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TheDumbMoney (67.28)

I'm Not An Options Trader, But Apple Seems Like a Straddle Candidate



April 21, 2012 – Comments (2) | RELATED TICKERS: AAPL

I'm just sayin'. 

Going into Apple earnings on Tuesday, it seems like a long straddle is a pretty good trade.  There is a high degree of uncertainty about Apple earnings.  They are likely to drop versus the fourth quarter of 2011 (which is the first quarter of Apple fiscal 2012), because that was a spectacular outlier quarter after release of iPhone 4s and because of holiday season.   There are also tons of rumors circulating around about things like slowing iPhone sales because of some Verizon numbers, etc.     

Anyway, I think there is a high likelihood that the stock is going to go either up a lot or down a significant amount upon the release of earnings.  I don't know which it's going to go, however.  The only thing I'm confident about is that when earnings are released, the stock is not going to calmly sit down and eat a taco. 

That is the whole point of doing a straddle.  I'm going to game this out with imaginary options, priced as if I really bought the options, just to play with it, without risking any money.  I don't recommend anyone actually follow this idea with real money.  But gaming it out could prove an interesting intellectual exercise.

2 Comments – Post Your Own

#1) On April 21, 2012 at 12:44 PM, TheDumbMoney (67.28) wrote:

I should note, this would have been a much better trade to set up two weeks ago.  So much volatility is probably priced into options now that it will not pay off unless there is a TRULY signfiicant move.  I'm just gaming this.  Again, playing with ideas, no real money.

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#2) On April 22, 2012 at 11:59 PM, Valyooo (33.89) wrote:

The real play was puying puts at $630, when it hit resistance.  those things were up like 400% in a week.  I thought it was so obvious, and I did nothing about it...h8 my life

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