To The Moon

Apple Bears Drive Block Trades as Stock Sees Worst Slump Since 2022

$Apple(AAPL)$   investors and large speculators took bearish option positions Monday with premiums worth millions of dollars as shares posted their worst slump since September 2022. 

Shares of the iPhone maker tumbled 4.9% to close at $227.48. The plunge came as the $NASDAQ(.IXIC)$   sank 4% after President Donald Trump didn't rule out a recession. 

Trump said the US economy could be in for a “period of transition,” responding to a question whether he's expecting a recession. His administration has threatened retaliatory tariffs, after imposing levies on Canada and Mexico and double the rate imposed on shipments from China. 

In the case of Apple, there are other worries weighing down the stock apart from a recession that could crimp consumers’ ability to buy new gadgets like iPhones, iMac and iPads. Delays in the roll-out of an upgrade including Siri's ability to tap into users' personal information to respond to queries, are also weighing down on the stock. 

Seventeen of the 22 block trades on Apple options posted Monday were bearish. The biggest of those bearish transactions involved an active seller collecting a premium of almost $8 million for issuing call options that give the holders the right to buy 300,000 Apple shares at $215 each by July 18. 

That multi-leg trade was posted at 9:55:39 a.m. in New York, the same time a bearish transaction for call options with a $210 strike price was also posted. In that trade, the seller collected a premium of $7.92 million for writing the call options, also covering 300,000 Apple shares expiring on May 16. 

On Friday, Bloomberg reported that the iOs 18.4 software update that will upgrade Siri digital assistant’s abilities, which was initially scheduled for April, will be released sometime in “the coming year.”  

That upgrade would “have driven a higher iPhone refresh this year,” Citigroup analysts were quoted by Bloomberg as saying in a report Monday. The refresh cycle refers to the practice of users buying new models of iPhones to replace their devices.

Amid the stock slump, nine of the 15 technical indicators are showing that Apple is now oversold and the trend could be turning bullish.

Monday's decline took Apple shares below the lower line of the Bollinger band, shown below. That's one of the technical signs used by those who study charts to gauge whether the stock has fallen too far too fast and may be poised for a reversal. 

"Despite macro environment uncertainty, we think AAPL’s premium valuation is warranted,” CFRA analyst Angelo Zino wrote in a note to clients last week, citing the company’s stable free cash flow generation, its aggressive capital allocation strategy, and management's ability to execute. 

"We forecast further upside to average selling prices in the coming years while ongoing growth within the installed base should keep services expansion intact,” Zino said, citing advertising, gaming and bundling. “Margins could offer upside long term, on better mix and good cost discipline.”

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