Apple earnings: options market is pricing in 4.2% move in either direction

Apple is due to report earnings on Thursday after the closing bell. The options market is currently pricing in a 4.2% move in either direction.

Gavin McMaster for Investor’s Business Daily:
‎

Here’s how to set up a bull put spread to profit if Apple stock follows its recent pattern of reactions.

With implied volatility high ahead of earnings, we can structure a credit spread to fit the view that:

1. AAPL stock will stay within the expected range.
2. The response to the earnings report is likely to be positive.

Now that we know the expected range [4.2% of the price for Apple stock], let’s find a bull put spread that has the short strike roughly seven points below the stock price. The closest strike that fits is at $162.50.

So if we sell a Nov. 3 put with a $162.50 strike and buy a $157.50 put at the same expiration, we create a bull put spread.

‎
MacDailyNews Note: As McMaster explains in his full article>/a>, 16% return in a few days would be nice, but the possibility of losing 100% is also very much on the table. This style of trade is only for traders with a high-risk tolerance; options are risky and investors can lose 100% of their investment. So, if you don’t know exactly what you’re doing and if you aren’t prepared to lose your entire investment, don’t do it.
‎
Please help support MacDailyNews. Click or tap here to support our independent tech blog. Thank you!

Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.