This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

A Better Way to Play Apple Earnings

Stocks in this article: AAPL

Simply put, from my perspective, you must be long-term bullish on the stocks you write covered calls and cash-secured puts on, particularly around earnings, because you could be left holding a stock at a loss.

Apple (AAPL) reports on April 24. Because this comes after April's options expiration day (the last day to trade April monthly options is Friday, April 20), we'll look out to May for the trade.

If you are long-term bullish Apple and have cash on the sidelines to buy the stock, consider selling the Apple May $605 put. As of Monday's close, you would collect $18.40 ($1,840) in premium that you keep no matter what. If Apple breaches $605 between now and options expiration day, you run the "risk" of getting put shares and having to buy 100 shares of Apple for $605 apiece for every put you sold, regardless of Apple's market price. Because of the premium you received for writing the call, you would not start to lose money on this trade until Apple traded below $586.66 ($605 strike minus the $18.40 premium).

Of course, this trade anticipates a pullback in the stock. If you do not see that happening, you can always increase the strike price to something closer to or around-the-money. Again, just make sure you're comfortable buying the stock at that particular strike.

In the event that you get put shares, you could simply hang on to them and proceed as you would with any other stock transaction. But to keep the income train rolling, you could look out to June come mid-May and write out-of-the-money Apple covered calls against your position. When you select a covered call strike, you have to consider your cost basis on the stock and make certain that if you get your shares called away, you'll be happy with the price you're getting.

For instance, in this example, if you get put Apple at $605 (with a breakeven of $586.66), you'll want to use those numbers in conjunction with covered call strike prices to calculate your return in the event your shares get called away. Writing the Apple June $630 call would cap your profit at 4.1% using $605 as a cost basis and at 7.4% when you factor in the premium and use $586.66 as your cost basis.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,072.21 +42.00 0.23%
S&P 500 2,090.15 +8.27 0.40%
NASDAQ 4,802.5210 +29.0490 0.61%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters