Take A Mini Bite Of Apple (AAPL) Before Earnings
Apple, Inc. Credit Spread (Nasdaq: AAPL)
TheOptionPlayer.com sets up an Apple (AAPL7) short-term (8-day) option strategy. Investors could simultaneously:
Sell the Oct. week-four expiration AAPL7 mini-option $520 call for $1.62 (yesterday's closing price)
Buy the mini-option $525 call at $1.03 (yesterday's close)
The difference between funds received and paid out is a $.59 per share credit which we keep if Apple stock closes below $520 on Friday October 25th, but immediately exit the position if it appears the price will end up higher. Another recommendation is if the price gaps higher in the morning open the trade using higher strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
Mini options trade for one tenth of their standard counterparts. A standard option is for 100 shares of a stock, but the mini option is on 10 shares. Mini options will help you to play complex strategies with lesser amounts of cash, otherwise they function exactly the same as standard options.
Apple, Inc. (NasdaqGS: AAPL) has fallen out of favor with traders lately. As other major technology stocks have been hovering near their 52-week highs Apple shares have been stuck in a trading range since the summer. Even as the NASDAQ index has attained all-time highs and pulled other tech stocks higher, Apple has not kept pace. You can see in the chart below that after crashing to a 52-week low in the spring Apple stock gradually recovered, but has not been anywhere near its 52-week high since.
The most recent Apple iPhones have been getting mixed reviews with some pundits openly speculating whether the iPhone 5c is a failure. Apple's iOS 7 product is evolving into its most troubled mobile operating system update, spreading concerns that the technology giant has lost some of its golden touch since co-founder Steve Jobs passed away two years ago. Apple announces earnings on October 28th and investors will be anxiously awaiting the results and future guidance. Apple stock will probably remain in a trading range until after the earnings report and depending on how analysts react to the news will determine if the price breaks out. The chart confirms that Apple has not been above the target price all year and for another week there is a high probability that Apple, Inc. stock will continue to trade below the target price.
52-Week High: $635.38
52-Week Low: $385.10
Average Volume (3 month): 12,866,900
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.