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Apple (NASDAQ:AAPL) announces earnings tomorrow, just one day before the October 4-12 options expire. As usual, implied volatility (IV) for those weekly options has skyrocketed -- this time to about 74, compared to the November 12 series, which is about 40. There are usually good opportunities for potential big gains when you can buy options with an IV that is considerably less than the IV of the options you are selling.

Will the market react positively or negatively to Thursday's announcement? I don't know, but for the last few years Apple has generally exceeded analysts' expectations -- 37 out of 39 times, by some reports. That doesn't always result in a higher price for the stock, however, and both earnings misses over this period took place in the last year.

One recent Seeking Alpha article makes a good argument that the outlook is positive for at least a flat post-earnings price and possibly higher. I personally am bullish on the company and can't quite understand the recent sell-off, when the major difficulty for the company seems to be that it can't make iPhone 5s fast enough to keep up with the demand.

One Seeking Alpha writer cited an admittedly small sample that his local Verizon store had not received a single iPhone 5 since introduction day. I got the exact same word from my local AT&T store, except it had changed the indicated wait from three to four weeks to 14-21 working days. That seems to be pretty much the same wait time to me. It also had not received a single iPhone 5 since introduction day.

Supply issues aside, demand for the most profitable product in Apple's line seems to continue to be robust. Regardless of how many iPhones 5s were actually sold in the quarter ending Sept. 30, company guidance for the fourth calendar quarter is likely to be positive. This might well give a little boost to the stock, especially after the recent weakness that we have seen.

To my way of thinking, the best way to take advantage of the big IV difference between the November options and the October 4 weeklies is to buy calendar spreads, and to buy them at strike prices both above and below the stock price so that you have a broader range of possible big gains. As surely every who is familiar with calendar spreads knows, the closer the stock price ends to your strike price the greater your gain.

The average cost of a November-October 4 calendar spread is about $7.50 - $8.00. After Friday's expiration, an at-the-money November option with three weeks of remaining life should be trading for about $16, so you could more than double your money at that strike. Strikes about $10 away from the stock prices should also be selling for a premium of about $11 compared to the cost of the calendar spreads.

Here is the risk profile graph for a selection of calendar spreads extending 30 points in either direction from the current stock price (about $615 as I write this).

Click to enlarge images.

These are the seven spreads that resulted in the above graph:

These seven spreads should cost about $5,600 to place. The graph suggests that at least a 50% gain should result from the seven spreads as long as Apple fluctuates less than $30 from its current stock price after the announcement. If the stock remains pretty much where it is right now, a gain of about 90% is possible. The great majority of the time, the after-earnings price change has been much less than $30, making this bet look like an attractive one to me. Even at the last announcement, which was so unexpectedly off, the stock only fell about $22.

This graphing software assumes that IV for the November options will remain the same (about 40) after the earnings announcement, but I suspect it will fall a bit (probably to about 36 which is the IV for the December series). This means the actual gains for these spreads might be less than indicated if all of the spreads are closed out on Friday.

But the potential gains do seem attractive over a fairly wide range of possible stock prices. As long as Apple does not come out with a huge earnings disappointment as we saw in Google (NASDAQ:GOOG) this week, these calendar spreads should be profitable. I plan to buy a few of them myself, and hope for a flat or moderately higher (or lower) stock price at the end of the day on Friday.

Source: An Options Play For The Upcoming Apple Earnings Announcement