How to Play AAPL, ISRG Earnings

Published on October 18, 2011

How to Play AAPL, ISRG Earnings

October 18, 2011

It was first posted for the OPN Income Newsletter’s Members.

Before you read further- please assume 100% loss upfront on whichever trade you take. Even though we might have win numerous times during the past (like GOOG recently), the chances of being correct are no better than flipping a coin. After screening all the tickers that are about to announce earnings after market close today and before market opens tomorrow (roughly 56 companies), here is my short list that I think will move and is worth spending sometime…

AAPL, CREE, ISRG, JNPR, BLK and FCX

ISRG, I prefer to open a NOV 420/430 (Bear Call) and 350/340 (Bull Put), roughly $4.70 credit as of this writing. The stock is expected to move some $25 or so, but the kick here is IV crash which should benefit the condor. Based on my past experience opening of Oct options is easy but closing those is hard (for a good price).

I think CREE, JNPR, BLK and FCX will not have pretty numbers. Either they will miss on earning, or revenues (most likely) and/or outlook. So I am biased for bearish trades. However, I couldn’t find good risk/reward structure. One needs to take risk here.

AAPL . I think they will announce “wonderful” numbers. No questions about it. But I think they are going to keep buffer in their pocket for the next quarter..for “what if”.. as that will be first quarter without SJ’s presence… there are two scenarios with AAPL.

  1. Gap-up and then fade throughout the day or
  2. Gap down.

I think 2) is the most likelihood but I have not met a single person who ever shorted AAPL. In case of AAPL Oct 390/400/410 Bear Put Butterfly seems to be a better risk/reward. I personally wouldn’t open bullish positions on AAPL. If I will, I’ll probably play with weeklies after earnings announced and stock gaps higher [i.e. scenario 1). ]

So bottom-line, I’ll assume 100% loss upfront and open a bear put butterfly on AAPL (debit $1.40 or so).

Disclaimer- As of this writing, I was long AAPL Oct 390/400/410 Put butterflies.

I shall update results post earning announcements.

3 Comments

  • Avatar Kim says:

    It’s interesting that with AAPL right at the middle of the range and only 3 days to expiration, the fly is worth only $3.50.

  • Avatar OptionPundit says:

    Hi Kim, How are you?

    Yeah, it was strange. I was originally expecting roughly $4.80 to $5.00 but it just didn’t reach that value. Though I didn’t track, it might be interesting to see if IV had anything to do with it?

    Did you play AAPL?

  • Avatar Kim says:

    Didn’t play it, just noticed that the fly is worth much less than I would expext. IV is down sharply but still around 30%, so it is probably related.

Leave a Reply

Facebook IconYouTube IconTwitter IconFollow Me on Instagram