Buy Before AAPL Earnings? Option Traders Know Better…

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AAPL reports earnings after the bell on Tuesday.  I think we can all agree on one thing, the stock will not trade flat after hours and on Wednesday.  The stock will be halted Tuesday at about 4:25Pm Est.  It will re-open after hours at least 5-7% higher or lower.  I see the stock trading lower to about $550.  $550 is my price for an AAPL low as I think the bar has been set high for AAPL.    On Wednesday AAPL, as I see it, will open lower.  I will be a buyer of calls on this dip and I think I will make a tidy profit on Wednesday employing this strategy.

Anyone buying stock options to play AAPL earnings right now is just plain crazy.  Look at the premiums.  For the call and put options expiring this week AAPL will have to move OVER 10% just so you can BREAK EVEN.  That is not a sensible option trade in my opinion.  Let's wait until Wednesday morning after the premiums get crushed to more manageable levels.  Below is the option chain for AAPL.  The farther out you go the cheaper it gets, but even 10% out,   AAPL calls and puts are wildly over valued.

 

I think the money will be made on Wednesday, either playing the rip or dip.  Savvy option traders know better than to buy over priced options.  We'll wait it out, just like we did for SNDK on Friday, and ultimately make a nice profit.

Profile photo of uranium-pinto-beansKnown to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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