Apple Stock Tanks After Antitrust Lawsuit is Filed
Apple Stock Tanks After Antitrust Lawsuit is Filed
The DOJ and 16 state attorneys general accuse the company of making it difficult to switch from its iPhone
- Apple has been hit with a major antitrust lawsuit from the Justice Department and state attorneys general.
- The stock fell nearly 4% after the news crossed the wires, while the value of other tech stocks held up.
- Traders may want to target directional bias with long spreads as IVR remains low.
Apple (AAPL) was hit with an antitrust lawsuit on this morning by the U.S. Department of Justice (DOJ). The company’s stock dropped on the news, with the price down nearly 4% in early afternoon trading. The move erased progress from the last two days when Apple stock hit its highest level since March 1. Still, the hype around chipmakers is helping the Nasdaq to remain in positive territory despite the drop in Apple’s stock price.
The DOJ alleges in the lawsuit, filed in a New Jersey federal court and joined by 16 state attorneys general, that the smartphone maker holds a monopoly over the mobile phone market. The action, led by the Biden administration, follows an antitrust action against Apple that his predecessor launched in 2019. In 2020, a House investigation into technology companies found Apple in violation of operating a monopoly on software distribution.
Apple has been accused of making it difficult for consumers to switch from its iPhone because of platform-specific messaging and limits on the ability of users to hold third-party wallets for their digital assets and accounts. Earlier this year, Apple was fined $2 billion by the European Union (EU) for limiting access to rival music providers on the iPhone.
Apple has losing record against DOJ
While Biden’s DOJ has had mixed results in its antitrust actions this year, the longer-term track record against Apple is stronger. The DOJ forced Apple to settle a case in 2010, preventing the company from going after employees of other tech companies.
In 2013, the DOJ won a case at trial after accusing Apple of colluding with book publishers to inflate prices.
If history is any indication, Apple might have a hard time defending itself against these new allegations.
Trading Apple on the news
Apple is down over 12% from its highs in December and hasn’t recorded a monthly gain since then despite novel product launches such as Apple’s Vision Pro.
That said, AAPL isn’t commanding too much in the terms of volatility. Traders who want to play a direction might want to take an approach with buying a call or put vertical instead of selling, given the current implied volatility rank (IVR) of only 41.4.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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