00:00 Speaker A

Apple shares on track here to snap a seven-day wind streak, but this under the radar rally has some investors looking for ways to play the tech giant. Join me now, we’ve got Jessica Inskip, stockbrokers.com, Director of investor research in the options pit sponsored by Tasty Trade. Jessica, it is always great to see you.

00:23 Speaker A

So let’s talk about Apple, Jessica. I mean what what a story for 2025. Earlier in the year, Jessica, you know, it’s out of favor. They’ve got no AI strategy. What does Tim Cook know know? I I I think I remember some analysts even suggesting maybe it was time for a change in the sea suite in Cupertino. Now’s been ahead, that stock’s up 40% in six months, but what’s the trade on the iPhone maker, Jessica, what do you see?

00:54 Jessica Inskip

Yeah, absolutely. When we see a stock like this that’s making all-time highs, a lot of time individual retail investors especially, we feel like we need to time the market. We got in too late or whatever that fundamental or even technical reason may be why we like the underlying security.

01:23 Jessica Inskip

So the way that we can utilize this with options is by creating an obligation to buy the stock and we can do that by selling a put or a cash secured put. So essentially, we would sell a put, it creates an obligation where I have to buy the stock at the strike price at any time through that expiration period, but in exchange for that obligation, I collect a premium.

01:46 Jessica Inskip

And the premium really acts as a buffer or this range that you can create where you put time on your side. So, essentially, first time options traders tend to buy stocks outright or buy calls for their first options trade. When you do that, time is working against you. You actually have negative theta. Positive theta occurs when we sell an option and we’re putting time more in our favor. So it’s less about timing the market and more about creating this window of time or a time frame and a cushion.

02:19 Speaker A

Do you consider Jessica a trade here, like the one you’re outline? Is this a good trade for, you know, a relative newbie? Like if I if I’m just getting my feet wet in the options market, is this is this a smart trade?

02:37 Jessica Inskip

Yeah, I think it’s a great trade for the first time options trader. and often times when you’re a first time options trader, you end up buying options rather than selling them. and once again, it’s when you can put time on your side. So, for example, the way that I’m constructing this one, I’m going 45 days out because an option is derived from the underlying security. So in this case Apple.

03:00 Jessica Inskip

It it has different premium components. We have to consider implied volatility, so a likely movement. We have to consider the time frame when it expires. So by going about 45 days, I have more more in that premium that’s excess based rather than just on the underlying security. So I’m going out 45 days so I can maximize basically that decaying.

03:26 Jessica Inskip

My strike price I’m choosing is very close to the money, which means it’s very close to the current price of the stock, which is 285. I’m collecting a premium of about 675 per share. That was earlier today. I checked before I hopped on and it increased a dollar, so it’s almost $8.

03:41 Jessica Inskip

But what that does now is I am creating an obligation to buy Apple at $285 per share and I have that obligation for the next about 44 days and I collect $6.75% per share in exchange for that obligation. And basically I’ve created this range.

04:02 Jessica Inskip

Think about about the chart. If we look at Apple around 285, if I go up 675, that’s about 291. That is my upwards range, but my downwards range and really my break even is that premium that I receive of 675. My obligation is at 285, but since I already collected 675, my break even is 278.25.

04:26 Jessica Inskip

So essentially, for a first-time options trader, we are utilizing the same risk as buying the stock outright, but we’re reducing that risk by the premium received. So we’re slowly introducing that options component aspect. I like to think of it like a limit buy order. When we’re putting in a limit order to buy a stock or Apple in this case, you would still set aside your cash within that limit order. But in this case, we’re setting aside our cash that if it hits that obligation kicks in, we’re going to have to buy the stock. However, I’m getting paid while I wait and that’s the difference here.

05:07 Speaker A

Finally, Jessica, before we before we let you go, you know, we talked Apple there, but I just want to get your thoughts bigger picture too. I mean, how should investors think about the the potential of the options market as 2025 draws to a close, Jessica? How how do you want to be positioned here?

05:28 Jessica Inskip

Yeah, so I I love to throw a top-down approach with all of my investing and looking at the macro as well. I think when we look at options, we tend to as individual investors look at the market in two dimensions, which is up and down. When we add options, it’s actually path. We have a third dimension because now we have strike prices and we have an expiration date. So a price and a destination and a time frame.

05:57 Jessica Inskip

So we can utilize the options market even if you don’t trade it as purely analytics to understand investor sentiment and we can gauge certainly a lot from that if you’re bullish or bearish.

06:12 Jessica Inskip

So from the overall macro picture though, and pairing that with what I look at as an individual investor and from an analysis perspective, it is a challenging market that we have right now. Um, I feel like we’ve hit a ceiling of resistance or very close within the broader markets and we’re really waiting on the Fed to cut interest rates, but are those interest rate cuts going to come because the upside risk to the labor market or unemployment rather is higher and that could bleed into your micro and your individual securities. They could sell off within sympathy. So it’s really important to think about your macro view and how the micro fits into that overall as well.

06:53 Speaker A

Jessica, great as always to have you on the show. Thank you.

06:57 Jessica Inskip

Yeah, thank you.