Apple (AAPL) Earnings Strategy

By Jan 23, 2013, 2:16 PM Author's Blog  

Apple (NASDAQ:AAPL) is up slightly today ahead of its earnings report after the close. The company is expected to post sales growth of 19%, and in the trading community there is speculation that it will need margins above 37% to impress. Apple’s guidance for the next quarter is also in focus and it could play a big part in driving the stock price either way. AAPL has a reputation for very conservative guidance, but a very low-ball number could frighten investors.

I am going to play into earnings with a call spread. With an options strategy, the risk on the trade is premium paid. I bought the $525 call and sold the $550 call with a ~$5 cost basis. If the report is any good, the huge descending channel will get resolved above $530. The next resistance after that is $555ish, and then after that there is $574 and $590. If it’s a soft report, the spread will be a 000. Risking $5 to make $20, I’m willing to go with that. Then the report risk will be out of the way and I’ll trade the stock and measure it depending on where it’s trading.

The levels to watch are recent low at $483, then a weekly support at $470ish and then major support at $440.

(click to enlarge)

They often halt the stock after the report so using this option strategy is how I will stay involved. I might also trade it after hours. I put on half my call spread yesterday and haven’t done the other half yet.

Disclosure: GE, LNKD, WMT, TASR, MGM, DBC, CAT. Long AAPL 525 calls, short AAPL 550 calls. Short IYT, SPY.

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