Should You Trade Apple's Earnings Release?

04/17/2013 8:00 am EST

Focus: OPTIONS

Scott Redler

Chief Strategic Officer, T3 Trading Group

As one of his favorite stocks to trade, Scott Redler of T3 Trading Group offers a potential earnings trade for Apple as it heads into its earnings release next week.

In today's "Morning Call," show I did not even think about mentioning Apple (AAPL), which, if you know me, is really a sign that there is not much opportunity with that stock right now. This high-beta tech giant has been in a steady downtrend since its September peak just north of $700, and more recently tried to bounce off a double bottom of $419. Now, it hovers just a few points above that pivot low once more. AAPL's last tradable move came last month when the stock briefly cleared its 50-day moving average, but it just couldn't commit to that level.

AAPL releases its earnings on April 23, which could be the catalyst to bring some volatility to the equation. Following its last earnings report in January, AAPL promptly plummeted in one day from $514 to $450, and has not yet recovered. Should AAPL continue to drop below $419, the next support level is between $360-$380, which is a sizable potential downside move.

So far, one can only speculate how upcoming earnings could affect AAPL, but it could propel the stock higher if CEO Tim Cook were to finally increase the dividend or announce a buyback program. Even if AAPL were to only re-test its 200-day, that would represent a substantial move back above the $500 level.

If AAPL is still in the $425 area leading into earnings, I could think about putting on a call spread, but I will drop it if the earnings report is lukewarm or if CEO Cook continues his style of lackadaisical leadership.

By Scott Redler, Chief Strategic Officer, T3 Trading Group

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