In Search of the Next Apple Pre-Earnings Trade

It was just this past weekend when I laid out my latest strategy trading Apple (AAPL) pre-earnings including updated historical data. Much to my surprise, my calendar call spread closed out at its pre-earnings profit target as AAPL followed through on Tuesday from Monday’s big 2.3% rebound. (As a reminder, my ideal scenario featured the short side of the position expiring worthless and then AAPL rallying into earnings next week).

Apple (AAPL) is stretching for its 2019 high.
Apple (AAPL) is stretching for its 2019 high.

The profit paid for my hedge using a put spread, but I am left with the question “should I reload on a new trade?” The answer is “it depends.”

At Wednesday’s closing price of $208.67, the options market is still pricing in about a 10-point move by the first post-earnings expiration of August 2nd. The market is clearly fixated on the 10-point price move even though this size of a move, plus or minus 4.8%, is larger than what history suggests is likely. With the hedge paid for, I am more inclined to sell premium back into the market. However, I do not want to take the risks of doing something like selling the Aug 2 $215 call option (closed today at $2.20). So, my preferred option is just to wait and react.

If AAPL manages to pull back 3 to 5 points, I will either reload on the original calendar call option or, more likely, buy am Aug 2 $210/$215 call spread. If AAPL continues to rally into earnings, I will either stand down or sell short a $220/225 call option. The lowest strike will be set at 10 points higher than the price at the time of the trade.

If I make any new moves, I will be sure to write about it.

Be careful out there!

Full disclosure: long AAPL put spread

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