SteadyOptions is an options trading forum where you can find solutions from top options traders. TRY IT FREE!

We’ve all been there… researching options strategies and unable to find the answers we’re looking for. SteadyOptions has your solution.

How To Trade Apple Earnings with Options


Last week Apple Inc (NASDAQ:AAPL) stock reached a one Trillion dollar valuation. A remarkable achievement. Of course there is nothing wrong with just buying the stock and holding it "forever". Today I would like to describe a different way to trade Apple using its options. It will also provide some insights into our trading process.

As most of our readers know, we trade non directional options strategies. That means that we don't care which direction the stock moves. Our strategies include mostly straddles, strangles and calendars around earnings.

This is how the process works:

  • Every week I post a list of trading candidates for the next week in Earnings Trades Discussions forum.
  • I post a separate topic for each candidate I think it suitable, with analysis of the suggested prices, average move, previous cycle etc.
  • The topic will always include a link to one of the relevant strategy topics above. This allows members to do their homework and to see if they like the potential trade.
  • I will try to get the trade at the best possible price.
  • When I do, I post it under the Trades forum.


Apple was scheduled to report earnings on July 31. Two weeks before earnings, we noticed that AAPL pre earnings calendar looks cheap. A discussion topic has been opened (please note the the discussion topic is always opened before the trade is placed):

image.png

This evaluation was based on proprietary software developed by one of our members. The software is designed to show the RV (Relative Value) of the strategies we trade in the last 8 cycles and compared them to the current cycle.

This is how it looked for AAPL:

image.png

The blue line is the RV in July 2017 cycle. The black line is the average of the previous 8 cycles. As you can see, the blue line was around 0.5% RV at T-10 (which is when the discussion topic was opened) while the black line had the potential to reach 0.65% RV or higher. That's 30%+ profit potential.

RV means "the price of the calendar as percentage of the stock price." With the stock price around $190, RV of 0.5% translates to $0.95 per spread. 

Based on the setup described in the discussion topic, the trade was opened later that day:

image.png

Please note that this was a half position (5 contracts, based on $10k model portfolio). We usually start with half position and open another half few days later.

Some members actually got better prices the same day:

image.png

A week later when the stock moved to $193.30, we opened the second half of the trade:

image.png

It is interesting that some members opened the second half even before the "official" alert went out, at the same prices:

image.png

Those members follow our recommendation of "learn the strategies and make them your own". They are able now to be much more independent and act based on our discussion topics, without waiting for the "official" alerts.

On July 30 (one day before earnings) I closed the first half of the trade:

image.png

And explained the reasoning on the discussion topic:

image.png

And few hours later closed the second half as well:

Capture.PNG

How other members did with this trade?

image.png

I hope this trade provided some insights into our trading process, community collaboration etc. 

Some people ask us what is our "secret sauce". The answer is: there is no "secret sauce". There are NO secret strategies. It's just hard work, a lot of discipline, risk management and backtesting. This is our "secret sauce". 

And of course in our case, it is an incredible value of our trading community. 

Want to learn more? Start your Free Trial

Related articles:

What Is SteadyOptions?

Full Trading Plan

Complete Portfolio Approach

Diversified Options Strategies

Exclusive Community Forum

Steady And Consistent Gains

High Quality Education

Risk Management, Portfolio Size

Performance based on real fills

Try It Free

Non-directional Options Strategies

10-15 trade Ideas Per Month

Targets 5-7% Monthly Net Return

Visit our Education Center

Recent Articles

Articles

  • The Gut Strangle

    The graphically named “gut strangle” is a seldom-used strategy, but it might work in some circumstances. This involves trading in-the-money calls and puts. A long gut strangle is set up by buying both options; and a short gut strangle calls for selling both sides.

    By Michael C. Thomsett,

    • 18 comments
    • 379 views
  • Selling Options When Implied Volatility is High

    In the second week of October 2018, the Dow Industrial Average tumbled 1,300 points within a two-day period just ahead of earnings season. How did it happen? There were several explanations for why stock prices sold off, but the most obvious was that investor fear had changed market sentiment.

    By Nathan Wade,

    • 1 comment
    • 149 views
  • Do all stocks have the same expected returns?

    When deciding to build a diversified investment portfolio, there are many different considerations. Which asset classes do you buy? Large cap or small cap? US only, or international too? Mutual funds or ETFs? How much in bonds? Passive or active? Growth or value?

    By Jesse,

    • 0 comments
    • 199 views
  • Selling Puts: The Good, The Bad And The Ugly

    Hardly a day goes by that I don't read an article or hear some pundit extol the merits of selling puts (put-write).This article will discuss various variations of put-write strategies. What accounts for put-write strategies under-performance? How to fix put-write underperformance? Why "easy money" isn't so easy.

    By Reel Ken,

    • 0 comments
    • 378 views
  • The “OOPS signal” trade

    Have you been taken by surprise by movement of your stock? Options traders who find themselves on the wrong side of a trade have experienced this dilemma, but as often as not, it occurs as part of a move and retracement.

     

    By Michael C. Thomsett,

    • 0 comments
    • 413 views
  • 14 Tips to Better Trading from Home

    Here are 14 actionable ideas that will help you improve your trading from home. Implementing these ideas will help aspiring traders move toward the consistent profitability they seek.

    By TFCAB,

    • 0 comments
    • 7,137 views
  • Powerful Channel Signal – Combining Bollinger and T-line

    Technicians tend to focus on single indicators, such as Bollinger Bands or the t-line. These are used to attempt to perfect a timing system. Individually, each signal has merit. Combined, the reversal signal is exceptionally strong.

    By Michael C. Thomsett,

    • 0 comments
    • 6,784 views
  • Following Signs That Others Ignore (VIX Study)

    In fact, the crowd sees hardly anything out there that might end this market party.” Michael Santoli made the above statement during CNBC’s closing market wrap on January 26th, 2018. He had reason to throw caution to the wind as the S&P 500 closed the day up by more than 1%, setting another record high.

    By Michael Lebowitz,

    • 0 comments
    • 489 views
  • Revisiting Anchor Part 2

    Last month we posted some updates to the Anchor strategy that were obtained using an in-depth back testing of the strategy and variations of it using the ORATS Wheel software.  We adopted three conclusions last month:

    By cwelsh,

    • 4 comments
    • 507 views
  • Covered Calls –Does Rolling Forward Mean Higher Risk?

    Do you roll forward to avoid exercise? It seems like an obviously advantageous move. You avoid exercise and generate a net credit. What can go wrong? Actually, rolling incurs more risk, and every covered call writer needs to study the potential roll and compare the advantages of rolling versus closing and taking a loss or allowing exercise.

    By Michael C. Thomsett,

    • 0 comments
    • 652 views

  Report Article

We want to hear from you!


There are no comments to display.



Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoticons maximum are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

Options Trading Blogs