Go Long Apple Inc. (AAPL) Stock For Free Into Earnings

AAPL stockIt’s hard to commit long AAPL stock near all-time highs, but we can do that with confidence, even into the uncertainty of earnings

I bet that by reading today’s title, you have already pegged me as an Apple Inc. (NASDAQ:AAPL) perma-bull. I can assure you I am not. Although I like the current money-making machine that is AAPL stock, I don’t like the direction in which Tim Cook is taking the company.

In the long run, I think the CEO will ruin Apple, but for now it continues to roll on rails.

Meanwhile, I continue to successfully trade the price action in either direction using options. Just recently, I shared two trades that were easy wins. The first was on how to go long AAPL with confidence, and another on how to short it. So you see, I am merely profiting from the price action in AAPL stock without making judgement on the company’s prospects.

Don’t get me wrong. I use the fundamentals in how I structure my trades, but I do so without any immediate directional commitment. I find that it’s best to not get emotionally involved in what I am trading.

How to Trade AAPL Stock Right Now

The bet: Buy the June $145 calls for $3.20 per contract. I need Apple shares to rally past my strike to really profit, and the faster the better. The May 2 earnings event could be the trigger that causes a big spike in AAPL. I chose June contracts just to give myself some time to be correct just in case investors have a temporary bad earnings reaction.

To mitigate my risk and lower my out-of-pocket expense, I will sell risk against perceived value in Apple stock. This is where the fundamentals merge with the technicals.

I must find levels where I am confident that buyers would buy shares if they fall. For that, I picture someone like Warren Buffett. I bet that he would add to his position in AAPL stock if it retests the low $100s, and this represents potential support.

The bank: Sell the Jan 2018 $115 put for $2 and with 90% theoretical confidence that this leg will be successful. So combined, I’d be long AAPL stock for less than half as buying the calls alone.

I could change the sold naked puts into a credit put spread to make the bank more palatable to milder risk tastes.

Note: The author of this article is Nicolas Chahine. Nicolas is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities.

 

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