Apple ($AAPL) releases quarterly earnings after the closing bell today. Most traders intent on trading AAPL earnings rush to the Option series closest to the earnings event because the “uncertainty” around the earnings event marks up the premium of these Options. It is tempting to sell premium in this series because Implied Volatility is so high, and premiums are juicy. Optiontiger is the creator of proprietary Options trading strategies that give traders a 75% edge on every trade. Please visit these links for more information. 1) SwingtradeMAX for swing trades - 20% to 80% in a few days to few weeks - http://www.optiontiger.com/swingtrademax/ 2) DayTradeMAX - this is daytrading on steroids - http://www.optiontiger.com/daytrademax/ 3) CondorMAX to manage Iron condors - http://www.optiontiger.com/optionedge-trading-system/ 4) IncomeMAX spreads and straddles systems - Dredit and debit spreads and Straddles and Strangles - http://www.optiontiger.com/incomemax-strategies/ 5) EarningsMAX - Powerful playbook of Earnings trades. Take advantage of Volatility bump and the "Crush" http://www.optiontiger.com/earningsmax/ YOUTUBE CHANNEL ------------------------ To access over 400 Options education, trading, and stock market videos, please visit our YouTube Channel – https://www.youtube.com/user/OptionTiger

2. Trading AAPL Earnings today
Apple ($AAPL) releases quarterly earnings after the closing bell today. Most traders
intent on trading AAPL earnings rush to the Option series closest to the earnings event
because the “uncertainty” around the earnings event marks up the premium of these
Options. It is tempting to sell premium in this series becauseImplied Volatility is so high,
and premiums are juicy. But there are perils with this approach – If in fact AAPL makes a
very large move, premium sellers could face significant losses in this series. But there can
be some very attractive opportunities if you move 1 series out in time. Lets take an
example from today’s AAPL prices around 11 am.
Figure I above shows the different series with the Implied Volatility and the expected
move as calculated by a 1-standard deviation move. The Oct4 Weeklys expire tomorrow.
Look on the right hand side, it has an Implied Volatility of 92% with an expected mo ve of
+ or – 32. Implied Volatility of 92% will certainly bid up Option prices, but you only have
1 day. And if AAPL moves more than 32, the positions you sold will get into trouble. A
better opportunity lies right below that series in Nov1 weeklys expirin g next Friday (8
days). Its Implied Volatility is 47%, the Nov monthly Implied Volatility is 40% and
thereafter most series are 35 to 36%. So we can safely say that 35 to 36% is the steady
state Implied Volatility as of today, and were it not for earnings being released today, all
the Option series would be at this level. In fact, tomorrow morning, you’ll see that all
Options series will be very close to 36% because the earnings event is over. So the Nov1
Weeklys can be expected to collapse from 47 to 36, which is a 11% point drop in Implied
Volatility. And the best part is your risk exposure is minimal because you have time to
react (next 7 days).

3. So a better way to play AAPL earnings would be sell a strangle in the Nov1 weeklys. You
want to stay away from the series that’s expiring tomorrow, but go out 1 series. The risk
profile of a strangle in the Nov1 series is shown below. You’re selling 1 contract at the
570 / 650 levels. You get a premium of $1100 on a margin of $8620. Your breakevens are
at 560 and 662. As long as AAPL stays between these points, your strangle will be
profitable. Notwithstanding, you can expect a drop of about 10 to 11% on Implied
Volatility itself, so this by itself gives you a very big edge in the trade. Even if you keep
the trade open until Monday, you should capture a return of 10% return in a few days, or
a triple digit annual return if AAPL does not move close to the breakeven points. Also
note that the breakeven points are outside of the 5% (red lines), they are more lik e 7 to
8%. Pretty safe trade ??
I’m putting this trade on today, and let’s see what happens. Will post an update
tomorrow. If you have any comments or thoughts on this trade, please post them below
in the comments section. Thanks for reading !
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