NEW YORK ( TheStreet) -- Earnings season is a crazy time for any company, but what impact will earnings have on Apple this week? If you're nervously awaiting results of iProduct sales, maybe it's time to assess hedging strategies to help you sleep at night.
To be sure, all eyes on Wall Street will focus on the earnings report. But it will not be the earnings per share that will drive share prices higher or lower. The key metrics that big money will focus on are gross and net margins. Don't be surprised if earnings per share takes a backseat.
For more information about my thoughts Apple's earnings see this article: Be Greedy for Apple While Others Tremble.
Bearish pundits are calling for shrinking margins, and some analysts believe Apple is on an irreversible course of lower margins and commoditized products. The bear thesis ignores the profitability and market dominance that Apple enjoys, and the bears have successfully convinced the rest of the market that Apple shares are for losers and that if you don't sell now, you will have to liquidate at a lower price soon.
Unlike with Research In Motion (BBRY) and Nokia (NOK), investors can't blame short-sellers this time. Well, maybe we can blame short-sellers for not shorting more shares, which may have helped support Apple while it declined. Even after the epic drop in share price, Apple doesn't have a lot of short interest. Short-sellers receive a lot of unjustified criticism, but Apple is a good example of what happens when a stock doesn't have the stability and reduced volatility that short-sellers create. Fortunately for investors, Apple's volatility is a tool you can use for profit.
Russell Rhoads is an expert on exploiting market volatility and literally wrote the book on volatility. It's titled Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes. If you want to learn how volatility may help your portfolio, I'd strongly recommend you it. Although it may not appear that a book about trading VIX futures is relevant for Apple investors, the volatility concepts are the same. As an Apple investor, you can use your Apple shares to hedge selling Apple volatility.