AAPL Which Way Will It Go George?


AAPL reports earnings after the bell tomorrow and it is one of the most anticipated events each earnings season.  From a strictly out of the money, close to expiration, option perspective AAPL has been a loser over the long haul.  The main reason being the options price in a big move and this move usually does not happen,  which means I likely will not play AAPL options for earnings, although I may get into a trade the day before and sell on Thursday for the premium build up near the close.  Option prices are showing a market that is anticipating another volatile post earnings session for AAPL, which means only one thing....

AAPL, like NFLX ( a stock that has a similar out of the money price build up), will ultimately trade no more than 2% in either direction. This will kill all the out of the money speculators who are paying BMW type money for Ford Pinto type quality.  Look at some of the strikes - the $660 strike is at $1.00.  That is a full 10% move.  The $540 strike puts are going for $.85.  The odds are against either type of move, however where I forced to trade AAPL for earnings I would get equally insane and go even farther out of the money.  If AAPL doesn't make my anticipated 2% move in either direction, I think it will pull a 15% move which would make those out of the money speculators very happy.  If you share my view the $680 strike closed at $.30 and would be worth $10 if we get a 15% move from AAPL.  The $520 puts are also going for $.30.  CMG's 20%+ slide showed on Thursday night and Friday that anything is possible these days when it comes to earnings reports.

I may change my mind with AAPL tomorrow and take a small position in both the puts and calls, essentially a strangle.

The $680 calls for $.30 -  8 contracts = cost $240 (+ commission)

The $520 puts for $.30 - 8 contracts  = cost $240 (+ commission)

With every analyst and his brother maintaining buy ratings on AAPL and $1,000+ price targets I do think the stock will head higher.  It's done nothing but go up since late 2008.  Heading into earnings back then I was buying up $90 calls.  To think less than 4 years later I am looking at the $680 calls.  LEAPS!

The answer to the title of my post is quite simple....we don't care.  We don't care where AAPL goes when we have a strangle.  That is the luxury of trading stock options.  All we need is a big move.

Known 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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2 thoughts on “AAPL Which Way Will It Go George?”

  1. I still don’t understand why your group doesn’t like to trade AAPL.  Yes, there are better returns to find out there but AAPL appears to be easy money.  I bought the $650’s today for $1.20 and sold over $2.28, an 88% move.  Yes it is putting more money out there than you would like to do however I have no problem putting that money out there b/c I knew there was a trade there.  That’s where I’m confused.  Is it just about getting better returns somewhere else? 

  2. Oh and btw, I did hold onto a few of those calls for tomorrow trading session (before earnings).  I may let all go except one call just to see exactly what happens after earnings as I haven’t ever held into earnings before since trading options.  

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