A trade that wins if Apple shares continue to break down following iPhone event

Apple’s (AAPL) annual event on September 9, 2024, is historically known to cause stock price volatility, with the stock typically moving between 3% and 6% in the 15 days following the event. Despite several updates and new versions of existing products, there were no groundbreaking announcements from CEO Tim Cook this year. Moreover, shortly after Apple introduced the iPhone 16 , Chinese smartphone manufacturer Huawei launched its tri-fold phone, the Mate XT. This device garnered significant attention, securing more than 2 million pre-orders within just a few hours of its release. To assist in forming a directional bias, I have provided a 1-year daily chart of AAPL below, featuring 8, 21, and 34-day exponential moving averages (EMAs). EMAs are widely regarded by market technicians as reliable indicators of potential trend changes, and a possible crossover is imminent for AAPL. Should Wednesday’s CPI data or any upcoming macroeconomic data disappoint, it may serve as the catalyst to hit the market and take Apple with it, confirming this technical signal. The trade The trade structure I’m employing is known as a “bear put spread.” At the time of writing, AAPL was trading at $219 in the premarket. To set up this bear put spread, I am buying a $222.50 put and selling a $217.5 put, with strike prices strategically positioned around the current price. This set-up limits my risk while taking advantage of potential downside movement in AAPL. Other spreads can be structured similarly. For example, if AAPL drops to $216, a $220-$215 put spread could also be created to reflect the new price levels. Here is my exact trade setup: Buy $222.5 put, Sep 27th expiry Sell $217.5 put, Sep 27th expiry Cost: $2.50 One advantage of buying at-the-money (ATM) spreads is the simplicity in calculating the potential cost. ATM spreads are generally priced at half the width of the strikes. In this case, with a strike width of $222.5–$217.5 = $5, the cost to purchase the spread is typically around $2.50 (or $250, accounting for the 100x option multiplier). If AAPL is trading at or below $217.5 on the expiration date, this trade will double the initial investment, resulting in a 100% return on investment (ROI). -Nishant Pant Founder: Author: Mean Reversion Trading using Options and Technical Analysis Youtube, Twitter: @TheMeanTrader DISCLOSURES: (Nishant has a 222.5 – 217.5 put spread on AAPL expiring on 9/27/24) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.