Apple Inc (AAPL) is set to release their most recent quarterly earnings report today after the bell. Stock is currently trading around $132.70, up nearly 2% today, in a 52 week range of $80.57-$133.60. The stock has been very strong this year with shares rallying nearly 20% year to date. Analysts have high expectations for this quarter’s earnings and market makers are pricing in a move that would represent a new all-time high for AAPL.
Some analysts are expecting AAPL to have sold upwards of 50 million more iPhones, but many believe that AAPL will once again far surpass these estimates. One of the focus points of the conference call will be news on Apple Watch sales. With versions of the watch selling out in a matter of hours on release day expectations for sales are very high. With expectations high and AAPL trading near its all-time highs how can a trader get long without putting too much risk on the table?
Let’s look at a few different options strategies a trader could use. With the options market implying a move of around $7.00 by this Fridays expiration a trader can develop an upside price target around $139.70. Using this target we can look at a few different strategies.
Expecting AAPL flat to higher:
Trade: Selling the May 1st Weekly 133-132 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $50 per 1 lot
Breakeven: $132.50
This trade offers a trader even money on AAPL rallying or trading flat after earnings.
Expecting a large move higher
Trade: Buying the AAPL May 1st Weekly 138-140 Call Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $138.50
This trade gives a trader a 3-1 reward to risk ration if AAPL trades above $140 on expiration.
A high reward, low risk trade:
Trade: Buying the AAPL May 1st Weekly 136-140-144 Call Fly for $0.65
Risk: $65 per 1 lot
Reward: $335 per 1 lot
Breakeven: $136.65 and $143.35
This trade has a huge reward to risk ratio but only profits if AAPL falls inside of a range on expiration.