AppLovin is a mobile technology platform that helps app developers grow, monetize, and optimize their apps using AI-driven tools for user acquisition, ad monetization, and analytics. Needless to say, it ticks off all the buzzwords for a growth company, but as you can see, it also has a healthy financial situation.

After earnings, APP jumped above $500, but has since pulled back to pre-earnings levels and below:

AppLovin 9 month performance. Credit: finviz

As you can see it has a good amount of support at the $300 level, so it may be a good time to open a position. While you can buy the stock and hope that it goes up in the future, its possible to use stock options to take advantage of time going by, and open a position which has a high probabilty of making money, without needing the stock to go back up to astronomical heights.

With APP trading at ~$325, here are a couple of options trading strategies which could make money, including profit/loss calculations. If you don’t know about stock options, have a look here, where I explain how stock options work using a simple analogy anyone can understand. If you’re just getting starte on your investing journey - have a look at my services for beginner investors.

But back to APP, first and foremost, the simple covered call strategy:

You can buy 100 shares and sell Jan 2026 (9 months) $300 calls for a net entry of ~$232. Max profit if called away at $300 will be $68, for a return of 68/232=29% over 9 months if APP ends the year above $300. If it expires below $300, you get to keep the shares at a net entry of $232, while the stock was trading at $325. Statistically this strategy has a 53% probability of any profit, as you can see in the screenshot below:

And if APP expires below $300 in Jan 2026, from a $232 net entry, you will be able to sell another ~$50 of premium over the next year, lowering your entry, again, by an addiitonal $50, or down to ~$180, or just about half what it is today. So this is a great way to buy APP for a 94/325 = 29% discount, although this does require an investment of $23k.

For anyone who doesn’t want to drop $23k into APP, there are other ways to make money. Another option would be to buy a call spread. With APP trading at ~$325, down for $500 just in the last month, it seems perfectly reasonable to guess it could go back up above $340, over the next 2 months. So you can open an Apr $330-340 bull call spread for net $3:

APP bull call (vertical) spread strategy

The max loss on this trade is the initial debit, so $300, while the max gain is $700. Statistically, this strategy has a 41.8% probability of any profit, but its only a $300 investment:

In the case APP goes down from its current $325, the adjustment to make even more money with a higher probability of success is very simple: roll the spread lower and wider, for the option to make more money at a lower strike price, so obviously a higher probability. Because the initial investment is only $300, you should feel comfortable doubling down at least 3-4 times. So the roll could be from a 330-340 spead for $300 down to a 300-320 spread for $800, down to a 270-300 spread for $1700 (max profit $1300) down to a 240-280 spread for $2500 (max profit of $1500 with APP above $280 on expiry). So with APP trading at $325, even if it goes down another 15% from where we are today, after the adjustments the strategy still makes 1500/2500 = 60% profit on a $2500 investment (up from an initial investment of $300 for a return of 700/300=2.3x). So instead of making $700, you end up making double that ($1500), at a much lower strike.

And then 1 last option which is a strategy I like to call a covered synthetic long strategy, and is a combination of the above mentioned 2 strategies:

A synthetic long options strategy is where you sell a put and use the proceeds to buy a call. Its a highly directional strategy, similar to buying the shares, but higher leverage. It has the same problem as buying shares though: if the stock goes up and then down you don’t make any money. I much prefer selling calls on top of my shares, as shown in the first example, because it enables you to make money as time goes by, even if the stock doesn’t go up. Selling a call above the synthetic long strategy has a similar effect: It turns the long call into a vertical spread, and can turn the whole position into a net credit, which decays as time goes by. The strikes you choose for the short put and for the call spread are flexible, depending on how direction you would like to be. Me personally I prefer to be conservative when I open a position, which leaves me a lot of flexibility to adjust if the stock goes against me. So for example, you can buy the same Apr 330-340 call spread discussed above, but sell a June (4 months) $200 put below the spread:

The strategy is a net ~$650 credit, which you will make as long as APP stays above $200, or 38% lower than it is today. The max profit though is $1000, plus the $650 initial credit, so $1650 profit on a $650 credit position. The position obviously will obviously require margin to cover the short put, but even if you look at it as a cash secured put, its a 1650/20,000 = 8.25% return over 4 months, or 25%/year return in the best case. In the worst case, you’re require to purchase 100 shares of APP at $200, or 38% lower than they are today. The probability of any profit for this strategy is 58%:

Covered synthetic long outcome probabilities

For a margin account, the margin required on the short APP puts is only 50%, as this is a growth stock, but still it makes the strategy twice as profitable, as you can leave the other $10k to cover the put in a HYSA and make an additional 4% on it.

As I mentioned, the strikes can be adjusted depending on your outlook for the future for APP, but I prefer to be very (!) conservative in my initial investment, which makes adjusting much easier. It essentially turns my “best” case into my worst case: I would almost rather the stock goes against me at first, so I can double down and make more money, rather than the position to immediately go my way in which case I make my “best” case.

So for the above example of the bull call spread, my “best” case is making $700 against my $300 initial investment. But really, I would rather make $1500 than $700, so I would almost rather to be able to double down a couple of times on my initial investment, in order to make more money on a larger investment, than make less money on a small initial investment.

And those are 3 stock options strategies on APP (AppLovin) stock which take advantage of the recent ~40% drop in APP from ATH, which will make money even if the stock doesn’t go back up to its previous highs any time in the immediate future.

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