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Apple Inc (AAPL) stock is rising but is still well off its highs. Moreover, it could raise its dividend next quarter. That makes it attractive to short sellers with out-of-the-money (OTM) put options and buyers of long-term in-the-money (ITM) call options.
I discussed this options strategy in a Barchart article on Feb. 2, “Apple Stock Is Off Its Recent Highs, But Is It Poised to Rise Again?” So far, these plays are working. This article provides an update.
For example, when the Barchart article was published AAPL was at $236.00, but today it's at $244.45, up $8.12, or +3.6%.
How the Options Trades Have Performed
Short-Put Trade. Moreover, the OTM put options have fallen, as expected, and the long-term ITM calls have risen much more than the stock price.
For example, I discussed selling short the out-of-the-money $225.00 strike price put option that expires on March 7, 2025, one month away. The premium received by an investor was $3.54. This was the bid-side price received.
That provided an immediate cash-secured short-put yield of 1.573% over the next month (i.e., $3.54/$225.00). In other words, an investor immediately $354 for one put contract after securing $22,500 with their brokerage firm.
Today, these puts are trading at 48 cents on the ask side. That means an investor has made money on this trade. They could close that short sale trade by entering an order to “Buy to Close” and paying $48.00.
The return would be $354-$48, or $306 for a 2-week investment of $22,500, or an ROI of 1.36% ( i.e., $306/$22,500 = 0.0136). Moreover, if the investor keeps this play until March 7 and AAPL stays over $225.00, the put will expire worthless, giving the 1.573% ROI.
However, this 1.36% is less than half of the upside that just owning AAPL stock would have provided (i.e., +3.6%), as mentioned above. Therefore, it might make sense to close this out and repeat the play in a new expiry period. More on that below.
Long-Dated ITM Call Trade. I also discussed buying a long-dated in-the-money (ITM) AAPL call option: the March 20, 2026, call options at the $200.00 strike price. On Feb. 2, the midprice was $53.30 for these call options, which were $36.00 below the trading price of $236.00, i.e., in the money (i.e., $236-$200).
Today, these call options are trading for about $60.00, between the bid and midprice, i.e., if the investor were to sell these calls today.
That means they have a profit of $60-$53.30, or $6.70 per call option, or an ROI of 12.6%:
$60.00 - $53.30 = $6.70
$6.70/ $53.30 = 1.1257 = +12.57%
Note that this is 2.5x higher than the 3.6% return from just owning AAPL stock over the past 2 weeks. So, again, it makes sense to potentially buy more of these call options.
Moreover, if an investor did both trades, their total return would have been as follows:
$6.70 x 100 = $670 + $48 = $718
$718 / ($22,500-$22,500 +$5,330) = $718/5,330= 0.1347 = +13.47%
That is 2.74x greater than just owning the stock.
Apple Could Hike Its Dividend
As mentioned earlier, it's possible that Apple could hike its dividend again. Last week (Feb. 13) it paid out its fourth quarterly dividend per share (DPS) of 25 cents per share. This was declared on January 30.
So, it's likely that Apple could hike its dividend on April 30. However, don't expect to see a heavy rise. Last year, the DPS rose from 96 cents annually to $1.00.
Nevertheless, even a small increase to say $1.04 could be a catalyst for investors to continue to buy AAPL shares.
Shorting OTM Puts
Some investors may want to close out the March 7 short-put trade and roll it over. The reason is most of the yield has already been made and there is about 2 weeks left just to make a small further amount.
For example, today the March 28 expiration period shows that the $235.00 put option strike price has a bid-side premium of $3.10. That provides an immediate yield of 1.32% (i.e, $3.10/$235.00). That is almost equal to the original yield of 1.36% made in the past 2 weeks.
So, after buying back the existing put at 48 cents, the net premium is $2.62. That means that the short-put yield is 1.11% (i.e., $2.62/$235.00 = 0.0111).
So, shorting OTM put options here is another way to make extra money. In addition, it helps pay for the ITM call options play described above. The bottom line is that AAPL options provide investors with an alternative way to play AAPL's potential upside.
