Apple stock has had some up-and-down price action over the past month, and it's a good bet that it will now go through a sideways consolidation. This could make for a great iron condor setup.
Iron condors produce a return on stocks that stay within a specified range over the trading period. They offer investors a way to benefit from stagnation rather than momentum.
This can be a welcome change — especially during periods of uncertainty — for buy-and-hold investors who rely on markets always going up.
Let's look at how we might set up an iron condor on Apple stock.
An iron condor can be set up via a combination of a bull put spread and a bear call spread. It creates a defined-risk, nondirectional strategy that profits if the stock stays between the short strikes.
How To Make The Iron Condor Take Flight
First, we take the bull put spread. Using a Sept. 19 expiration, we could sell the 210 put and buy the 205 put. That spread trades around 55 cents a share.
Then investors can place the bear call spread by selling the 242.50 call and buying the 247.50 call. Traders could sell this spread for around 40 cents a share. In total the iron condor generates around $95 in premium on a 100-share contract.
The profit zone ranges between 209.05 and 243.45. This can be calculated by taking the short strikes and adding or subtracting the premium received. Also, those levels are above recent support and below resistance benchmarks.
As both spreads are $5 wide, the maximum risk in the trade is $405. Calculate this by subtracting 95 cents from $5 and multiplying it by the 100-share contract.
Therefore, if we take the premium of $95 divided by the maximum risk at $405, this iron condor trade has the potential to return 23.5% in just under one month. If price action remains stable then this iron condor will work well. However, if Apple stock makes a big move, the trade will suffer losses.
One way to set a stop loss for an iron condor is based on the premium received. In this case, investors receive $95, so they could set a stop equal to the premium of $95. Apple is not due to report earnings until late October, so this trade should have no earnings risk.
Apple Stock Ranks Third In Its Group
Apple's business centers on the iPhone, but its Services division featuring iCloud, Apple Music, Apple Pay, and more has become a major revenue driver.
Devices like the Apple Watch and AirPods have propelled Apple to the forefront of wearables, while expanding its role in personal health tech. This ecosystem strategy deepens customer loyalty and boosts recurring revenue through subscriptions.
With growing emphasis on health, chip innovation, and digital services, Apple is positioning itself for long-term dominance beyond hardware.
According to IBD Stock Checkup, Investor's Business Daily ranks Apple stock is third in its group. Further, it has a Composite Rating of 82, an Earnings Per Share Rating of 84 and a Relative Strength Rating of 51.
It's important to remember that options are risky and investors can lose 100% of their investment.
Gavin McMaster is founder and operator of Options Trading IQ, a website offering instruction on how to buy and sell options. Follow him on X/Twitter at @OptiontradinIQ.
