The earnings calendar is packed this week, with Apple Inc. (NASDAQ: AAPL) headlining a slew of heavy hitters slated to take the stage. Wall Street is expected to at least pay lip service to Apple’s top- and bottom-line figures, with analysts expecting a 25% jump in earnings to $2.59 per share and a 17% rise in revenue to $57.6 billion.
However, iPhone unit sales will likely be the big mover for Apple stock.
Expectations are rising heading into Apple’s quarterly report, and holiday-quarter sales figures for iPhone unit sales range between 61 million and 71.5 million iPhones shipped.
As you can see, there is plenty of wiggle room here, though any figure near the midpoint of this range should have positive results for AAPL stock.
Speaking of high expectations, the brokerage community is aglow with bullish activity. First, EarningsWhisper.com reports that Apple’s first-quarter whisper number arrives at a lofty $2.74 per share, well above the consensus.
Meanwhile, Thomson/First Call data reveals a whopping 41 “buy” ratings, compared to just nine “holds” and one “sell” rating. There is room for improvement, however, with the 12-month consensus price target of $124 representing a meager premium of only about 9.8% to Friday’s close.
If Apple can live up to Wall Street’s expectations, price-target upgrades could add fuel to a post-earnings rally for Apple stock.
Turning toward the options pits, short-term traders are also betting heavily bullish on Apple stock. Currently, the January/February put/call open interest ratio arrives at 0.51, with calls nearly doubling puts among options set to expire in the next month. This ratio plunges lower when we zero in on the soon-to-expire weekly Jan. 30 series, dipping to a reading of 0.43.
As I noted this morning, AAPL has been the target of heavy call activity recently, with about 68% of Friday’s activity crossing on the call side of the tape. I would expect this trend to continue throughout today and tomorrow heading into Apple’s quarterly earnings report. 
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Overall, weekly Jan 30 series option implieds are pricing in a potential post-earnings move of about 5.3%. This places the upper bound near $119, while the lower bound lies at $106.95. Apple stock’s short-term low resides near $105, so a selloff this week would leave the stock with a reasonable buffer before hitting key support.
A rally, however, could take AAPL to the edge of short-term resistance near $120, especially if iPhone unit sales come in at the high end of analysts’ range.
2 Trades for Apple Stock
Call Spread: Given Apple’s strong price action and the stock’s considerably bullish sentiment backdrop, I’m inclined to side with the bulls heading into Tuesday’s report. Those looking to join the stampede might want to consider a Feb $114/$120 bull call spread.
At the close of trading on Friday, this trade was offered at $2.06, or $203 per pair of contracts. Breakeven lies at $116.06, while a maximum profit of $3.94, or $394 per pair of contracts, is possible if Apple stock closes at or above $120 when Feb options expire.
Put Sell: If an outright bullish bet isn’t your style, you could look into a bull put sell position as a way to capitalize on Apple stock’s strong technical backdrop. Along those lines, a weekly Jan 30 $100 put sell may fit the bill. After the close on Friday, this Jan $100 put was bid at 25 cents, or $25 per contract.
The upside to this put sell strategy is that you keep the premium as long as AAPL stock closes above $100 when weekly Jan 30 options expire at the end of this week. The downside is that should AAPL trade below $100 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $100 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
