Apple Partners with OpenAI, Will the Stock Soar?



In a Trade Insight dated 26th March 2024 we noted that Apple was likely to integrate AI into its handsets.

Despite its earlier flirtation with Google’s Gemini AI technology, earlier this week Apple finally outlined its strategy for implementing generative AI across its product offerings. Instead of building its own in-house generative AI models as its tech rivals have done, it has opted to partner with industry trailblazer OpenAI.

This has been received very positively by the market. Before this announcement, Apple’s share price had lagged behind the parabolic returns seen amongst many of its tech peers, as prior to Monday’s event the unveiling of each generation of iPhone had increasingly struggled to inspire consumers to upgrade their handsets.

The latest on-device AI models quash any user concerns over privacy in what is now a hallmark of the Apple ecosystem; and its further optionable integration with OpenAI’s ChatGPT (the current market leading generative AI Large Language Model) will spur demand for consumers to transition away from legacy devices in favour of the modern intelligent devices set to be released.

If you believe that a future smartphone supercycle is on the horizon, possibly driving a new period of exponential growth for Apple, then you could consider buying a long dated out of the money call spread.

Call Spread

buy Buy 1 AAPL 18-Jun-2026 250 Call @ $21.00
sell Sell 1 AAPL 18-Jun-2026 320 Call @ $6.00

Trade Idea

Buy a Call Spread

Call Spread

AAPL Cash Price = 215.70 (as of 12/06/2024 @ time of writing)

Buy: 1 (number of contracts) x $21.00 (contract price) x 100 (contract size) = $2100 debit

Sell: 1 (number of contracts) x $6.00 (contract price) x 100 (contract size) = $600 credit

Total consideration of $1,500 (excl. fees + commissions)

Historically, AAPL has risen by >56% since June 2022.

A further 48% increase on the current share price to $320.00 by 18-Jun-2026 expiry, would yield a 366% return on your initial investment, valuing the call spread at $7,000 (320 – 250 x 100), yielding a maximum profit of $5,500 ($7000 – $1500) (excl. fees + commissions)

A rise to $320 in the underlying share price would yield a 7.5x greater return on the call spread than buying shares outright.

Maximum loss $1,500 (excl. fees + commissions)

Defined risk profile, maximum loss is equal to the net option premium paid.

Lower initial outlay in exchange for a capped maximum profit.

Breakeven if underlying share AAPL = $265 @ Expiry 18-Jun-2026 (strike price + net premium paid)

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