The Apple earnings report – Look Both Ways

A lot could be said about the stock price rocket ship move from November 2011 until early April 2012 for $AAPL. One thing is for sure though, the earnings report after hours today has the attention of a LOT of people – for many valid reasons.

First, let me say that many of you will be long this stock into earnings and you really do need to consider some sort of downside protection – just a friendly suggestion. For those with no position, how can you participate in this earnings festival parade? There will likely be many suggestions for trade ideas, many using options, but this is what I am doing:

  • I am long the weekly 580 call and short the May 595 call. This was done for a $1.50 credit last week.
  • Today I added the trade that allows for the other direction, a Bearish bet. I am long the weekly 555 Put and short the May 540 Put. This trade was put on today for free ($16.4 price on each) so just cost of commissions.

Some things to note here:

  • These are earnings event trades and not meant to be held to May expiration (one side will be a “loser” so buying back the short option may be advantageous.┬áKeep most of the premium, reduce Risk, and trim down margin use).
  • The margin use will need to be considered if you do want to hold any short option position until May expiration.
  • There will be 3 trading days to deal with the weekly option components so there is a possibility that both directions can have value.

Buckle up, hold on tight, mouthpiece in. We are in for a bumpy ride.

Update: I have done the following as of 5/2/2012:

  • unwound the Put side of this trade for 2.30
  • Sold the weekly 580 call for 35.20
  • Buy to Open the May 4 weekly 595 Call thus creating a 595 Call Calendar with the May monthly call. Locking in $13.80 in profits if price stays under 595

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