Overall, weekly Jan. 24 options are pricing in a post-earnings move of about 5.5% for Apple stock. Such a move would place the upper bound near $580.50, while the lower bound lies near $519.50. While the low is well within the trading range AAPL has occupied for the past month, the upper bound would represent a fresh 52-week high, placing the shares within striking distance of the $600 level.
Click to Enlarge Technically speaking, AAPL stock in rebounding from near oversold levels after the shares were rejected near $580 in early December. AAPL is currently staring up at potential short-term resistance near $560, with long-term resistance looming overhead at $600. AAPL’s 50-day moving average is in the $550 region, and is converging on the stock’s 10-day trendline.
Despite high expectations for sales figures, and considerable exuberance surrounding Apple stock among options traders, I’m inclined to run with the bullish crowd heading into AAPL earnings. Chinese sales combined with strong holiday sales and new/updated iProducts should be more than enough to impress Apple’s historically bullish investing crowd. Here are two possible trades to make:
Apple Stock Trade #1:
As such, those traders looking to take advantage of a post-earnings rally for Apple stock might want to consider a Feb 550/580 bull call spread. This spread is offered at $11, or $1,100 per pair of contracts. Breakeven lies at $561, while a maximum profit of $19 is possible if AAPL closes at or above $580 when February options expire.
Apple Stock Trade #2:
For those looking for a way to play Apple stock that doesn’t require as much capital upfront, an alternate AAPL earnings trade could be a Feb 490/500 bull put spread — a trade that keys off AAPL’s technical support near at the $500 level. This spread is bid at $1.38 cents, or $138 per pair of contracts. The maximum profit is the $1.38 credit collected upon initiation, while a maximum loss of $8.62 is possible if AAPL closes at or below $490 when February options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.