Apple’s (AAPL) stock price has been moving downward for about a year now, coming off of a high of over $130, down to under $100. And although the stock has moved up over $105 at this moment, there’s not a very strong hold on this price, and investors are quickly losing confidence in Apple’s current price, even if it is already much lower than it has been.
There are a number of factors pushing Apple’s price down, and these things don’t look like they will be changing soon. For one, Apple is currently in the midst of losing its grip on a huge marketplace in China. Thanks to current regulations, Apple has suspended its iTunes Movies and iBooks stores there, which is likely to lose the company millions of dollars. There are also issues with the new iPhone’s production. Basically, the biggest problem for Apple is that both customers and investors are losing enthusiasm, and that will only lead to more losses for the company in the coming months. When they announce earnings next week, we can get a better assessment on how much damage has been done, but until then, sentiment is markedly against Apple. That means future price drops in its stock are likely.
The big question that short term traders need to be asking themselves is when Apple will have hit a bottom, and when it becomes a good idea for binary options traders to switch from a focus on put options to call options. The earnings announcement will be a step toward figuring out what the fundamentals of the company are, and then price movement can be better determined after that. However, the short term focus for now should still be primarily on put options, especially as a change in fundamental data will not sway the general trading public’s feelings about the stock immediately.
If you are looking at the stock with a long term focus, though, there are plenty of opportunities that may arise here. It’s unlikely that a perfect scenario will develop where the company is actually worth more than what its stock price indicates, but something similar could occur. Apple has a strong management team, and despite what the media is saying about lagging consumer usage, the company does have a strong and loyal following. There is big potential for a turnaround, and if the company’s stock dips too low, then a situation will pop up where a long term strategy of using call options becomes correct. These should stagger in expiries, ranging from a week in length out to the end of the year, granted that your broker allows these trades. You may not want to switch your short term strategy yet, as the general feel may remain short for several days after this threshold has been surpassed.
So what is this magic threshold price? That’s not too clear at this point. $100 is a nice round number, and Apple is definitely worth more than $100 per share, but the threshold that you set for your own trades should probably be a bit lower. Something closer to $95 or $96 is probably more accurate, as this gives you ample room for growth and a greater ability to overcome short term variance.
If the stock never hits this low, but starts to show signs of moving upward anyway, you can still adjust your strategy. Part of the beauty of trading stocks with binary options is that your level of risk never gets out of control since you don’t need to worry about shares, ownership, or long term commitments. You can invest as much or as little as you want for very short times.