Apple Earnings Trade Ideas: PE 1-23-13 part 2
- Posted by Greg Harmon
- on January 23rd, 2013
One more name today that reports tonight, Apple, $AAPL.
Apple, $AAPL, has been falling since topping out at 701 in September. The Relative Strength Index (RSI) is trying to move higher but in bearish territory and the Moving Average Convergence Divergence (MACD) indicator is negative but flat. The trend remains lower. There is resistance at 555 and 565 followed by 595. The Hagopian Line has been acting as resistance as well and stands at 530 very near the 50 day Simple moving Average (SMA). Support lower comes at 500 and 483 before 476 and 450. The reaction to the last 6 earnings reports has been a move of about 4.72% on average or $24.25 making for an expected range of 487 to 540. The at-the money January Straddles suggest a larger $36 move by Expiry with Implied Volatility at 115% above the next week at 60%.
Trade Idea 1: Sell the January 445/590 strangle for a $1 credit.
Trade Idea 2: Buy the January 540/550/555 broken wing call Butterfly for $1.91.
Trade Idea 3: Buy the January 480/470/465 broken wing Put Butterfly for $1.64.
Trade Idea 4: Buy both Butterfly’s for $3.55.
I will not be taking these as some of you may have seen me sell to open a January 470/450/430 put Butterfly. This is now paired against my outstanding February 475/450/425 Put Butterfly and reduces my cost.
#1 is a good income trade but will eat margin. The good news is that it is only for 2 days if you have that margin. #4 allows you to participate either direction on a move of $30, and if it blows out to one side still gives you a 1.45 profit.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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