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AI Boost: Apple's Stock Surge Strategy

26-03-2024

AI is in hot focus within the top tech companies at the moment. However Apple has yet to mention what they plan to do in the future themselves within the AI space. Apple have been in talks with Google-parent Alphabet over licensing its “Gemini” artificial intelligence training model for use in iPhones, according to a report. Google stock rose over 7% on the news, which follows controversy over Google’s Gemini-powered gen AI chatbot.

Apple is currently trading around a support level of $170 area. From a technical perspective, any news on its plans for AI could see a push back up to the 38% retracement level of $178. If we then break through the resistance of $180 (See chart below), that would solidify the support of $170 and break the recent trend down. The next level to the upside would be this year’s high of $195.

If you think a rally is likely on the back of any AI initiative and earnings on 5th May you could buy a call option, or reduce the cost of this call buy buying a call spread, in effect financing the cost of the long call option by selling a further out of the money call for the same expiry. Whilst call spreads require a lower initial capital outlay and reduced margin requirement versus an outright long call option, the maximum profit is capped rather than unlimited.

 

(Chart displaying Apple stock price, highlighting yearly high and retracement)

LONG AT THE MONEY (ATM) CALLS

buy 1 AAPL SEP24 185 CALL @ 6.90
sell 1 AAPL SEP24 200 CALL @ 2.95

Trade Idea

BUY AN OUT OF THE MONEY CALL SPREAD

Call Spread

BUY AN OUT OF THE MONEY CALL SPREAD

INITIAL OUTLAY OF $395 (TOTAL CONSIDERATION)

MAXIMUM PROFIT OF $1105 if APPLE EXPIRES ABOVE 200 in September

Written By

Sebastian Blanco

Desk Broker

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