Apple's big fall, should I buy?
The Russo-Ukrainian war has caused a series of supply chain problems, as well as frequent interest rate hikes by the Federal Reserve due to inflation, which has intensified the volatility of the US stock market since late August.
The S&P 500 index plummeted from its relative high of 4,325 on August 16 to 3,640 as of the time of writing on September 29, a decrease of 16%.
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During the same period, the VIX panic index soared from 19.5 to 31.8. The higher the VIX index, the greater the market panic, indicating that investors are more uncertain about the economic situation and are more inclined to withdraw from the high-risk stock market.
![Apple's big fall, should I buy?](https://sgsnsimg.moomoo.com/feed_image/101527948/d2762088900836589aed2e8259d3c018.jpg/bigmoo)
Then, during this uncertain period, the previously stable Apple stock price plummeted.
So what happened to Apple?
Apple has always been a stock of interest. In a bearish market, AAPL is considered to have strong resistance to decline among the FAANG stocks. In the three months from the end of June to September 29, while the overall market fell by 4.6%, AAPL only fell by 2.3%, and its recent trend is in line with the overall market.
However, in the past five trading days, AAPL has fallen by 6.7%, surpassing the overall market's decline of 3%.
There are two reasons for this:
On Wednesday, September 28, Bloomberg reported that Apple failed to see the anticipated high demand for its new iPhone 14, so it informed some suppliers that it was abandoning their plans to increase production. The stock price fell 1.3% to 149.8 on that day.
Following the old saying, 'When it rains, it pours,' on Thursday, September 29, Bank of America analyst downgraded the stock from Buy to Neutral, citing expectations of weakening consumer demand next year and the challenges facing the macro economy. They also lowered their target price from $185 per share to $160 per share.
The stock price of Apple plummeted directly to 142.5, the level it was at in early July.
Our view on Apple
But Apple fanatics do not agree with this.
Ming-Chi Kuo stated on social media, 'The rumor that Apple is giving up on increasing iPhone production is a bit strange to me. As previously surveyed, Apple has plans to switch iPhone 14/14 Plus production lines to iPhone 14 Pro/14 Pro Max/reduced price iPhone 13, but I haven't heard of any overall iPhone production increase plans.'
Ming-Chi Kuo remains optimistic about Apple's performance in the fourth quarter and has revealed that Apple may establish a new Apple Car project team before the end of this year.
This also confirms our opinion on Apple. We have a long-term bullish outlook on AAPL and are willing to buy at a lower price.
Apple's warning to suppliers actually reflects the rationality and reality of management, which is a good thing.
BOA's downgrade is certainly not good, but generally this kind of downgrade needs to be repeatedly certified within the banking system, and the release on Bloomberg the day after is a coincidence. Moreover, another securities company, Rosenblatt Securities, has upgraded Apple's rating from neutral to buy, and raised the target price from $160 to $189, which means a 25% increase from the current level. Rosenblatt's survey of more than 1,000 American adults shows strong demand for even higher-priced new Apple products.
03 our trading.
When disasters strike, what will increase in price? Insurance will increase in price.
It is the same in finance. When the stock price drops significantly, put options (bearish options) will rise significantly, and we can consider put options as a form of insurance. At this time, we are willing to be an insurance company that sells insurance, charging insurance premiums and making a bottom guarantee to the counterparty who is willing to pay premiums. When the stock price falls below a certain lower limit, we will spend money to buy the stocks in their hands.
Insurance on AAPL will increase in price. Of course, we cannot sell insurance casually, there are several criteria:
1. Insurance for the worst possible outcome, the so-called tail risk, because we are not willing to immediately buy stocks, or in other words, the probability of buying is very small;
2. In the worst case scenario, we are willing to hold, so we need to have confidence in the underlying asset for a long period of time;
3. If possible to buy, it is best to have no or very few holdings of the stock now, otherwise it will result in duplicate positions.
Uncle currently does not have AAPL, but is bullish on it in the long term.
Therefore, on September 28, when Apple AAPL dropped to $145.4, we sold the 135 put option with expiration on 9/30 for income of $0.27. On 9/30, which is two days after the trade, there is a 4% probability of dropping below 135.
On September 29, when Apple AAPL dropped to $143.5, we sold the 125 put option with expiration on 10/7 for income of $0.3. There is also a 4% probability of dropping below 125 on 10/7.
The income of $0.27 and $0.3 may not seem like much, but we are insuring against extreme events, so we shouldn't be too greedy. From 9/30 to 10/7, there are still 1 to 6 trading days, so if we annualize it, we can expect a 10% to 25% return, which is good enough.
Lastly, it should be emphasized that we are still in the process of selling insurance and there will be ups and downs. The premiums will only be truly pocketed when the contracts expire (9/30 AAPL 135 put, 10/7 AAPL 135 put), and safety comes first when they are in the pocket.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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dhkbb02 : There was a big backlash
长庚年 : You can buy it, but not now.