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All Eyes on AT&T Ahead of Apple Earnings

At this moment, we think there is a 50% chance that Apple will beat estimates and will report sales of 35 million iPhones. Those odds are much more appealing with Apple trading at $570 than they were with Apple trading at $644. If AT&T shows better iPhone results than Verizon, then the chances that Apple sells more than 35 million goes up above 50%.

We are going to make our portfolio allocations dependent upon AT&T. Our first move for today is to sell out of the 2% allocation of AAPL April 2012 $600 puts that are up 60% since we bought them on Thursday. Tomorrow, we will add a new 10% allocation of AAPL October 2012 $550 calls if AT&T shows better than Verizon. If AT&T shows that it is sequentially flat or even up over the holiday quarter, then we will add an additional 10% allocation of AAPL May 2012 $560 calls to take advantage of the rapid recovery that will quickly occur.

Earnings season is a volatile time which is why you want to take profits beforehand. By having over 80% of the portfolio at ApplePlusPortfolios.com in cash, we are able to take advantage of unforeseen selloffs. The $90 correction in AAPL marks a great long-term entry point.

At the time of publication, the author was long AAPL.

Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.

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SYM TRADE IT LAST %CHG
AAPL $125.80 -2.25%
T $33.73 -2.30%
VZ $50.09 -0.85%
FB $77.56 -1.59%
GOOG $531.81 -1.70%

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