Latest news with #OptionsPlay
CNBC
a day ago
- Business
- CNBC
Downside risks on Apple are growing. Using options to hedge against potential declines
Apple's (AAPL) recent rally has lifted the stock back towards valuation levels that have downside risks when we factor into the lack of meaningful innovation. While recent earnings were better than feared and investments in the U.S. may eased regulatory concerns, the signs of decelerating growth and a lack of meaningful innovation with continued reliance on financial engineering — suggest renewed downside risk if market expectations aren't met. Trade timing & outlook AAPL has rebounded strongly, now trading around $230 after the post‑earnings spike with relative strength versus the S & P 500. However, this move approaches major resistance levels, and both momentum and volumes have slowed, raising the odds of consolidation or pullback in the absence of fresh catalysts. Looking at a longer term chart, we see a potential head and shoulders topping formation in the making that would target $200 to the downside. Fundamentals Apple recent rally pushes its forward P/E multiples near decade highs, suggesting diminishing margin for error. While the market rewards Apple's strong margins — but they're increasingly driven by services, not innovation. And the average target price across 40 analysts that cover AAPL is $236, reflecting only 2% upside. Forward PE ratio: 29x vs. Industry Average 20x Expected EPS growth: 9% vs. Industry Average 11% Expected revenue growth: 6% vs. Industry Average 6% Net margins: 24% vs. Industry Average 7% Bearish thesis Apple's AI upgrades, notably for Siri and Apple Intelligence, are delayed and underwhelming despite investing over $10 billion in AI. Most of the value creation levers now appear linked to services and share repurchases, raising sustainability concerns. With tech concentration in the S & P 500 near 40%, and broader economic uncertainty, consensus caution remains around correcting valuations across the sector. Options strategy To reflect these headwinds, I'm using a bearish-to-neutral income structure by Selling the Sept. 26 $230/$245 Call Vertical @ $6.10 credit. This entails: Selling the Sept. 26 $230 Call @ $7.90 Buying the Sept. 26 $245 Call @ $1.80 Max profit: $610 per contract if AAPL is below $230 at expiration Max risk: $890 per contract if AAPL is above $245 at expiration Breakeven: $236.10 View this Trade with Updated Prices at OptionsPlay This structure caps upside — reflecting valuation saturation — while capturing time decay and offering modest downside exposure if innovation delays and market sentiment puts pressure on the stock. Summary: While Apple remains fundamentally strong, the elevated valuation, innovation stagnation, and macro uncertainty suggests a cautious stance. The defined-risk bear call vertical captures this outlook where momentum stalls and valuation realignment sets in. DISCLOSURES: None. 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.
CNBC
31-07-2025
- Business
- CNBC
Zhang: Tariffs seem manageable, but China's August 12 deadline is the bigger risk
Tony Zhang, Chief Strategist at OptionsPlay, tells Worldwide Exchange that markets are calm despite tariff risks, while PCE and jobs data could shift Fed expectations and spark volatility.
