Apple Earnings Trades: This Is Only A Test

Apr.22.12 | About: Apple Inc. (AAPL)

I wish Pandora (NYSE:P) and iTunes - my two primary sources of "radio" listening - had to run tests of the Emergency Broadcast System. When I worked in terrestrial radio, it was big fun to have to activate one. It made me feel like I was a secret agent or something. As a listener, these tests often beat hearing Stairway to Heaven for the third time in one "Triple Shot Weekend."

In that spirit, this article is only a test. If these were real and actual trades, you would gain or lose a lot of money.

Apple's (NASDAQ:AAPL) April 24 earnings report might be one of the most anticipated of all-time. It comes slightly before or after the last one, depending upon who you ask. Over the last several weeks, many of us have gone back and forth trying to determine how to play it. In this article, I objectively lay out different ways to do it, via the stock as well as options. We'll check back next week to see how things turned out.

A couple of rules. We'll take Friday's closing prices for all trades. We'll close everything out one hour after the market opens the day after Apple's report. That's 7:30 a.m., Santa Monica, California standard time, Wednesday, the 25th, give or take a few minutes on either side of 7:30.

Go Long The Stock

  • Buy 100 shares of AAPL at $572.98.

Short The Stock

  • Short 100 shares of AAPL from $572.98.

Long Call Options

  • Buy 1 AAPL May 2012 $500 call for $79.80.
  • Buy 2 AAPL May 2012 $570 calls for $31.20.
  • Buy 9 AAPL May 2012 $640 call for $8.65.
  • Buy 1 AAPL Jan 2013 $500 call for $113.00.
  • Buy 1 AAPL Jan 2013 $570 call for $74.60.
  • Buy 2 AAPL Jan 2013 $640 calls for $46.10.

Long Put Options

  • Buy 13 AAPL May 2012 $500 puts for $5.70.
  • Buy 2 AAPL May 2012 $570 puts for $28.25.
  • Buy 1 AAPL May 2012 $640 put for $76.30.
  • Buy 2 AAPL Jan 2013 $500 puts for $41.50.
  • Buy 1 AAPL Jan 2013 $570 put for $73.40.
  • Buy 1 AAPL Jan 2013 $640 put for $115.05.

Let's see how this little experiment goes. If it yields anything useful, we'll throw in some options spreads ahead of Apple's next report.

Disclosure: I am long P.