The ‘high-probability’ way to play Apple’s next move

Apple shares are slipping on Monday, after enjoying an incredible surge last week, but one trader sees a big opportunity to make money on the tech giant's next move.

Excitement over the iPhone 7 launch helped Apple shares to add 11.3 percent last week, for the stock's best week since 2011. But Todd Gordon of thinks that the shares may "run out of the supply of natural buyers," meaning there will be "no one left to push the stock up and then selling will come in."

With two hours left in Monday's session, the stock is down 1.3 percent.

On the chart, Gordon sees the shares running into "a zone of resistance," he said Monday on CNBC's "Trading Nation," noting that the stock will have trouble rising above $116 in the days ahead.

To capitalize on his view that Apple isn't going higher, Gordon plans to sell a call spread — a trade in which one call is bought, while a higher-strike call is sold. This structure gives the trader an immediate premium from selling a more expensive option than he is buying.

In this specific case, Gordon buys the October 118-strike call and sells the October 114-strike call for about $1.60 per share, or $160 per options spread. If Apple closes below $114 on October expiration, he gets to keep that money. However, If Apple shares close above $118, he will lose $240 if he holds the trade to expiration.

"It is a skewed reward-to-risk ratio, but by selling call spreads above the market, we have a higher probability of success," he said.

Gordon plans to get out of the trade if the stock moves above $116.50, since that will disprove his theory that $116 will serve as resistance.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more