AAPL Earnings – Follow Up to the Weekend Review

In my Weekend Review I mentioned a trade from the Options Action guys around Apple earnings (AAPL – 557.50). Basically the idea was that AAPL options are pricing in a much larger price reaction to earnings that the historical norm. This trade was also based on pricing from last Friday and it was mentioned on the show that you should consider the same concept, but adjust for pricing just before earnings. Well it’s just before earnings and based on AAPL around 557.50 here’s what strikes match up to the concept spelled out before using the Weeklys on AAPL that expire this coming Friday –

Long 1 AAPL 520 Put @ 4.60

Short 1 AAPL 530 Put @ 7.00

Short 1 AAPL 585 Call @ 7.45

Long 1 AAPL 595 Call @ 5.00

Net Credit = 4.85

Maximum Risk = 5.15

 

Also, I just happened to see a friend of the Options Institute, Dan Sheridan, and his feeling was if you agreed with the concept that the options are overpricing AAPL’s reaction to earnings tomorrow then you may want to consider an Iron Butterfly instead. If you like Dan’s take on this idea then one version may be an Iron Butterfly structured below.

(Note – AAPL had moved to 559.00 when I priced this one)

Long 1 AAPL 520 Put @ 4.25

Short 1 AAPL 560 Put @ 18.45

Short 1 AAPL 560 Call @ 18.75

Long 1 AAPL 600 Call @ 4.50

Net Credit = 28.45

Maximum Risk = 11.55