How To Trade Around Apple Inc. (AAPL) Earnings

Apple stock newsThe Expectations for Apple (AAPL) Earnings

As many people are probably quite aware, the red hot tech giant, Apple Inc. (AAPL) is having their Q2 2015 Earnings Release this Monday, April 27 at 4pm EST. The current analyst consensus is $2.16 a share. This is up from the same period last year where consensus was $1.66 a share. In January, Apple announced earnings guidance and a gross margin expectation between 38.5% and 39.5% The revenue is forecasted at $56.1 billion compared with last years Q2 at $45.6 billion. In other words, Apple is still making money and growing their piggy bank, but, will that be enough to satiate the over enthusiastic investors and keep the big money bears away, looking to pounce and scalp any short term, perceived weakness?

Subscribe to The Prudent Speculator

Apple has a few key metrics that many people will be looking out for during the call. What are iPhone sales doing? Is China still one of their fastest growing markets? What are the numbers looking like for the new Apple Pay service? Will there be an update or timeline announced for Apple’s new television service? It has been reported that pre sales of the Apple Watch have exhausted supply chains and that demand is driving backorders and shipping delays, which one would think is generally a good thing. Then there are the dividend and share buyback plans. Apple announced in 2012, that it would pay out $130 billion in dividends and share buybacks through the end of 2015. So far, they have kept good on their word and have paid out $103 billion. At the end of 2014, Apple was sitting on $178 billion in cash. By all accounts, fairly astounding numbers.

Many investors, analysts and speculators suggest that Apple will be the first company ever with a trillion dollar valuation. Currently, it sits around $750 billion in market cap. Numbers like these draw savvy investors and novice retail traders to the market like moths to a flame. But, is Apple really a buy and hold here? Or is there a smarter way to trade around the numbers on Monday.

Trading the Event

As a long time trader and investor, I have definitely followed Apple’s story over the years. In 2015, I have traded Apple several times, and with 100% success thus far. After watching this company release new products and go through earnings calls in the past, it isn’t as simple as buying and holding and waiting it out. Sure, if you have time and aren’t an active trader, you can buy and hold Apple, collect your dividend, and cash in your shares 20 years from now if that suits you. However, if you have ever seen Apple’s previous earnings events and the subsequent price action in the stock, there is more going on that meets the eye.

Due to the extreme hype and pressure to constantly wow the investors, if Apple reports anything less than blowout numbers, beating on every level and increasing guidance forecasts, Apple generally tends to see a sharp sell off. It is the downside of being the king. All eyes are on you, and when you don’t give the people what they want, they riot, picket, complain, sell and short the stock. As a trading educator and active trader, I do not recommend playing Apple long or short through any volatile event. I can recommend however, if you are so inclined to trade this and want to be a part of the action, to consider a more conservative strategy that will help you manage your risk with this giant. You can see here where I traded around the events, not through them. I am a huge proponent of risk management and risk management techniques and in my opinion, a straddle or strangle options strategy is going to be the safest bet.

In a short, swing trade video recap from last week, I explained how I traded Apple most recently. There is no reason that even novice investors with capital looking to profit can’t take advantage of the price action in Apple and see 100% success rates too. Keep an eye for my trade alerts on Twitter and StockTwits, cause once we know what the numbers end up being, you can bet I am going to look for an entry on this goliath for another quick profit.

Where do you think we will see Apple in the coming weeks and months? Leave your comments below!

As always, if you have any questions about trading, education or anything discussed in this article, feel free to contact me [email protected]

Leave a Comment