Apple Earnings: It needs to be little more than speculation

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Apple is going to announce earnings after the market close today. Though there are lot of big names who are going to announce today after market close and tomorrow before market opens, I am going to focus only at Apple (AAPL). I have succesfully tested multiple strategies to play earnings on Google, but this is an interesting play. All those earning strategies had one thing in common, expiration week. During expiration week, option premiums has very little time value left in it and hence tend to be cheaper. It’s cheaper to play backspreads, OTM butterflies, straddles or strangles during that time. Even simple straight call and put also are cheaper vehicles to speculate.

Now compare this with Apple this time, there is one full month for Aug expiration and option premium are very expensive. Expensive for two reasons, a) IV has shot-up to 50s and 2) Time value of one full month.  Add to this the fact that aaple is making new high literally everyday except last two session. It was down y’day on iPhone numbers.

winning-trade_10.jpg Here is the IV chart of one full month. Now with so much on stake, I don’t want to play it like Google simply becuase it’s expensive to do this. Which means I also need to lower my reward expectations then. So far I found only one trade that is offering me an ok (not so great) risk/reward. Right now I have modeled the trade based on after market close prices.  I shall share this once market opens and I have real prices to factor into it.

Till then, enjoy the volatile rides in the market,

Profitable trading, OP






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