in the US stock market. You can get income while holding it.

This strategy is very suitable for stocks that have long-term positions but are in bearish sentiment recently. For example, the $195 calls are now trading for $1.13 or so, and the covered call yield is 0.58% (i.e., $1.13/$195). It is about 5.7% out-of-the-money.

It can be a good strategy for mature investors to roll over when holding some targets for a long time.

There are only 15 days until expiration. So if repeated every 2 weeks for a quarter the investor can potentially generate about 6x this amount for the next 90 days. That works out to a quarterly yield of 3.48% (i.e., $678/$19,500).

$AAPL 20240216 195.0 CALL$

That is a good potential income for existing shareholders. For those who don't already own AAPL stock it could bring potentially risks, should the stock rise above $195.00 in the next two weeks.