CNBC
16-07-2025
- Automotive
- CNBC
Tesla faces a series of technical and fundamental headwinds. This options trade maximizes returns
Tesla (TSLA) is facing significant challenges that present a compelling bearish outlook. Despite industry-leading growth metrics, Tesla faces declining deliveries, increasing competition and significant executive turnover. With recent price action suggesting that investors are concerned, this presents an optimal opportunity to seek bearish exposure using options with limited risk heading into next week's earnings. Trade timing If we look at the chart, TSLA has continued to trend lower and recently was rejected at its $360 resistance level and more recently again at its $330 resistance level. Couple this with the stock underperforming the S & P 500, it suggests that there is a possible distribution by institutional investors ahead of next week's earnings. The timing for bearish exposure in TSLA is optimal with a favorable risk-to-reward profile, targeting a potential downside to $180. Fundamentals Despite industry leading growth and profitability metrics, TSLA trades at an extreme valuation premium relative to its industry peers, significantly raising valuation risks. Forward PE ratio: 166.4x vs. industry average 11.5x Expected EPS growth: 17.8% vs. industry average 8.3% Expected revenue growth: 13.0% vs. industry average 3.1% Net margins: 6.7% vs. industry average 2.7% Trade thesis Declining demand & deliveries: Tesla has seen consecutive quarterly declines in deliveries and increasing inventory buildup, signaling weakening demand. Fundamental weakness: Tesla has repeatedly missed financial targets, experiencing declining automotive sales revenues. Analyst caution: Mixed analyst ratings, including a consensus hold rating and skepticism around valuation. Intensifying competition: Heightened competition from Chinese EV manufacturers, has led to market share losses and forced price cuts. Executive turnover: High-profile departures, including Tesla's top North American sales executive and senior artificial-intelligence leadership, signal internal instability. Options trade To leverage TSLA's downside potential into earnings, I'm buying an Aug. 15 $300/$265 put vertical @ $9.97 Debit. This involves: Buying the Aug 15, $300 put @ $14.27 Selling the Aug 15, $265 put @ $4.30 Maximum Reward: $2,503 per contract if TSLA is below $265 at expiration. Maximum Risk: $997 per contract if TSLA is above $300 at expiration. Breakeven Point: $290.03 View this Trade with Updated Prices at OptionsPlay This bearish strategy positions you to profit from Tesla's operational and competitive pressures, executive instability and technical weakness. With clearly defined risk and attractive reward, this put vertical spread offers a compelling approach to profit from anticipated declines in TSLA stock, or hedge an equity position into next week's earnings report. DISCLOSURES: None. 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.
CNBC
01-07-2025
- Business
- CNBC
OptionsPlay's Zhang on Target: Today's levels could be start of a recovery
Tony Zhang, OptionsPlay chief strategist, joins 'Power Lunch' to discuss why Target's stock is set for a bounce.
CNBC
11-06-2025
- Business
- CNBC
Buyers of this retail stock look exhausted. How to trade a downturn in the shares
Walmart (WMT) is facing headwinds with looming tariffs likely to erode profit margins amid an already overstretched valuation. The retail giant, a leader in the defensive sector, trades at a substantial premium, raising concerns about downside risk as global trade tensions mount. With technical rejection and elevated implied volatility (IV) offering attractive premiums, this set-up presents a timely opportunity for bearish exposure to capitalize on WMT's vulnerabilities. Trade Timing The timing for adding bearish exposure to WMT is optimal, as the stock recently rejected its $100 area of resistance. This rejection, combined with negative divergence with momentum suggests buyer exhaustion. We have an immediate downside target of $91, offering an attractive risk-to-reward profile for a short position. Fundamentals WMT trades at a considerable premium to the retail industry despite growth rates and margins that align with the sector, highlighting substantial valuation risks. Forward PE Ratio: 37.4x vs. Industry Average 18x Price to Sales Ratio: 1.2x vs. Industry Average 0.5x Expected EPS Growth: 9% vs. Industry Average 9% Expected Revenue Growth: 4% vs. Industry Average 5% Net Margins: 2.7% vs. Industry Average 2.4% Bearish Thesis Tariff Impact on Margins : Rising tariffs, particularly with potential US-China trade tensions, are likely to increase input costs, squeezing WMT's already thin margins. Limited Growth Upside : WMT's expected EPS and revenue growth (8.97% and 4.19%) are nearly in line with industry averages (9.02% and 4.98%), offering little justification for its premium valuation. The trade To capitalize on WMT's potential downside, I'm selling a July 25, 2025 $98/$103 Call Vertical @ $2.08 Credit. This entails: Selling the July 25, 2025 $98 call @ $3.15 Buying the July 25, 2025 $103 call @ $1.07 The maximum reward is $208 if WMT is below $98 at expiration. The maximum risk is $261 if WMT is above $103 at expiration. The breakeven point for this trade is $100.08. View this Trade with Updated Prices at OptionsPlay This strategy positions you to benefit from WMT's potential downside, leveraging its optimal timing, overvalued fundamentals, and tariff-related margin pressure to profit from selling premium with defined risk. With its premium valuation at risk, this call vertical offers a compelling opportunity to capitalize on a potential decline in WMT stock. DISCLOSURES: (None) 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.
