A Few Ways to Look at Earnings
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A Few Ways to Look at Earnings

Henry Gambell - April 26, 2016

Getting Your Head on Straight

Good evening, everyone. This is Henry Gambell with Simpler Options, and in tonight's free video, I want to spend some time talking about AAPL (Apple).

Apple is set to report earnings tomorrow or Tuesday after the close, and there's three ways that I think you have to look at earnings. You're essentially going to look at earnings either saying I'm going to try and catch a move into the report, I'm going to play it directly on the report, or I'm going to wait for the results of it, and then try to look to capitalize on that.

I would say the easiest, if there are, or if there was an easy way of the three, would be to wait for the report and see what happens after that number, because you have so much more information then, rather than playing something directly on top of it. The other would be buying something like a straddle for a move into the day.

So into the close today, I was looking at this with the at-the-money straddle. Just the general concept that, as of now, implied volatility is relatively low in this series for Apple. If that can increase for me into tomorrow, I will not hold that position through the report.

The whole idea with something like this is that the volatility increase is able to overcome the one day of theta. Of course, being early in the week helps that time premium, as well. And if I can get in tomorrow afternoon, see this value rise, then I will sell that just before the report. Once that is through, I would take this analysis and use it the exact same way, whether you're going to play it prior to earnings, or after.

So we've got about a $5 expected move, and it looks like a very nice range here, from $100 into about $111, with a close at $105, that lands us almost exactly in the middle of the range, technically, and market makers are telling us that they're looking for about the same type of move.

So, either working iron condors around that, or doing strategies like iron butterflies, will be worth considering. And then once the report is out, try to play it, provided nothing crazy happens, but short at $111, and long at $100, would make sense after the report, and that is every aspect of how I will be looking at AAPL into tomorrow. I hope that helps.

One thing I want to make sure you guys were aware of: we will be having a free webinar tomorrow night with John F. Carter. He's had some time to really reflect on his trading, and I know he's been with a lot of excellent mentors, and I'm excited to see what he's come back with, because the psychological side of trading is one of the biggest ones. It's one of the things that I think gets the least amount of attention, though we would probably do better to put it first. I'm really interested in what I'm going to learn in this, as well. John's going to bring you everything that he's been using to keep his head on straight.

You want to be executing earnings? Or being able to really tolerate those types of moves? I think this will be an excellent course, and I hope to see you guys there.